Macro Theme:

Key dates ahead:

Founder’s Note:

Futures are flat ahead of 8:30AM EST CPI. US 10Y holds at 5.19%.

Positive gamma has filled in for today, which implies support for equity prices. We note one fairly large ~10k 0DTE spread up at 7,870, which could be a target in the event of a light CPI. Support is at 7,800 then 7,750.

Arguably the more important options market dynamic is the vol – or lack thereof. With CPI on deck the 0DTE SPX straddle is $34.2/43 bps (ref 7,820). That straddle pricing implies that CPI today is a non-event. We’d argue that if there is some type of surprise print, that the low vol itself would become a catalyst for higher volatility as traders that are short gamma at these low prices are forced to cover.

One can argue that there is still a fairly healthy vol premium for options out past the election, given the low SPX realized vol (1-month 10%) vs ~15 handle VIX.

We should not forget, though, that the biggest realized moves were when the equity market moves higher, as this market has been arguably more of a “stock up, vol up” system. With the Nasdaq stalling of late, it arguably threatens to change this dynamic, but we still see top stocks holding call skews. This suggest traders still have upside belief in top tech stocks.

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