Macro Theme:

Key dates ahead:

Founder’s Note:

Futures +30bps ahead of PCE at 8:30AM ET.

Straddle check: $22/35 bps/14.2% IV ref(6,160). Bottom basement expectations despite PCE. However, should PCE be a miss, we’d expect the dip to be bought in a heavy way because there are big positive gamma strikes at 6,150 & 6,140. To the upside there are no material gamma strikes until 6,210. This dynamic will of course change because 0DTE traders will flood in after PCE & the market open – remember 0DTE volume is consistently 55-65% of SPX trading.

Monday’s ATM IV is now a 9.1% (!!!) – and as we covered in yesterday’s AM note (read here), we think this is due to the JPM collar & related positions squashing vol, and the rolling/expiration of those positions (along with Quarter end flow) could be a trigger for a short term jump in vol. We emphasize short term, because its very unlikely anyone wants to carry long protection over the July 4th weekend. More simply said: we are likely going to take a little swing at owning 6/30 or 7/1 straddles, placing the order into tonights close. Yes, there is some weekend carry cost, but that is de minimus given the low IV.

There is another dynamic here, and that is single stocks are starting to feel short term overbought. You can see this in compass as many names are now in the bottom right quadrant (reflecting expensive calls).

From a positioning standpoint, in yesterday’s Q&A we scanned at least a dozen stocks that all had a very similar “just above positive gamma thats about to expire” looks. This implies that we could lose some single stock cushioning/support. Again, this is not a sirens call for an all time high top as much as a 1-2 day shake out possibly today (PCE dependent) into Monday. Ultimately we think stocks will have the tailwind of IV suppression from after Monday through next weeks holiday.