Macro Theme:

Key dates ahead:

Founder’s Note:

Futures are higher on OPEX Friday — ES +26bps, NQ +45bps. VIX at 18.15.

Housing starts data at 8:30.

TLDR: OPEX day. Today the positive gamma blanket likely erodes. Dealer gamma has been supportive of the market all week — today that rolls off, and next week the dampening effect should reduce. The timing is critical: the April 21 ceasefire expiration is Monday, and that lines up with a gamma-reduced vulnerability on Monday. Outside of the Iran situation are the clear signs of single stock FOMO: VIX trading < SPX realized, record call volumes, etc.

Below we have the estimated OPEX impact measured in delta $ terms, and you can see it’s very call-heavy, with weights +80% which is as high we’ve ever seen. These values are driven by the huge equity rally since the start of April: SPX +11% in 2 weeks!

Typically we look for trends to pause and consolidate into expiration. Clearly the market has been surging higher into this expiration, an consolidation is what we have been discussing since Wednesday and VIX expiration. No doubt the market has thus far had other ideas, as the SPX pushes to fresh ATHs.

Outside of OPEX, the challenge we see here is the price of options. While 2 weeks ago calls were seemingly cheap, the landscape is much more expensive. You can see this via Compass, which shows the various major stocks dispersed across the map. This suggests that calls are now much more in favor, and IVs are high not only because of earnings, but also explosive moves higher. It’s hard to buy options at these prices and have them pay off.

OPEX is often a time where positions reset, and things may therefore take a breather. Then there are the apparent signs of FOMO, with stocks like BIRD (+300% in 2 days on AI pivot), CAR (+300% in 2 weeks) etc.

While there is a clear bid to single stocks, we simply cannot deny the surge in non-0DTE SPX calls. You can see this in the chart below, wherein non-0DTE call volume is just blowing it out. On this topic we note that SPX 0DTE volume %’s have decline sharply over the last few days: from sustainable daily levels +60% to daily marks of 50% over the last week. We quite frankly don’t have a great explanation for why call volumes would surge like this – but its big, and its non-0DTE. Over the medium term this seems rather bullish, but in the short term our read remains “overbought”.