Macro Theme:

Key dates ahead:

Founder’s Note:

Futures are off 50bps with no data on the tape. Traders are blaming the 35% Canadian tariff proposal for the drawdown – but we think this is just “overbought tremors”.

Vols are mildly higher, but we’d expect those vols to get sold today in front of the weekend, with a big positive gamma bar at 6,250 there to add some support.

If you look at SPX term structure there is very low vol for the rest of July. despite CPI & FOMC, and a clear uptick tied to the 8/1 tariff deadline. We have been advocating for traders to sell call skew and/or buy puts into next week as we think that low IV expectation for the rest of July could be wrong. A kicker for that trade is you are getting into puts at objectively low IV’s which means low carry costs…particularly for longer dated puts that will hold 8/1 event vol premium. We like 2 or 3 month expiration SPX puts, and possibly 1-month risk reversals in high call skew stocks (ex: XLB, XLK).

Now we turn to the hottest trade in town: crypto.

Bitcoin nearly tagged 119k this am and is now up 7% since Wed night. The call vol in stuff like COIN, MSTR and IBIT is now hitting +90th percentile, which screams overbought. Adding to this is the fact that these IV readings are from last nights close – and so these IV’s are likely even richer this AM. ~2-3 month call 1x2s or broken wing call flies might be decent ways to play a mild correction in this space.

We’ll also just pass on anecdotally that we have been buying ~20-25 handle wide 1DTE ES/SPX strangles with a fair amount of success into this low IV environment. 4 our of the past 5 session these long strangles have paid – this is essentially the “Anti-Captain” trade. We will likely look at doing a wide 1DTE long condor into tonights close – selecting a condor as to try and carry some of the weekend decay with short deeper OTM contracts. Don’t take that as a recommendation (we are not qualified to offer investment advice), but more of a nod to IV’s already being a bit underpriced in this past relatively data-free week.