MARKET SELLOFF Deepens as Yields Hit 4.92% and Oil Tops $105 | Thursday Sept 10th Live Trading — watch on tastylive
Brent Kochuba, founder of SpotGamma, joined tastylive Thursday to map S&P 500 negative gamma below 7,600, a lifting vol surface and Oracle’s call skew.
The 7,600 Line Splits the Gamma Map
Oil pushing $100 and the 10-year grinding higher gave equities every reason to sell. The options map offered no cushion underneath. Brent Kochuba, founder of SpotGamma, joined tastylive Thursday and walked through S&P 500 negative gamma below 7,600.
For the past couple of weeks, positive gamma has sat right around where the index traded, helping keep volatility subdued. Fueling this were 0DTE sellers stacking condors above and below the spot price. Thursday’s 0DTE positioning built that same support near 7,600, and the index tested the level and bounced. However, looking forward one week shows the map changes: below 7,600 SPX runs into pure negative gamma, where dealer hedging means futures are sold by market makers into a decline.
Vol Lifted Off a Zero IV Rank
Implied vol rank in SPY and IWM measured 0 and 1 a couple of days ago, about as cheap as protection has been all year. That leaves a lot of room above. At-the-money fixed-strike vol gained roughly a point day over day about a week out, VIX traded near 18, and VIX futures contango compressed to under a point from about two and a half.
Vanna is the accelerant. As vol rises, puts pick up delta, dealers sell more futures to stay hedged, and that selling feeds the move that lifted vol in the first place.
Oil and Rates Took the Wheel
Equities and oil normally carry a loose positive correlation. That relationship flipped over the past week, and oil now trades higher while equities trade lower. The 10-year yield moves close to in-sync with crude, which puts the rate impulse outside anyone’s control.
Implied odds of a hike at next Wednesday’s FOMC moved from roughly 60% to 80% on the day. The hike is largely priced. The path oil takes into inflation is not, and that gap is what equities dislike.
Oracle: Call Skew Priced for Perfection
Oracle’s options priced a ~10% earnings move, and the upside was already crowded. Risk reversal rank measured 95, meaning the 25-delta call traded richer than the 25-delta put in a way it has in only 5% of readings over the past year, with IV rank at 65. Brent reads that combination as a high bar: buyers already expect amazing results, so the report has to deliver “amazing squared” for that skew to pay.
For ORCL, selling near-dated upside calls against a longer-dated long call (a call diagonal placed for roughly even money) would be one method to bet on the skew compressing rather than on pure directional movement.
Call Selling Into the Highs
The same pattern as last week showed up across top tech and crypto names this week: traders sold calls into new high prices, and a thick band of gamma led resistance as price rejected. Upside got monetized and parked ahead of FOMC rather than pressed.
What Would Change Brent’s Read?
We encourage traders to watch two things into the weekend. The first is the SPX 7,600 level, and whether the index holds above it or slips into the pocket where hedging adds to the move instead of damping it. The second is whether fixed-strike vol keeps lifting after CPI on Friday (September 11), because rising vol acts as a tax on long call positions and keeps upside bets expensive. Brent leans toward waiting for rates to settle and oil to mean-revert before putting fresh capital at risk.
Watch the full segment on tastylive.
Brent Kochuba founded SpotGamma and contributes to tastylive. He was previously a portfolio manager at Seven North Capital Management, building options-based strategies, and a derivatives broker at Wolverine Execution, Credit Suisse and Bank of America.
Gamma Guy with Brent Kochuba runs Tuesdays at 10:00 a.m. CT on tastylive.