The S&P 500 has spent much of the summer grinding steadily higher to achieve record highs. Meanwhile, implied volatility has reset toward yearly lows for both major indices and many single stocks. When options become this cheap, the price of volatility itself can open new trading opportunities. The Term Structure chart reveals current SPX at-the-money […]
dealer gamma
Welcome to the Summer Melt-Up
The S&P 500 delivered a high octane four-day run last week, establishing all-time highs with a 6% rise from weekly lows. Shifting interest rate expectations, easing Middle East tensions, and strong corporate earnings powered the dramatic rally. The sharp surge brought out notable divergences across the tech space. Software outperformed the broader market, with strong […]
The New Normal in Volatility Takes Shape
The final week of July proved to be quite dramatic. An FOMC decision, PCE inflation data, and the Super Bowl of Q2 earnings all took place over the span of just 2 days, with companies representing 36% of the S&P 500 by weight reporting results last week. The results were extreme: U.S. 30-year treasury yields […]
Big Tech Earnings and FOMC Collide
The Dispersion Unwind Arrives Last week, we noted in our pre-market Founder’s Note that markets were skating on thin ice. In addition to growing macro risks, COR1M had collapsed below 8 signaling extreme dispersion between index and single-stock volatility. After our Risk Pivot level was breached on Thursday, the growing negative gamma environment amplified the […]
Space Stocks: Oversold Bounce or Ready for Liftoff?
Last month, space stocks rocketed their way onto every trader’s radar. SpaceX’s record-breaking June IPO (SPCX) drew a wave of retail and institutional attention to the sector, while a string of NASA announcements made headline news and fueled several meaningful moves. Overall, the space sector has been defined by a notable downtrend in the past […]
Will the AI Unwind Finally Spill Over?
Last week delivered a string of constructive catalysts that supported the market through Thursday. Inflation ran cooler than expected, bank earnings impressed, retail sales beat, and ASML and TSM offered encouraging commentary towards semiconductor demand. While hostilities with Iran escalated, the market remained quite stable until Friday’s 1% drop following the Kimi-3 announcement. The stability […]
Volatility Approaches Record Lows — Is It Priced Too Cheap?
The S&P 500 spent early July grinding higher with sector rotation quietly forming beneath a calm index. As SPX price action remained relatively muted over the past week, implied volatility dropped to near-record lows as of Friday: IV for contracts expiring next week now sit in the 6-10% range. Regardless of any directional bias for […]
The AI Trade Unwinds
Wall Street’s historic weekly winning streak came to an abrupt halt last week. On Friday, a sharp NFP report drove the S&P 500 down over 2.6%, leading to a sharp AI selloff and rising bond yields. Adding fuel to the fire, the market now appears to be pricing in a rate hike by the end […]
June Catalysts Threaten a Volatility Spasm — How Are Traders Positioning?
The S&P 500 has posted fresh record highs for the ninth straight week. Tech and semiconductor earnings fueled much of the recent surge, with SNOW climbing 52%, DELL gaining 57%, and MU surging 28% within one week. As we move into June, stretched positioning now meets a cluster of major catalysts. Three upcoming events will […]
Record Highs and Thinning Hedges
Last week, the S&P 500 closed its eighth straight weekly gain — the longest streak since 2023. As the rally continues to achieve record highs, underlying options positioning has evolved meaningfully since March. Most importantly, the market has quietly shed much of the protective hedging that was in place just two months ago. A dense […]