Robust Mag7 and semiconductor earnings have reinforced investor confidence in the AI trade, lifting the S&P 500 and Nasdaq to fresh highs. Index implied volatility (IV) — the options market’s expectation of future price movement — reset to its lowest level in three months. Despite the backdrop of the Iran conflict and heightened oil prices, […]
dealer gamma
How next week’s earnings could drive volatility
Markets pushed to fresh all-time highs this week, driven by continued strength in AI stocks. One of the notable stores was SMH (the semiconductor ETF) which surged over 30% this month to cap 168% gain in the past year. While euphoric spirits have recently prevailed, next week brings an event-heavy calendar that might shift the […]
The Hidden Mechanics Behind Last Week’s Rally
The S&P 500 has bounced back to record highs, closing decisively above 7,100 after Friday’s 1.2% rally. That marks a 12% rise from March lows in just under three weeks. In that same timeframe, volatility expectations have seemingly collapsed: VIX is down 40% since March 31, dropping from >30 to below 18. Crude oil has […]
Vol Crush Lifts the S&P 500 — Will the Rally Last?
Following last week’s ceasefire announcement, the S&P 500 lifted 3% from roughly 6,550 to 6,800. On the surface, this rally looked like a meaningful shift toward risk-on sentiment as implied volatility collapsed rapidly across all expirations. Similarly, VIX plummeted below 20 for the first time in four weeks, marking one of its largest single-day declines ever. Yet […]
How One Key Level Drove Last Week’s Rally
The S&P 500 bounced back 2% last week after scraping against 6-month lows. Mixed headlines on the Iran conflict explained much of this tug-of-war, yet markets are still holding their breath. For many traders, the rally felt counterintuitive: How can equities rally so furiously if geopolitical uncertainties remain unresolved? When looking at Tuesday’s major bounce in […]
The New Volatility Regime
Over the past several weeks, we have consistently highlighted the market’s growing fragility. From the negative gamma “trapdoor” to the destabilizing impact of geopolitical shocks, the message has been clear: this is no longer a range-bound market. Last week confirmed those warnings, as the S&P 500 is down nearly 9% from all-time highs. On Thursday and Friday, traders […]
After OPEX: Market Loses Its Shock Absorber
The options market has just cleared one of the largest structural events of the quarter, as Friday’s OPEX saw nearly $1.4 trillion in delta notional expire for the S&P 500. Because significant positions have now rolled off from the March expiration, the market has lost an important stabilizing force just as macro pressures begin to build. […]
March OPEX: Tipping Point or Turning Point?
Fragility, Risk, and Potential Vol Reset As the S&P 500 enters OPEX week, we echo the same theme of the past few weeks: this market remains fragile. Last week’s selloff pushed the index below the three-month trading range of SPX 6,800-7,000 that had held since late 2025, subsequently closing down 5% since mid-January. The conflict with Iran continues […]
Geopolitical Risk Hits a Fragile Market
Markets entered last week on fragile footing. In our previous Sunday note, we emphasized how negative dealer gamma, extreme put skew, and heavy 0DTE options activity set the market up for a trapdoor scenario. This created a market structure vulnerable to sharp drops and spikes in volatility, as we saw play out last week. The dramatic […]
The Options Market Trapdoor
Over the past week, the topic of volatility has returned to the forefront. While the market has been largely range-bound, underlying support remains tenuous. Simultaneously, traders have begun more actively paying for downside protection. Given the backdrop of flaring geopolitical conflict, we see assymetric downside risk forming as trader uncertainty and negative gamma threaten to unlock the […]