The S&P 500 pulled back slightly last week, and the market’s recent volatility compression phase appears ready for a reset. With earnings season largely over, both index and single stock volatility have dropped from the elevated levels that prevailed earlier this summer. Our pre-market Founder’s Note on Friday explained how substantial short-options positions cleared with […]
synthetic gamma
How Traders Can Play Low Volatility Environments
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 […]
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 […]
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 […]
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 […]