Why Today’s Expiration Could Be a Turning Point — watch on tastylive.
Brent Kochuba, founder of SpotGamma, joined tastylive to break down dealer positioning into VIX expiration, the 7,700 gamma level in the S&P 500, and a three-month put wing that has started to bid ahead of earnings season.
The S&P 500 sits near 7,800, within about 2% of its all-time high, while the Nasdaq and small caps have been sold hard for two weeks. VIX options expiration falls on Wednesday (October 21), all while earnings from SpaceX, Tesla, and Meta land across the same 48 hours.
SPX 7,700 Still Divides The Two Regimes
SpotGamma’s risk level for the S&P 500 has sat at 7,700 for three or four weeks. Above this level, dealer gamma remains positive and hedging dampens volatility. Below 7,700 negative gamma prevails, where dealer hedging runs with the move and tends to expand volatility. Currently, much of the positive gamma above that line is 0DTE positioning that is rebuilding every session, as opposed to longer dated positioning.
Looking at the forward gamma map through TRACE, almost every session reads negative, which is because customers own the options and market makers are short them. That is a market positioned for relatively wide movement, so an outside push (for example, oil swinging 2% in either direction) could get reinforced by hedging flows.
VIX Expiration: Dealers Short Calls At 20
On Friday, the VIX jumped nearly four points on the session while the S&P 500 fell only about 1%. Traders monetized this fast: they rolled up calls out of the 18 area into the 20 strike, and put positions appeared at 16 that had barely existed the day before. Customers remain long those 20 calls, dealers are short them and short more up into the 30s, while dealers hold puts in the 17 to 17.50 area where their peak P&L sits.
For the VIX complex, the gamma flip sits at 17.80, roughly where the index trades. Pushing the VIX down while the S&P 500 holds up is a vanna-type trade, and that support fades once the VIX options settle on Wednesday morning, potentially marking the expiration as a pivot point.
Put Wing Bids, At-The-Money Vol Stays Cheap
Over the past two weeks, three-month skew has shifted: the 25-delta January put have lifted against the at-the-money options while 25-delta calls have lowered. On a fixed-strike basis, implied vol at strikes such as 6,600 and 7,000 now prices higher than just two weeks ago. However, at-the-money implied volatility now sits about as cheap as it has been in nearly two years. That is partly mechanical, because with the S&P near highs the at-the-money option sits at the low point of the S&P’s long-standing put skew, and a move lower lifts both at-the-money vol and the VIX by riding that skew back up.
Single-Name Positioning Has Turned Defensive
Two weeks ago most single names carried call skew into earnings; many have now rolled to put skew alongside high implied vol, which is a defensive lean that recent earnings seasons have not shown. Names outside of tech — Walmart, Home Depot, John Deere, Delta Air Lines, JPMorgan — still carry bullish positioning, which fits the rotation narrative rather than broad equity de-risking. Three-month correlation has started to gradually lift while one-month stays low, and correlation picking up is what tends to appear when index and single-stock vol starts to move together. If earnings hold up, traders who leaned bearish into the reports may have to flip bullish quickly, and that unwind could drive a sharp bounce in tech.
What Would Confirm The Read?
Brent walked through owning optionality on both tails: maintaining S&P 500 call positions, running put spreads for downside, and holding Nvidia (NVDA) calls bought when implied vol there was cheaper. We encourage traders to watch whether 7,700 holds up through earnings season, and whether fixed-strike vol lifts across the whole curve rather than only in the put wing.
Watch the full segment on tastylive.
Brent appears on tastylive regularly — watch for his next segment there.