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Good Morning!
This is the Jumping Cholla (CHOY-uh). The newsletter that turns options market insights into a fun, easy-to-read email that helps you reduce your chances of getting pricked while trading!
And even if you don't trade, learning how to think like a trader builds a robust framework for problem solving, taking risks, managing a plan, and just living life.
BANG for Your Buck:
| 3/6/2023 SPX = 4045.64 | Handles of Movement | Implied % Move |
|---|---|---|
| BANG (intraday) | 47 | 1.2% |
| BANG (weekly) | 104 | 2.6% |
Implied volatility got smoked last week…realized, well not so much. It took 2 weeks to grind 200 handles lower, and basically 2 full days to “get right back to where we started from!”
Feel free to over allocate into stocks, because the new bull market has arrived! Or better yet, just go with the flow, don’t marry anything, and make money trading!
Generally, exuberance through large call open interest dampens upside moves, and the market hovers slightly lower / around the call OI. In this scenario, that lines up with the 4000 level in SPX.
Just looking at the BANG, getting over 4100 or under 4000 is gonna need a catalyst or lack of liquidity. (hell, selling that weekly strangle looks enticing…but I know the second I do it, sh*t hits the fan or the war is over)
Options Market Positioning
4000 = critical support and entering large negative gamma land.
Being above 4000 currently, we expect dealers to be neutralish to slightly positive gamma. This means they’re size up and can absorb a sh*tload of bets. Naturally, underlying ranges and volatility tends to compress with high liquidity.
3950 = large speedbump
Volatility bets are still on!
Over the past few weeks, large VIX trades occurred that essentially bet volatility will go up precipitously (50% to 100% higher from here) into March through June.
News/Reports
3/10 - Non-farm payrolls
Pi Day (3/14) - CPI
3/15 - PPI
3/17 - OPEX
Technically a “quad witching” since this is the quarterly roll. Stock Options, Futures Options, Index Options, and Futures contract roll
3/22 - FOMC Rate Decision / Press Conference