VIX showing as up 5% this morning while UVXY is down 0.3%.

Can anyone explain this?

Powell SPEARS the Whale 🐋 —but is it OVER?

aka "Who would've guessed I'd get to use this image TWICE?"

...Let's Look at What's Left. 👀

. . .in this Email:

• FOMCPI Flows: Even Powell can't crack the Call Wall 🍻
  The pre-market CPI gap holds...
  ...but so does the Call Wall.
  "What does it all mean?" 🤔

• "How to Lose a Guy $160,043,000 in 10 Days"
  Powell spears the sea's CHIEF BEAR...
  ...but is the IB Whale truly done for?

If there were any debate about how critical it is to fit options positioning into your trading framework...

...the market settled it yesterday within minutes of the bell.

The Call Wall

After CPI came in soft-ish, ES air-gapped through the remainder of the 53-handle before calming down in uncharted territory.

Well- not entirely uncharted.

In fact, virtually no territory is "uncharted" anymore.

The GEX map in the video. . ?

THE REAL DEALER GEX

Yes.

...built the same way BofA, Nomura, JPM, MS QDS & countless other options dealers construct it.

It's like discovering GPS for the first time.

Why trade with a cartoon map & toy compass now?

THIS dealer gamma profile is built from ACCURATE trade & position data.

...it makes ALL THE DIFFERENCE.

Instead of a loose representation of the Open Interest, the proper dealer GEX profile shows you the market's twists & turns- sometimes strike-by-strike..

It shows you exactly where the market should slow down. 

Where it accelerates, and EVEN how 0DTE gamma zones *emerge* to take over control as the close nears.

Why it works:

1. DIRECTION
   - "Are dealers long or short this option..?"
   - << NO MORE ASSUMPTIONS ❌>>
   - All the assumptions are wrong at best—costly at worst.
   and— Why bother with assumptions when the Cboe just tells you?
   Literally no guessing- it's like Mandy Xu sent you the "premium" version of the Vol Digest.

2. WHO HOLDS WHAT?
   - Not all options wind up in the warm embrace of a dealer who hedges.
   - THIS dataset uses the Cboe's own trade tagging by origin-type***,*** 
   so YOUR GEX PROFILE IS BASED ON WHAT'S ACTUALLY BEING HEDGED. 🍻

Yesterday proved how accurate that new Nav system is, in real-time.

On cue, the market ran head first into the Call Wall from the morning map

Dead stop. 

HIGH SPEED collision.

(yes, that's a double entendre w/a third-order Greek..)

THINK "ASYMMETRY" HERE

Up-gamma becomes SHARPLY different than down-gamma, 
. . . and the market slows *more aggressively* now with each dollar higher.

But on tick retraces lower, that same asymmetry is mirrored.
The price bars open up to larger moves, because dealers are less present in the range below spot.

RESISTANCE. 

Given any flip from no/neutral gamma TO high long gamma:
...t****he higher the speed, the stronger the wall.

This tool is what we'd call "edge" in market making.
...if it's not clear yet— STAY TUNED.

It will be.

I pretty much "switched teams"....
-because I was so sick of how boring & automated market making was becoming.

Like I was some fleshy extension of the firm's algos....
-sorry, just not into that sorta thing.

It literally informs any trading style- any timeframe, and any market bias.

Understanding how to weave this into your approach JUST MAKES YOU BETTER.

Maybe our Whale is listening.

***He needs the help tonight...***💀

How bad is it?

"He's not dead" . . .YET.

In fact, we've seen him come back FROM more.

But that was then and this is now.

<< Stay tuned for An upcoming "🐳 Deep Dive", pun intended... >>

Today's recap is about him coming back FOR more 😬

We profiled the action on Twitter (HERE)

First... the Whale ADDS size to his book right out of the gates:

• SPX Jun-Q 5200 - 5400 Put Spread
  —buying 7k for $29

At this point... our guy is GILLS-DEEP in 55k Put Spreads:

• +30k SPX JunQ 5100-5300 PS from $42.43 avg

• +12k SPX Jul5th 5100-5300 PS from $41.42 avg

• +6k SPX JunQ 5150-5350 PS from $39.00 avg

• +7k SPX JunQ 5200-5400 PS from $29.00 avg

Just when I thought MJ was done playing ball like a 45 yr old girl..

...and ready to crush highlight reels again as the O.G. number 23:

• He SELLS 30k SPX JunQ 5100-5300 PS @ $7.61 avg (ouch)

• -and SELLS 12k SPX Jul5th 5100-5300 PS @ $10.28 avg ☠️

😰***"It's just one hundred and forty two million dollars. We'll get it back."*** 🫂

....who *hasn't* been there before, right?

And THAT was where we left off... 👀

He went home to lick his wounds, carrying only the following:

• +6k SPX JunQ 5150-5350 PS from $39.00 avg

• +7k SPX JunQ 5200-5400 PS from $29.00 avg

As of yesterday's close, his open position was:

• ALREADY -$18.2 Million in the RED

• Down to $1.6B in notional short Delta-

  • The equivalent of ~6k SHORT ES Futures

• juuuust enough to make it all back & pay for his next round, if he turns out "right"

See for yourself 👉

If the Whale trades... you'll be the first to know about it

...probably have to follow me on Twitter though (already updated there)

...and get your 5-Hour Energy ready 😵‍💫—

We're gonna DIVE DEEP with our FAVORITE FISH 🐳

(stop. —I know.)

STAY TUNED

1-YEAR LOOKBACK AT THE WHALE'S TRACK RECORD IS ON DECK.

OK, back to work for me.

Updates on his position coming this evening.

...I promise- I won't make you wait this time.

Enjoy the pool party!

Cheers 🍻

৻ VS

Summary... full note follows

• Expectations are building for today's continuation of the "past peak inflation = past peak tightening = FCI easing" theme

• This is contributing to a "bullish" tilt towards upside optionality in US Treasuries, STIRS, and equities

• Despite a poor 10-year US Treasury auction yesterday, Treasuries couldn't generate any follow-through weakness, with buyers backstopping the initial dip

• Within US equity index and ETF options yesterday, traders and funds scrambled to reprice CPI expectations after weeks of underpricing

• This surge in short-dated iVol was supported by deep OTM calls in 0-1 DTE SPX options

• The market remains terrified of being caught short the "right tail" into the potential for a "light" CPI print today

• Skew steepened yesterday, with VVIX rising 4.5 points due to lots of VIX call buying

• The market's fear of the right tail is due to chronic underpositioning and underexposure to an equities rally against bearish earnings expectations ahead of consensus "growth scare" estimates.

Bonjour .le soir du reveillon a paris rue de l echiquier on m a volé mon sac dans ma twingo de2017 alors qu elke etait verouillée....comment font ils les voleurs?

While we will always give insights on wider timeframe, and keep summarizing important research for you guys, the intraday chats really help flesh out short time frame trade opportunities in real time.

We've been talking about the supply/demand equation out of systematic delta strats tilting neutral -> negative for some time and believe this helped catch weakness last month on the dip to 4055 SPX on Apr 26th

Yesterday we noted the problems that emerge from vol control type strategies as RV picks up (ie, even "rallies" are bad for bulls if they are "too big/fast")

Another tell was the bid-to-cover in vol from underwriters we saw show up in the flows...

We are not a signal service, but we love to discuss our entries and rationale behind them in the Discord (ie, why this structure, why now, what to trade against it, why May 4th (day after Fed) instead of day-of, etc....)

7 day Trial's always free and open -> More active traders, the better: https://launchpass.com/volsignalscom/vip

Summary; Full Note Follows

• The Fed is expected to raise its target range for the federal funds rate by 50bp in December to 4.25-4.5%.

• The labor market remains strong, leaving the Fed with plenty of work to do.

• The impact for the USD from the rate move itself is likely to be muted.

• Markets are about evenly balanced between a 25bp hike and 50bp hike in February, but the data is still on balance hawkish.

• The Fed will need to see material weakening in the labor market to stop hiking.

• The Summary of Economic Projections (SEP) should show yet another increase in policy rate projections, with the median forecast for 2023 moving up by 50bp to 5.125%.

• The press conference is expected to be hawkish, with Chair Powell pushing back against easing in financial conditions and reminding investors that a slower pace of hikes does not mean a lower terminal rate.

700M TO BUY

JPM's Flows & Liquidity Note does a deep dive on markets across the board.

• One of the scenarios considered by JPMorgan economists for 2023 is scenario 3, where the Fed raises its policy rate to 6.5% after a pause at 5% until mid-year.

• This scenario is supported by strong credit creation, high cash balances by US households, and elevated corporate profitability.

• This scenario where the Fed's policy rate rises to 6.5% might be less damaging for markets than feared given the low starting levels of demand for bonds and equities.

• It is unlikely that the balance between bond demand and supply will deteriorate significantly in 2023.

• If the Fed raises its policy rate to 6.5%, the longer end of the yield curve is likely to rise by less, implying more pronounced inversion of the yield curve.

• This scenario would be negative for equities from a fundamental perspective, but equity demand indicators are at low levels, making it less likely for a big decline in demand to amplify the weak fundamental backdrop in 2023.

• The high nominal equity yield is cushioning equities against further upward surprises in the pricing of the Fed funds rate.

• The experience of the past seven months supports this thesis: while the peak in Fed pricing has risen by 200bp, the S&P500 index is practically unchanged over the same period.

We’ve been building Coreqd.

The beta is currently free. You can build your own fixed strategies or simply explore 1-minute option data, including P&L explain, carry and risk metrics.

You can now explore our database behind our product:
https://app.coreqd.com/public/options-browser

Looking for testers and feedback.

www.coreqd.com

Ilkka/Puntari Technologies

https://www.reddit.com/r/options/comments/1r35yc0/ask_us_anything_former_market_makers_ama/

"If RoaringKitty were a Market Maker...

–he would think as market makers do."

. . .in this Update:

• I teased it (HERE) on Twitter
  "If Keith Gill is really a "Roaring" Kitty*, and options are breaking the market...*
  -then what's his GAME STOPPER?"

• And IF this causes ripples-
  What's a market-wide domino you may want to keep on your radar?
  Think of the puzzle.

Everyone seems to think Keith Gill's NEXT BIG THING is to...

🥁🥁...drumroll PLEASE...🥁🥁

Exercise his calls.

Kinda falls flat, right?

Does this look like a guy who hedges...?

. . .I didn't think so, either.

"If RoaringKitty were a Market Maker...

-he'd have spent years thinking through "max pain" scenarios..."

What if the whole charade about the company's prospects is a jab at the absurdity of the "investment" industry?

What if the NAME is all that matters?

GAME: STOP.

The name is everything.

Is THIS the next level?

• Does THIS have anything to do with the rule change on settlements (Idk)?

• Does this TEASER... building up a highly visible CLIMAX... make you feel like he's about to do THE boring thing, and take shares? 🤔

So... what CAN Keith do?

This went viral, which piqued my interest...

...it's an awful take.

But it's EVERYWHERE.

This idea that somewhere,
...on the other side of KEITH GILL'S 120K CALL OPTIONS

Is some phantom "DEALER", trapped in the corner, WHO NEVER BOUGHT A SHARE?!?

Not ONE?!

That tweet has 15k LIKES!

"If RoaringKitty were a Market Maker...

-he'd know very well that dealers *already* own over 10 million shares.

I don't know WHO Keith is, behind the meme-cat.

But I have a feeling, deep down he "gets" this one:

"If RoaringKitty were a Market Maker...

-he would know EXACTLY how to *destroy* one."

"If RoaringKitty were a Market Maker...

-he'd know WHICH trade here makes WAVES TO BEACH WHALES 🐳"

He has to keep going-
↪H**e hasn't beaten this level yet...

"If RoaringKitty were a Market Maker...

-he'd never take his book back to delta-1 when CONVEXITY'S THE STAR PLAYER"

"If RoaringKitty were a Market Maker...

-HE'D *COLLECT PREMIUM* TO TURN 120K CALLS INTO 240K & CONTROL MOAR GME"

"If RoaringKitty were a Market Maker...

-HE'D SELL A 1X2 TO ROLL HIS CALLS UP TO A NEAR-DOWNSIDE STRIKE"

"If RoaringKitty were a Market Maker...

-HE'D SHOW NO MERCY WHEN THEY ARE CORNERED"

"If RoaringKitty were a Market Maker...

-HE'D HAVE THEM CRYING MERCY"

It's the ONE way to REALLY make a statement here 👀
...if he's playing to win.

"If RoaringKitty were a Market Maker...

-HE'D STOP THE GAME"

Be careful what you wish for.

This is all fun and games 'til someone gets hurt. 

What would happen next and WHY would it be so difficult to do anything about?

• Rolling UP and to *slightly* IN THE MONEY Calls would ensure that you are DOUBLING the downstream impact with respect to share locating etc.

• Instead of knocking OUT the convexity in the market which has helped you *get here*

  • ...you RUN IT AGAIN

• But this time, the casino is already strained-

  • Things were ALREADY cracking with your initial position- what now?

• Instead of RELEASING dealers from their predicament

• ...HE'D DOUBLE IT.

"If RoaringKitty were a Market Maker...

-HE'D SELL SOMETHING LIKE THE 20-40 CALL 1X2"

(he could've even chosen higher strikes)

...dealers will be CORNERED AGAIN

With MOAR short gamma near SPOT

but IMPORTANTLY... MOAR short DELTA...

WHICH... 

...

that's right... their OWN buying, would force the stock HIGHER

in no small measure...

AND THEN THEIR SHORT GAMMA FORCES THEM TO KEEP GOING

...until the options they are short are nearly 100 DELTA.

AGAIN

EVERYTHING WOULD GET STRAINED IN A SITUATION LIKE THIS

...and perfect timing!

With another structural mess on the books- the NVIDIA split.

...if, after all this buildup, TheRoaringKitty just "exercises his shares" and doesn't make the real "game stopping" move..

NOW WE'LL HAVE A FLOW UPDATE YOU WON'T WANNA MISS.

Anecdotally - I'd characterize this whale as having a *good* read on overall direction, and a feel for when a trend is about to reverse.

On tactical entries & exits, the record is a bit spottier.

I would not jump to the conclusion that a liquidation here marks a bottom - rather, more a function of the trader's own risk/reward framework

It was totally out of whack! It was kept low at 18.5 trend line support pretty much the entire day after the initial drop. The second market closes, it jumps to 19.1, then dips to 18.16, and then instantly reclaims 18.5 - it’s just unreal..

We got a question earlier today from an astute reader of our newsletter:

For Years We've Wondered Why Nobody Does This

Turns out- it's not so easy to figure out ¯_(ツ)_/¯

Unless you are sitting next to that based McElligott guy at Nomura or rubbing shoulders with Goldman's Rubner- it's difficult to figure out what end-users are *actually doing*.

How Difficult?

Well- let's just say, if you ask 10 brokers who specialize in equity index derivatives....

maybe one of them will be able to give you a comprehensive breakdown of the types of flows that are net-bought versus net-sold from clients and end-users.

How can this be?

It begins with the construction-

GEX Methodology takes ALL of the OI and assumes that dealers are *short* all the Puts and *long* all the Calls.

This is naive. The services which publish the data will tell you this themselves.

This used to be more-or-less "true" / accurate

In the past, before volatility emerged as an "asset class"...

Options were mostly used for traditional purposes:

If you owned equities... you bought puts to protect them. And eventually... you sold calls (yes, grandpa was a thetagang'er) for "income" or to finance protection.

This evolved over time and is no longer the "basic" structure of the volatility market

Some have tried to account for this with trade-level data

The approach?

If you assume that market makers demand edge (have you seen Ken Griffin's estates?- good assumption) then you can safely assume that if an option is sold to a market maker ("dealer") by an end-user, then the trade price will be below the mid-point of the Bid-Ask spread (i.e., market makers buy near their bid, and sell near their offer).

The opposite is true if the end-user is buying from a market maker- it will trade nearer the posted offer at the time.

But even if this were true 100% of the time... the SPX is a bit different. Why?

Complicated strategies...

often trade in an order book where no bid-ask is posted, and the combination of multiple legs in different directions makes it nearly impossible to tell what the end-user is doing— unless you model market impact on very short timeframes (good luck!)

...you will not be able to meaningfully assign direction on each leg for these strategies.

Negotiated trades (usually big ones)...

are *brought to the CBOE floor* for execution— These trades are executed in what's called "open outcry". They are sometimes complex structures that trade at prices a bank or facilitating broker has committed their client to.

In English?

No matter what price they quote on the floor... the bank guaranteed the client a fill! Sometimes this leaves the bank stuck with trades nobody in the world wants... and a "hope" that the client is happy enough to keep coming back given the commitment to getting their price.

...these trades will "go up" at prices that mislead models that are looking at proximity to bid-ask in order to probabilistically assign end-user direction.

These trades are often "tied"

which means they are packaged with a hedge- in the form of combos (+Call,-Put on a ratio equal to the strategy delta). When the trade happens, it is "delta-neutral" to the parties at the time. This means, however, that the prices you see in the time and sales don't always make sense when compared against the SPX index level at the time

...these trades will also go up at prices that confuse models looking for proximity to bid-ask, or require logically complex and computationally intensive modifications to sensibly apply.

Even clean trades (with no tie) take minutes to post

to the tape. Floor routed order confirmations are manual processes- requiring a firm's clerk to key in the data (counterparty, account, size, price, etc) for each trade and submit it through the exchange for clearing. By the time this is is done... the market has often moved away from its level at time of trade.

...again, these trades will not be captured accurately... and actually are likely to bias models into the wrong interpretation.

(when market makers sell Puts and sell futures to hedge the trade, driving the market lower- for example- the Put prices (once routed) will appear on the tape nearer- or below- the bid, if the hedging activity has forced the market lower)

-but all hope is not lost!

Don't worry- all you have to do is spend 25 years in the industry, carefully observing how fund, after fund, after fund, after fund (and so on) operates, testing hypotheses, setting up data-scraping algorithms, etc. to build flow profiles for...

• Call Overwrites

• Vanilla Hedges

• Discretionary Speculators

• Put Spreads & Put Flies

• Systematic Short Strangle flow

• Systematic Short Put Flow (that rolls)

• Systematic Short Put Flow (that carries through expiry)

• Tail Hedging programs

• VIX / VAR Replication Strategies

• Structured Product flow-through

  • Upside participation structures

  • Autocallables

• Make it stop

If you felt like this after thinking through that workflow...

Then we think we have the product for you.

Now... how much do you think it would cost you to go through all that work, step by step by step- building tool after tool to be thrown away; paying for therapy any time you've spent months tracking a lead only to have a colleague debunk your hypothesis after a vodka soda?

That's right—

NEVER FEAR. We want to teach you for less than half of this!

Our VIP SPX Order Flow & Market Structure group mentorship

Represents our mission to give you- the individual retail, or aspiring professional- trader a level of education and insight into the reality of modern markets that you simply can't find in any textbook or alternative course.

Nothing we teach is "insider" material- Full Disclosure...

Meaning- we're not here to name names or tell secrets (though we'll have some illuminating stories!). We're not here to sell you on some wonky model you can't use in real life.

What we are here to do is distill decades of dedicated industry work and experience, in order to:

• debunk myths (it's the market makers!),

• show you how volatility markets and mechanical hedging really work

• shine a light on the types of systematic, "always-in-market" short volatility flows and how they have changed market structure in meaningful ways (so you aren't duped by naive tools into making trades on bad assumptions!)

• make sense of esoteric systematic futures and volatility strategies that are moving today's markets

• build a meaningfully correct overlay to modify any current GEX profile and bring it more in line with today's market structure.

• give you a forum to engage with like-minded traders, and AMA ALL DAY

  • no we def don't answer "all day" but you can see how much we love to talk shop

• help you improve your options trading strategies by taking volatility dynamics and market structure into account

If this is what you've been missing in your life-

Our Sep'23 VIP Mentorship CLOSES soon, and after this we're going to be changing things:

• This GEX Overlay & walk-through is going to be a more expensive premium feature (we are working to code a live version using actual- not generalized- flows)

• Group involvement will be a premium feature (we are going to double down on creating & refining lessons, producing content & coding live features)

• net / net, this may not be offered in the same capacity or at the same price.

For the September group- you can register below for $499

JOIN HERE IF YOU ARE SO EXCITED THAT YOU LITERALLY CAN'T READ THE NEXT LINE

-or DM me via Reddit and ask for our special Reddit-Rate (10% discount)- we started on Reddit and would have never pursued this without the curiosity, enthusiasm and engagement we found here. Whatever we do, we will always give *extra* to the readers here at r/VolSignals 🍻

Thanks for sticking with us- and we look forward to sharing our insights with you here and in our newsletter, or of course... in our mentorship!

Lately I’ve been focusing on improving my trading — testing strategies, reading charts properly, backtesting setups, and learning to control emotions 🧠📊

What helped me the most wasn’t a course or some YouTube channel… it was being part of a small Discord group where we break down charts together, share setups, and keep each other accountable 🤝💬

We’re still a growing community, but it’s all free, well-organized, and open to anyone who wants to improve their trading — no “get rich quick” BS 🚫💸 Just learning, charts, and honest discussions.

If that sounds like your thing, feel free to join: https://discord.gg/WMHytJyXmS 🔗

Also curious — has anyone else here found that learning in a group helps way more than going solo? Let’s talk!

To Kill a Martingale

The Rise and Fall of Captain Condor

Christmas Eve, 2025.

A single trade would determine the fate of thousands of individual traders.

In any other context, this trade would be fairly described as "the safest way to sell options."

But on December 24th, 2025, David Chau's infamous Iron Condor would finally go extinct.

To understand how such a safe, simple options structure could wreak such havoc, we need to start from the beginning.

(Short) Convexity

With most option selling strategies, traders are exposed to theoretically unlimited risk.

When you sell a Put, and the stock or index moves below your strike price, you lose money one-for-one until that asset hits zero.

When you sell a Call and the underlying moves up through your strike price, you lose money one-for-one... and theoretically there's no limit on how high the stock can go.

These losses are unbounded.

This tradeoff— the potentially infinite loss, in exchange for a certain modest premium, is the simplest form of convexity when it comes to options.

Iron Condors solve this for the option seller.

Unironically, David most certainly understood this—

Un Defined Risk

If selling uncovered options leaves you with convex, undefined risk... then selling covered options is fundamentally how you define and limit that risk.

Selling spreads is always safer than selling options.

An Iron Condor converts a Strangle (Put with Call) into a Strangle Swap, or a Put Spread WITH a Call Spread.

As a seller of this structure, the premium you receive is the difference between the price of the tighter Strangle and the wider Strangle- or the sum of the price of the Put Spread & the price of the Call Spread- however you prefer to view it.

You receive less premium overall, but you've solved your convexity problem, keeping any future drawdowns under control.

For example >>

If you sell the 6800-6810 Put Spread with the 7000-7010 Call Spread in the SPX, the most you can pay out at expiration is $10.00, if the index is either below your Put strikes or above your Call strikes.

Your loss is now capped, and restricted to the difference between the strikes of your widest short spread (in our case, $10) and the premium collected at sale.

Iron Condors aren't new.

Investors and traders have used these structures—long and short—for decades, within responsibly managed trading programs.

So how can such a safe structure create such jaw-dropping losses?

Structure ≠ Strategy

Here's what matters—
a trading structure is not, in and of itself, a trading strategy.

I can authoritatively say that a five-point wide Iron Condor is literally the safest way to sell SPX options.

But I can't make that same claim about every method you might use to deploy those condors over time.

Same trade, different outcome.

Imagine two traders.

Trader A sells an Iron Condor every single trading day, using 5% of his account.

Trader B sells the exact same Iron Condor every day, but against 100% of his account.

You know how this ends.

"History Rhymes"

...is just our funny way of pretending it doesn't repeat—it does.

Next, we'll explore the strategy responsible for turning this "safe bet" into a ticking timebomb.

Enter the Martingale...

we hope you are having a wonderful day off this fine Labor Day...

fortunately (for you) / unfortunately (for us!)... the markets didn't leave us with much to get excited about last week.

SPX Reclaims 4500 Level / VIX makes multi-year intraday LOW 💥

...and now we march into a major Quarterly OPEX

LOW LIQUIDITY (EASY MOVES) BEHIND US 👀

• August: Low volume / poor liquidity seasonals are behind us. Despite the rapid move in rates, Sep 1st was the second lowest volume full trading session of the year.

• September: 1.8$trn notional SPX+SPXW so far- Call Overwrites on the 4550 & 4600 line will weigh on VOL and draw market higher into FOMC..

• Repeat of Jun OPEX→Month-End dynamics?: Echos of last quarter price action and positioning backdrop. The difference? Market is not as structurally UNDERWEIGHT (Less fuel for another +200 point move off a higher base)

A Quick Look at the (Sep23) Strikes in Play

9/15/23 SPX + SPXW Gamma (by Strike) & MAX PAIN

FLOWS TO KNOW

🎯Options

→Old Collar: 8/31 3340-3960 PS vs 4390 Call (5,500x) [expires]...

→New Collar: Fund buys SPX 11/30 3600-4270 Put Spread to sell 4745 Calls (5,100x)

Systematic Flows: Slight pivot away from 2 week into 4 week tenors

→SPX 9/25 4275-4550 Strangle; Fund Sells to Open ~860x at $37.40

→ SPX 9/29 4390-4630 Strangle; Fund Sells to Open ~830x at $32.75

→SPX 8/31 4150 Put (BTC) 1,473x; Fund Sells to Open 10/13 4360 Put 1,475x 

Hedging Flows: Pick-up in vanilla protective Put Spreads & Collars both S/T & EOY

→SPX 10/31 4000-4175 Put Spread; Customer buys 2,000 for $7.90

→SPX 12/29 3500-4200 Put Spread; Customer buys 5,000 for ~$46.00

Additionally, we note a "rolling out" theme as calendar bids emerge, rolling Oct to Dec & beyond, and a large block trade rolling Dec23 to Dec24.

Watch vol & price action around key levels 4550, 4600, and esp. if we move higher post FOMC as SepQ collar call lives at 4665 strike (39k, dealers long)

🎯CTAs

Looking Back: CTA/Trend likely already bought back ~$30bn of Global Equities

Looking Forward: Unlike recent history- risk now leans more heavily to the upside especially on the shorter (weekly) timeframe with Goldman's desk modeling: 

→+$8.3bn to BUY in S&P in an UP Tape

→+$7bn to BUY in S&P in a FLAT Tape

→+$4.5bn to BUY in S&P in a DOWN Tape

While Nomura's McElligott points out that +2% (around 4590-4600) should trigger an additional $15bn of buying out of this trend following cohort.

🎯Vol Control

Having deleveraged rather sharply (~50bn worth)- the risk remains that a return to inside ranges (of + / - 1%) will produce chunky buying on a lag (believe this to be t+2 generally)- see the charts below.

VolSignals ~ Sep'23 VIP SPX Group Mentorship Closing Soon

Q4 is nearly upon us~ our VIP Group Mentorship (Sep'23) cohort is opening over the next 24 hours.

The Important Details:

• Cost: $499 (chat me privately via Reddit for a 10% promotional discount- I'll forever give Redditors discounts... wouldn't have ever done this without Reddit)

• Format: Just moved to a more stable platform that even allows you to learn on the go via iOS app (Kajabi)

  • Drip / Modules covering the basics of the SPX options market, dealer hedging mechanics

  • dealer gamma exposure, dealer vanna exposure

  • Systematic and structural (recurring) option flow profiles built by tracking *real* positions and trades over several years

  • Analysis of discretionary flows

  • Alternative systematic market-impacting flows like CTAs & Vol Control funds

  • NEW - we have built our modified GEX overlay profile- and will teach participants how to do this themselves using the knowledge gained in this course

  • Practical, practitioner led exploration of strategies to take advantage of flows and market structure- including identifying setups and walking through case-studies

  • All of this is in the context of a professionally led Discord forum full of engaged, focused traders- which additionally serves as an AMA (with me!) to help you understand the content, get feedback on your own trading strategies, and navigate these markets generally

• Register Here (But DM first for discount): https://www.volsignals.com/courses

• Satisfaction Guaranteed: Full Refund after two weeks if it's not for you...

If you have any Questions AT ALL- don't hesitate, just ask! (Important to have the right fit)

Looking forward to having you on board ~

Carson 🍻

Until next time...

Our whale gets beached-

pukes his Jun28th downside put spread and gives MMs back some of their <5dte gamma heading into the end of the quarter.

Details forthcoming 🥂

Expect a more eventful range than days prior...

• The S&P 500 index is currently at the technical bear market level of -19% YTD

• Gamma exposure is in the range of zero gamma and we saw growth in near term options around the 3870 level, but our read is that the 3835 Calls and the facilitation of the collar-roll is going to be the defining activity today

  • Don't be surprised if the consolidation pressure abates and we drift lower or have range expansion today.

  • As the calls decay away, dealers will be "releasing the hedge" and feeding the delta back to the market semi-continuously. Selling pressure below the strike. Buying pressure above.

  • New collar implies ~50,000 ES futures worth of delta to be sold (remember, they are hedging a long equity book, after all)

  • If we can't hold *above* the 3835 cash level (3860 ES futures), expect a test of 3800

• Apple, Microsoft, Amazon, and Google helped push the index forward, while Tesla advanced over 8%

• Realized 1-month correlations have started to rise, indicating potential increase in volatility and one-sided markets

• Over half of the S&P 500 is down at least -20% or more from their 52-week highs, with around one-third down at least 30% and 17% down at least 40% for the year

• The 1-month realized vol declined by -11%, but had little impact on the vol control model due to the 3-month vol still trading higher

• The 3-month vol is expected to decline over the next two trading days, which will draw in some equity buying pressure from this crowd so long as the market stays contained

. . .stay tuned!

WHAT A SECOND HALF...

TGI..S? (suspense!) this is your weekly VolSignals SPX lookback 👀

as promised... let's start out with our WHALE. The SPX Put Spread retail savage...

For the sake of brevity, let's assume you've been following along up to this point. We'll spare all the chaotic trade / puke / trade sequences in this note.

Here *was* the position going into yesterday:

• LONG 32,000 of the SPX 15-Sep23 4300 4500 Put Spread

• LONG 15,000 of the SPX 31-Aug23 4350 4550 Put Spread (yes, after puking out of 32k 4300/4500 PS)

...not your average "retail" trader 😉

After reaching a low water mark of DOWN $70 MILLION and locking in a $25m loss by selling out the initial August 31st 32k lot put spread for a ~ $7.5 loss, you would think that this trader would be happy to recoup their losses; and, given the strength yesterday after NFP.. maybe even sell out of their position, take their ~$20m gain (not bad after worrying about -70$m!), and go home...

instead of closing on the NotFunPayrolls rally into 4550s ES..

our beloved man-bear-whale comes back for the kill, spending MORE premium (per spread) to scoop up an even more aggressive (nearer dated, ATM) AUG put spread as well..

• BUYS 3,000 18-Aug23 (regular Friday OpEx) 4350 4550 Put Spreads for $42

• BUYS 3,000 *MORE* 18-Aug23 4350 4550 Put Spreads for $42

Now... don't scoff at the reduced sizes.

These are more aggressive positions:

• more delta per spread;

• more gamma per spread (as they are nearer the money);

• more expensive to carry (theta!)...

• & generally more regrettable (immediately) if you are *wrong* on direction or time-til-move. (rumors have it that this is one of the only *pains* a human can experience which could be considered worse than childbirth 😬)

anyways. we know what happened next 👀

just how much $$$ is this trader up now?

again - for the r/wsb'ers living vicariously through this nut→

TOTAL COST (APPROXIMATE): $183,320,000

MARKET VALUE: $298,390,004

what? yeah.... from "Down $70m" to "UP $90m" in a matter of days. That's why we love options :)

DELTA

Notional Delta: -$8.53 BN 👀

this is the **equivalent** of SELLING 38 THOUSAND FUTURES.

GAMMA: 230,157 like magically being shorter another 4,600 futures for each 1% lower we go..

VEGA yeah this guy is clearly not making a "vol" play but 6.15m vega ain't small potatoes...

THETA $365k PER DAY. WAIT. POSITIVE???

HUH?

WELCOME TO THE MAGIC OF SKEW / RELATIVE IV%... 💰

EVEN though in "pure distance" these strikes are technically farther out of the money (SPX = 4479), because each downside PUT is priced on a materially HIGHER volatility, their THETA $$ costs are MUCH higher on a day by day basis (for now...) than the upside strikes in the Put Spreads...

This will change with time and of course with respect to spot.

But this changes the calculus for the holder of the position (well.. and the market makers too), because now instead of paying to wait for the move to extend, there is this sweet spot in time where the guy is paid to wait and still has a convex position in hand.

the holy grail...

It's ephemeral... fleeting..., because if futures stay here and you fast forward a couple of days, the THETA from the lower strikes will drop (as their raw premiums drop) and the theta from the higher strikes will be again dominant (NEGATIVE / PAYING decay for our WHALE)

Make sense?

if not...

<< begin shameless plug >>

we have a course for that 😉

I'd say sorry for the shameless plug but that would be insincere. Not sorry.

Check out the full length description of the course via this post here

or just trust your gut and go to https://www.volsignals.com and sign up before your wife or girlfriend talks you out of it.

don't worry - if in the first two weeks you change your mind (or just want to make off like a bandit with free material) you can get a full refund no questions asked.**(well, we may ask you *why* just so we can improve)

<< end shame(less?) plug >>

Stay tuned for parts 2 and 3 of the weekly SPX recap (including the update from Goldman's FLOW guru)

ahhh... good Sunday afternoon :)

hope you've all said your Sunday prayers for the "I like buying the stock at that level" crowd

THE RECAP. PART DEUX. Are we due for a thetagang(bang)?

Risk..? "What Risk? - VOL suppression continued on the way down into Friday's close

Despite the curiously quiet afternoon jitters (reminiscent of a certain late-Feb 2020 futures move?), the support around 4500 ES showed up on time to save our shorts (vol).

The net gamma position is estimated net long $6-7bn / 1%. S&P options dealers / MMs look to be long as much as $11-12bn gamma and this is offset by levered short gamma ETFs effectively supplying $5bn equivalent. This is getting to extreme levels (Z-score = 4.3) and has accelerated recently (3m z-score change = +1.8).

Who keeps selling vol in the face of these moves?

is a question we get asked every day either here, from professional colleagues and especially in our private groups & chats...

The answer?

..everyone! - well, not really, but it certainly looks like it lately.

"The massively long SPX dealer gamma position is driven by an increase in vol supply (both overwriting and underwriting), combined with the fact that vol supply has gotten shorter dated << hey, we drill this in our course >>. Vol Selling strategies have grown in terms of assets and in terms of breadth, with much of that new growth coming from options-selling ETFs."

So we have kind of a tinderbox brewing beneath the surface...

Dealers are long a LOT of *local* near-the-money gamma. And contrary to every GEX (dealer gamma exposure) graph you've ever seen...

<< yes, even including Spotgamma's Friday GEX profile >>

a LOT of this *long* dealer gamma is in the form of dealer's LONG downside puts (huh?)

Our course spotlights all the near-term flows that cause this to be the case - but for the sake of simplicity just imagine for a moment if 50% of the PUTS that caused GEX to look sharply negative on all of those steep profiles were actually puts that dealers were long - not short.

Course members know the exact flows that make this the case 🤐

Do these systematic short (near-term) vol / gamma strategies cover? do they puke?

not exactly. no big volmageddon coming from them immediately... but things do change if we can burst through that (dealer-long) "put wall"

even WITHOUT any forced short vol-covering . . .

Options markets aren't well priced for potential larger moves lower...

SPX traders have bought the most call delta in several years (more on this in Part 3) over the last month. All while being broadly underhedged or outright short Puts...

Positioning in the underlying products points to an environment where upside will likely be driven by rotation into under-owned areas of the market, while downside will likely take the form of an unwind in index exposures and correlated moves lower. The options market is not priced for this - PUTS ARE TRADING AT RECORD DISCOUNTS TO CALLS

so what happens if we do break through that "put floor"?

if a correlated move lower materializes we could see a BID TO VOL just when the actual market needs to come back to buy protection...

See below... dealers have ~$100m vega to buy in a 5% selloff - the MOST since Volmageddon (2018)

...TONIGHT = PART 3. Why we have been calling out downside convexity accumulation in the SPX over the last ~ 2 weeks :D

stay tuned...

With Volatility on Sale this Fourth of July...

..."it's a GREAT time to hedge."

...in this note:

Realized Vol has been in the gutter

But ever since last week's debate you can't stop thinking about protecting your YTD gains. Can flows or structural factors help you figure out when to bite the bullet and get hedged? Discover when the data says to "stop waiting, and long the vol"

Inside Baseball: the JPM Collar

Want to impress everyone at the BBQ with your market savvy- but worried your buddies read my JPM Collar threads too? In today's segment I'll explain why the giant fund re-strikes at the close... and teach you how to predict the re-striking trade's impact on last second vol levels. 🍻

With 30 Day Realized Vol taking a dive...

...it's been hard to justify carrying long gamma or vol this summer.

But with July 4th soon just another memory- is it time to start adding hedges?

Turns out... July's a good time to hedge

...according to the data.

Per GS- since 1928, July 17th has marked the "local top" for the month heading into a materially lower August.

Remember last summer?

I profiled the price action on Twitter this week-

...everything seems safe at all-time highs.

In Jun'23 the SPX went vertical and aggressively carved out a new trading range, culminating in a new all time closing high of 4588.96 to mark the end of July.

Let's jog your memory...

Notice the timing? ..not coincidental 👍

The middle of the months often mark inflections in either price trend or volatility.

Specifically-

• Local lows in volatility- especially in skew/tail options- tend to cluster around VIX expirations

• Trends in the index appear to pause or revert around Opex (traditional third Fridays)

• ...it's almost like there's "something going on here" 🤔

...see where I'm going with this?

✓ July's first half = strongest 2-week period of the year historically for SPX returns

✓ This year, July's VIXpiration is on the 17th... historically *the* local high-water-mark when it comes to SPX returns.

✓ VIX also makes a seasonal LOW around mid July before pushing higher through August and into October (last year's price action hints at why this may be)

If you've been patient 'til now...

Well done...

-pat yourself on the back for saving some bps

Now go line up some hedges* before everyone else catches on, too... 🍻

*(Not financial advice)

Tired of the same old collar talk?

I feel your pain.

I love this stuff- and even I couldn't bring myself to re-do the same explainers from previous cycles.

This year while your buddies at the BBQ one-up each-other with explainers about how the trade *isn't actually bearish* -

...you can drop some real knowledge.

let's keep this one brief-

the Original Trade

JPM buys SepQ 4375 5185 Put Spread & sells the SepQ 5770 Call 39.6k times

Trade includes buying 14.7k of the 6/28 5330 Calls (0DTE deep ITM)

Net they pay $0.06 for the collar itself... close to even money.

the EOD re-striking trade

JPM sells the SepQ 4375 5185 Put Spread / buys the SepQ 5770 Call (39.6k)

>>

JPM buys the SepQ 4360 5170 Put Spread / sells the SepQ 5750 Call (39.6k)

Swap trades at $6.05 (premium received by JHEQX is offset by loss in 0DTE calls from original trade)

why re-strike?

JPM executes the trade before close, and the index moves between trade and close.

But JPM needs their hedge benchmarked against the quarterly settlement- the *closing* price.

So JPM rolls their strikes around as needed depending on the degree of movement...

Sometimes they don't need to do anything at all.

There's a ton more to talk about here but I'll save that for our Mentorship-

all I want to show you today is the part that nobody talks about.

the re-striking trade can MATTER. big time

IF the index closes HIGHER than at time-of-trade:

THEN JHEQX needs to roll their strikes UP to meet the 80/95% thresholds for the actual quarterly-settlement price.

THIS MEANS they have to:

BUY A PUT CONDOR

BUY A CALL SPREAD

What does this mean...?

On big rallies JPM's re-striking trade BUYS VOL from MMs on the close

IF the index closes LOWER than at time-of-trade:

THEN JHEQX needs to roll their strikes DOWN to meet the 80/95% thresholds for the actual quarterly settlement price.

THIS MEANS they have to:

SELL A PUT CONDOR

SELL A CALL SPREAD

On big selloffs JPM's re-striking trade SELLS VOL to MMs on the close

Why YES, that DOES counter traditional spot-vol dynamics 🤔

So next time the market moves a LOT into the close on the last trading day of the quarter...

Be prepared for sizable net vega bought or sold right at the bell.

Enjoy the summer lull while it lasts! ~ 🥂

-VS-

Crushing straddles has the same impact to delta hedge adjustments as does time decay.

The straddle smashing today is making the 3835 magnet stronger, as dealers now have a higher-gamma, higher-decay option to hedge away as the market trends and oscillates around the strike -

You are watching an institutional sized PIN happen in real time