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VolSignals

@VolSignals

Jul 18 • 13 tweets • 5 min read • Read on X

Scrolly

Welcome to OPEX

Should you trust the rally?

Let's take a look

(1/n)

First, why was yesterday so boring compared to Wednesday?

Well putting aside VIX expiration- we had less headline noise (market already digested Trump's Powell noise)

and we also had a far more supportive (and sticky) profile around 6300

If these look mechanical- they are.

In last night's Mentorship call we discussed the most likely pin for this morning.

Every reasonable interpretation of the dealer position suggested 6300 AM settlement.

(Sorry if you were looking for 6382 this morning 👀)

Why?

Take a look at the AM SPX July position:

I know you may be used to seeing much bigger numbers... like the BBG OPX Screen below—

(If you don't know why this OI doesn't matter- you need to listen to this morning's meeting)

What's happened so far overnight?

The index failed to clear an important cluster of dealer short options, and has reverted right back to its only balancing point in range: $6300

AM rolls off at 9:30 AM and has not been traded since yesterday's close.

Does it matter for today's price action?

Answer:
"in a way, yes"

This is the PM-expiring positioning today- aka "ODTE"

These options are subject to change, but note the massive clusters of dealer longs

There's no generative magnetism from a strike that has 5 Delta.

That giant bar up top at $6350?

Not relevant down here at $6300.

If we squeezed above 6325 overnight...
TOTALLY different story.

and how about that inventory on the bottom right?
which date is that from?

did you guess Feb 21 2025?

That date also happened to be a PM expiration.

Similar price action (near ATH)
Similar VIX action that week
Similar 0DTE positioning

How did that day work out?

Nevermind. Let's move on.

Back to the day ahead...

Sweeping positive speed profile but no sharp features in the inventory to provide CLEAR "tests" to the downside.

Gamma is neutral to negative through a wide range here

...unbecoming of a $23 straddle

And with no clear standout positions to the downside, we don't ever find STRONG support from the decay flow that would encourage holding $6300

If we lose that level after the settlement, it's going to get hard to stay buoyant quickly to the downside

Takeaways?

We'll cover in this morning's meeting.

Listen to today's call LIVE at 9:05 AM
volsignals.com/vspro

Join the Mentorship
for apprenticeship + domain expertise
volsignals.com/vip-mentorship

Trial RTM for live institutional quality signals
volsignals.com/rtm

and of course, slides posted daily in the free server

discord.gg/volsignals

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More from @VolSignals

VolSignals

@VolSignals

Jul 14

Welcome to OPEX Week

This marks the seasonal inflection.
Last year it was the 17th, a seasonal peak that coincided with VIX expiration.

The move preceded a series of events that culminated with an epic vol spike and vanna fueled crash.

History can't repeat, right?

(1 / n)

Customers are confused today...
inventory is scattered across the range without the type of clear patterning we are often used to seeing.

Relatively large hedging at 6300 should be respected but properly understood in terms of tradable influence.

An array of tests and ranges within 2x straddle distance around the implied open 6240 with a clear "level to hold" for the bulls on any weakness

Will talk more about tests and ranges and these two important levels in today's meeting

Another cheap straddle, reminiscent of the vols we saw last year leading into the market's breaking point.

Today we have negative speed on the profile which is a fancy way of saying we get shorter gamma on the way UP

Be wary of RV creeping higher into this period on the calendar...

Read 7 tweets

VolSignals

@VolSignals

Jul 13

GS put out a novel way of visualizing dealer gamma

Three lines:

(1) Prevailing gamma $ mm est.
(2) Cumulative hedging flow on 5% UP-move
(3) Cumulative hedging flow on 5% DOWN-move

some interesting takeaways here...

Prevailing gamma varies, but not that much

I assume here that they're giving us the "notional gamma per 1% index move" figure here.

Since the tariff shakeout in April, dealer gamma has been mostly flat to small negative

MMs have been mostly LONG gamma (net) on 5% down moves

For DOWN moves, cumulative BUYING flow indicates positive net gamma, since dealers are buying as futures fall- countering the market and adding liquidity on the way down

Read 5 tweets

VolSignals

@VolSignals

Jul 2

if you think the summer markets are boring,
REFRAME

This is exactly the kind of market you want to to trade if you're leaning on dealer hedging:

✓ low intraday volumes
✓ low implied vols in the front
✓ localized greeks
✓ bigger dealer positions

I'll explain (thread)

(1) low intraday volumes

Most of the order flow we can't predict.
Dealer flow is different. I
t's rules based, systematic, and fundamental to the business.

WHY IT MATTERS

Outcomes are more "predictable" when "predictable" flow is a greater volume-share.

(2) low implied vols in the front

As 0DTE straddles get cheaper, certain greeks become larger on a per-option basis.

WHY IT MATTERS

Larger Gamma and Charm values require greater hedging volume. Bigger volume = bigger influence.

Read 10 tweets

VolSignals

@VolSignals

Jun 30

—JP MORGAN'S QUARTERLY PUT SPREAD COLLAR—

all you ever wanted to know about:

✓ the trade
✓ its market impact
✓ its expiration effects

(a thread)

first, the fund itself.

the giant SPX put spread collar
that's bought at the end of every quarter comes from JHEQX- JP Morgan's Hedged Equity Fund-I

It's the largest of 3 funds which are all contractually obligated to do the exact same thing, just at the end of different 3-month cycles.

the largest of the (3) funds, JHEQX trades on the quarterly cycle.

Position sizes are typically between 32-40k

Read 37 tweets

VolSignals

@VolSignals

Jun 24

Know your edge (and when it disappears)

If you're still looking for that JPM Collar call to pin the market next Monday at 5905

—stop.

This far in the money,
the SPX 6/30 5905 Call is a 92 delta option.

Why does that matter? ⏩

You're trading around the dealer position 📌

the 5905 Call expiring 6/30 is the largest inventory around, hands down.

For simplicity, let's consider *only* the quantity of calls sold to MMs by JP Morgan's Hedged Equity Fund (JHEQX).

Per their own documents dated 5/31, we believe them to be short 35,861 of the 6/30 5905 Calls.

✓ Dealers own these.

✓ They hedge them dynamically.

Let's tackle the most basic problem, first.

What's the maximum delta this call strike can have?
⏩ 100 ✓

How many futures would be sold by MMs at d100?
⏩ ES QTY = (35,861 x 100 x 1.00) / 50 = 71,722

Where 35,861 is the open position
100 is the SPX option multiplier
1.00 is the option delta, expressed as a percentage
50 is the ES future multiplier

At MOST, we know the MM community will be short 71,722 futures against this block of deep ITM calls.

We see on Bloomberg that currently the Jun-30th 5905 Calls trade with a 92 delta (source: BBG OMON)

How many futures
are already paired off against this position? ⏩

Read 18 tweets

VolSignals

@VolSignals

Jun 8

Market Makers don't manipulate price—
we're trapped by our own hedging requirements.

When SPX drifts between long and short strikes, our systems start buying and selling futures in ways that create predictable paths.

(short thread)

These paths depend on a variety of factors... it's not as simple as "GEX"

► Gamma (Spot Movement)
► Charm (Passage of Time)
► Vanna (Changes in Implied Volatility)
► Position Type
► Position Size

Gamma
[dDelta/dSpot]

The gateway to dealer hedging flows.

Option Gamma values grow as they near expiration, so 0DTE options make the biggest impact to our book here.

If we're long options, we're long Gamma.
Our Delta grows more positive as the market climbs.

Read 25 tweets

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