The OPEX Effect The Rally No One Trusts | What the Options Market Tells Us About What Comes Next
May 10, 2025
Market forces are at play as the May options expiration approaches. The alarming lack of downside hedging amid a strong rally suggests a fragile market. Zero DTE options are creating an illusion of stability while masking volatility. The discussion touches on market sentiment shifts and the relationship between retail and institutional trading. Listeners learn about the potentially dangerous call exposures and the implications of liquidity challenges, alongside an intriguing 'Saul Goodman' reference that hints at market signals.
AI Snips
Chapters
Transcript
Episode notes
May Options Skew Signals Fragility
- May options expiration is skewed heavily toward call positions, indicating bullishness but also potential fragility in the market.
- This call dominance after a strong rally suggests May could mark a short-term market high with limited downside hedging.
Market Momentum Faces Resistance
- Market momentum fueled by call buying is reaching resistance around 5700 level.
- Without new catalysts, recent rally's momentum may fade leading to consolidation or pullback post-expiration.
Market Under-Hedged on Downside
- Lack of downside put hedging despite rally suggests market is not well protected against declines.
- Short put positions could force accelerated downside selling if market reverses.