The OPEX Effect

In the latest episode of the OPEX Effect, Jack Forehand and Brent Kochuba take a look behind the scenes of the big market selloff and the options flows driving it. They break down the massive options expiration coming up (the second-largest ever) and its potential impact on market movements.Key topics covered:Understanding the current high-volatility environment and why options volumes are driving increased market swingsAnalysis of the JPMorgan collar trade at the crucial 5565 level and its market implicationsDeep dive into the mysterious "Captain Condor" trader and their impact on market dynamicsDiscussion of multiple major events ahead: VIX expiration, FOMC meeting, quarterly OPEX, and potential tariff deadlineExamination of fixed-strike volatility and why traditional VIX readings might be misleading in the current environment

In this episode, Jack Forehand and Brent Kochuba analyze the current state of the options market heading into the February 2024 options expiration. They explore several critical themes, including:Why volatility remains surprisingly low despite significant market-moving eventsThe unusual dynamic where large single-stock moves (like NVIDIA's historic drop) aren't translating into broader market volatilityThe concerning signs in correlation metrics that echo patterns from past market stress periodsThe critical role of NVIDIA's upcoming earnings as a potential catalystWhy the current environment shows signs of stretched positioning that could lead to future volatilityThe shifting dynamics in Tesla options and the broader implications for market sentimentBrent shares his unique insights on why we're seeing an environment where traders are responding to market drops by selling calls rather than buying puts, and what this means for market stability. He also breaks down why the upcoming NVIDIA earnings report on February 26th could be a pivotal event for market direction.Whether you're an options trader or just interested in understanding market dynamics, this discussion provides valuable insights into the forces currently shaping market behavior.

Join Brent Kochuba and Jack Forehand as they analyze the current market landscape and what options flows tell us about potential volatility ahead. The duo dives deep into why the market may be underpricing volatility risk despite a recent 5% drawdown, significant upcoming events, and shifting rate dynamics.Key topics covered:Why the current options market positioning suggests heightened volatility riskAnalysis of January options expiration and its potential market impactDeep dive into Tesla vs NVIDIA options positioning and what it means for both stocksThe evolution of zero DTE options trading and its real market impactHow dealer gamma positioning could amplify market movesBreaking down the correlation between different asset classes in the current environmentWhether you're an options trader, long-term investor, or market enthusiast, this episode provides valuable insights into the mechanics driving today's markets and what might lie ahead. Don't miss this detailed discussion of market structure, options flows, and potential catalysts that could drive significant moves in early 2025.

Join Brent Kochuba and Jack Forehand as they break down December's historic options expiration - the largest OpEx on record. In this deep-dive episode, they explore:Why this December OpEx is uniquely significant with over $1.9 trillion in options value expiringTesla's remarkable 75% surge since November and what the options market signals about its sustainabilityThe fascinating case of MicroStrategy, Bitcoin enthusiasm, and concerning signs of market euphoriaHow major market positioning could impact year-end tradingWhy extremely low volatility and deteriorating market breadth may be warning signsThe stark divide between mega-cap tech performance and the broader market00:00 - Welcome to The OpEx Effect - Biggest Options Expiration Ever00:35 - Why This OpEx Is Different: Record Volumes & Significance02:06 - Understanding Options Market Growth & Impact05:07 - Breaking Down the $1.9 Trillion in Options Value08:42 - Call vs Put Dominance (10:1 Ratio)15:07 - Record Low Volatility & Market Implications19:15 - Tesla's 75% Surge Since November23:30 - MicroStrategy, Bitcoin & Market Sentiment28:45 - Market Breadth Issues & Mega-Cap Divergence35:14 - The "Balloon Pop" Theory of Volatility42:17 - JP Morgan Collar & Market Pinning Effects47:16 - Cost of Portfolio Hedging at Historic Lows50:47 - Warning Signs: Margin Debt & Retail Speculation54:27 - The Problem with MicroStrategy's Premium58:31 - Market Divergence: "Crocodile Jaws"1:01:47 - Final Thoughts & Looking Ahead to January1:04:49 - Closing Remarks & DisclaimerDOWNLOAD THE SLIDE DECKhttps://spotgamma.com/opexMORE INFORMATION ABOUT SPOTGAMMA⁠https://www.spotgamma.com⁠⁠⁠⁠⁠⁠FOLLOW BRENT ON TWITTER⁠⁠⁠https://twitter.com/spotgamma⁠⁠⁠⁠⁠FOLLOW JACK ON TWITTER⁠⁠https://twitter.com/practicalquant⁠

In this episode of The OpEx Effect, we dive deep into the fascinating market dynamics following the recent election and explore the remarkable surge in options trading volume. We break down how Tesla's impressive rally is being driven by options flows and explain the mechanics behind gamma squeezes.We explore several key themes, including:How the post-election volatility crush led to a significant market rallyWhy Tesla has become the premier "Trump trade" and what the options flows tell us about its momentumThe current state of meme stocks and the return of familiar faces like Cathie WoodWhy the upcoming NVIDIA earnings could be a major catalyst for the broader marketWhat dealer positioning and options skew tell us about potential year-end movesThroughout our discussion, we emphasize our core thesis that "flows over fundamentals" is increasingly driving market action, especially as options trading volume continues to hit new records. We also touch on our outlook for the crucial December OpEx period and share our thoughts on why the current rally may have more room to run despite stretched valuations in certain names.Join us for an in-depth conversation that combines technical analysis, market structure insights, and practical implications for long-term investors.DOWNLOAD THE SLIDE DECKhttps://spotgamma.com/opexMORE INFORMATION ABOUT SPOTGAMMA⁠https://www.spotgamma.com⁠

In this episode of the OPEX Effect, we take a look behind the scenes at options flows at what is going on in the options market as we head into the election. We cover:- The current options landscape leading into October expiration- How NVIDIA's performance continues to drive broader market trends- Analysis of volatility patterns and their implications for market movement- Detailed exploration of potential market reactions to the upcoming U.S. election- The mechanics behind post-election volatility crush and its effect on stock prices- Comparisons to previous election cycles and lessons learned- Discussion of the JP Morgan collar trade and its market influence- Insights on interpreting options flow data to anticipate market movesWhether you're an options trader, long-term investor, or simply interested in understanding market forces, this episode provides valuable perspectives on how options expiration and major events like elections can shape market behavior. Brent and Jack break down complex concepts into digestible insights, offering both technical analysis and practical takeaways for navigating the current market environment.SPOTGAMMA'S NEW PRODUCT - TRACE THE MARKEThttps://spotgamma.com/trace-the-market-excess-returns/?aff=ExcessDOWNLOAD THE SLIDE DECKhttps://spotgamma.com/opexMORE INFORMATION ABOUT SPOTGAMMA⁠https://www.spotgamma.com⁠⁠⁠⁠⁠⁠FOLLOW BRENT ON TWITTER⁠⁠⁠https://twitter.com/spotgamma⁠⁠⁠⁠⁠FOLLOW JACK ON TWITTER⁠⁠https://twitter.com/practicalquant⁠

In this episode, we dive deep into the world of options and their impact on market dynamics. We start with an "Options Dealer Flows 101" primer, explaining key concepts like delta hedging, gamma, charm, and vanna to help viewers understand how options flows can drive stock prices. We then analyze the current market situation heading into the September 2024 options expiration, one of the biggest of the year. We explore the outsized influence of Nvidia options activity, discuss potential outcomes from the upcoming FOMC meeting, and examine how bond-equity correlations are shifting. We break down why understanding options flows is crucial even for long-term investors who don't trade options themselves. Using real-world examples, we illustrate how options positioning can create market volatility and reversals around key dates. Whether you're an options trader or just want to better understand what's moving markets, this episode provides valuable insights into the hidden forces shaping stock prices. Join us as we unpack the complex world of options and their far-reaching effects on the broader market. SPOTGAMMA'S NEW PRODUCT - TRACE THE MARKET https://spotgamma.com/trace-the-market-excess-returns/?aff=Excess DOWNLOAD THE SLIDE DECK https://spotgamma.com/opex MORE INFORMATION ABOUT SPOTGAMMA ⁠https://www.spotgamma.com⁠ ⁠⁠⁠⁠⁠FOLLOW BRENT ON TWITTER ⁠⁠⁠https://twitter.com/spotgamma⁠ ⁠⁠⁠⁠FOLLOW JACK ON TWITTER ⁠⁠https://twitter.com/practicalquant⁠

In this episode of OPEX Effect, we dive into the recent market volatility and its connection to options flows. We discuss the sudden VIX spike to 65, examining the factors that led to this extreme event, including low liquidity, the unwinding of correlation trades, and the impact of zero-day options. We explore how the market landscape has shifted, with a focus on the transition from inter-equity correlation to a broader bonds versus equities perspective. We also analyze the current options positioning and its implications for future market movements, particularly in light of upcoming economic data releases and events like Jackson Hole. Throughout the episode, we emphasize the importance of understanding options flows and market dynamics to make more informed investment decisions in these volatile times. DOWNLOAD THE SLIDE DECK ⁠⁠⁠⁠⁠https://spotgamma.com/opex MORE INFORMATION ABOUT SPOTGAMMA ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://www.spotgamma.com⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠FOLLOW BRENT ON TWITTER ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://twitter.com/spotgamma⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠FOLLOW JACK ON TWITTER ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://twitter.com/practicalquant⁠⁠⁠

In this episode of the OPEX Effect, we explore the current market rally and discuss the concept of "correlation spasms" - unusual movements and relationships between market components. We examine record low volatility, the outsize impact of mega-cap tech stocks, and the recent surge in small-caps. We analyze the prevalence of zero days-to-expiry options trading and its effects on intraday volatility. We consider potential scenarios for how current market imbalances may unwind and highlight key indicators to watch around the upcoming options expiration. Our goal is to provide insight into the complex forces driving markets, helping long-term investors better understand and contextualize daily market moves, even if they don't actively trade based on these shorter-term dynamics. DOWNLOAD THE SLIDE DECK ⁠⁠⁠⁠https://excessreturnspod.com/opexeffectjuly2024⁠⁠ MORE INFORMATION ABOUT SPOTGAMMA ⁠⁠⁠⁠⁠⁠⁠⁠⁠https://www.spotgamma.com⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠FOLLOW BRENT ON TWITTER ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://twitter.com/spotgamma⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠FOLLOW JACK ON TWITTER ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://twitter.com/practicalquant⁠⁠

In this month's episode of the OPEX Effect, we take a deep dive into the world of options flows and their impact on the markets. We discuss the recent GameStop saga and the role options played in the stock's wild ride. We also explore the concept of volatility suppression, the dispersion between mega-cap tech stocks like NVIDIA and the rest of the market, and the record-breaking streak of low volatility in the S&P 500. Finally, we analyze the extreme bloat in NVIDIA's options complex and what it means for investors. DOWNLOAD THE SLIDE DECK ⁠⁠⁠https://excessreturnspod.com/opexeffectjune2024⁠ MORE INFORMATION ABOUT SPOTGAMMA ⁠⁠⁠⁠⁠⁠⁠⁠https://www.spotgamma.com⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠FOLLOW BRENT ON TWITTER ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://twitter.com/spotgamma⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠FOLLOW JACK ON TWITTER ⁠⁠⁠⁠⁠⁠⁠⁠⁠https://twitter.com/practicalquant⁠⁠