Volatility contraction precedes post-OpEx expansion
The guest argued that the market will experience volatility contraction and supportive price action ahead of May OpEx, followed by a significant volatility expansion.
The argument
High positive gamma from short-dated options currently acts as a supportive 'straight jacket' on the S&P 500. Once May OpEx clears and NVIDIA reports earnings around May 20, this supportive positioning decays, freeing the market to move more dynamically in either direction.
The thesis, stress-tested
✓ What validates it
- ✓VIX index declines further in the next ten days
- ✓Realized volatility of the S&P 500 drops below 10% ahead of May OpEx
- ✓An expansion in implied volatility immediately following May 20
▸ Risks discussed
- ▸NVIDIA earnings could significantly beat expectations and prevent a downward correction
- ▸Geopolitical developments could alter the volatility regime prematurely
Hear it yourself
"billion times in my career is, like, looking at this huge thing going on in the short term being, like, wow. That's a huge problem. The market's, like, forget about that. Like, earnings over the next ten years are gonna be massive. Yeah. So, you know, I think that's part of what's going on. Yeah. And it's kinda funny because it was, I guess, two months ago now that we were talking about software stocks. Right? And and Satrina had put out this big piece that made, I mean, global headlines. It was one of those"
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