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Brent Kochuba Says the S&P Has Not Been This Still Since 2020
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ticker lesson
Breakdown
0:08lesson
Market context and unusual volatility
- Market weaker with unusual intraday volatility
- Negative gamma situation identified late last week
- Zerodt condors pushed markets lower
- Oil rate FOMC situation to be discussed
1:50lesson
Options expiration and mean reversion
- Big options expiration on Friday
- Volatility relief expected if market drops
- Opex brings mean reversion in price and volatility
- Traders fading upside rallies into expiration
3:34S&P 500· ticker
S&P 500 under 7600 — negative gamma
- Risk under 7600 with negative gamma
- Dealers selling futures or buying puts
- VIX at 1760, implied volatility rising
- Put spread at 7560 as support/target
5:16S&P 500· ticker
Call spread at 7620-7625 — negative delta
- Big negative delta move with 20,000 contracts
- S&P drops sharply as futures sold to hedge
- Condor position with 10,000 lot
- Market expected to stay within 1% range
7:02lesson
Market reactions to catalysts and realized volatility
- Market may mean revert to unchanged prices
- Zero realized volatility if unchanged
- Realized volatility basis for implied volatility
- Iran peace headlines could trigger mean reversion
8:47S&P 500· ticker
Realized volatility at 9 — VIX at 18
- One-month realized volatility at 9
- VIX at 18 with 4-point premium
- Rule of 16: VIX at 16 implies 1% daily move
- Market not moving despite risks
10:29lesson
Market hedging and convexity risk
- Put call ratios at lows, market not well hedged
- V premium based on low realized volatility
- VIX at 18 vs fair value of 13-14
- Market on precipice of breaking down
12:12S&P 500· ticker
Realized volatility and VIX relationship
- Realized volatility at 9, VIX at 18
- Historical spread of 3.5-4 points
- VIX at 18 implies 14 fair value
- Market expecting catalysts but not reacting
14:01S&P 500· ticker
Term structure and market suppression
- Term structure elevated due to FOMC
- Market not moving despite catalysts
- Realized volatility at 9, lowest since last year
- Strange mean reverting quality
15:49lesson
Market suppression and potential catalysts
- Realized volatility suppressed despite events
- Iran, oil, rates should create volatility
- Market mean reverts intraday
- Volatility could break down soon
17:36S&P 500· ticker
High-low realized volatility at 3rd percentile
- High-low realized volatility at 3rd percentile
- Lowest since January 2020
- Market suppression despite catalysts
- Strange mean reverting behavior
19:20lesson
Market tight range and potential catalysts
- Realized volatility remains suppressed
- Market in tight range despite catalysts
- Potential for volatility to expand
- October AI IPOs and midterms as catalysts
21:11S&P 500· ticker
Gamma curve and downside target at 7300
- Negative gamma curve to 7300
- Downside volatility expected to roll off
- Put flies at 7400, 7300, 7200
- 3% move lower as target
23:02S&P 500· ticker
Upside structures and election premium
- Ford implied V at 114 for election premium
- Call structures for November/December
- Tech-heavy NDX for upside
- Bet on realized volatility expanding
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