Don here...
The Fed cut rates by 0.25% today.
Markets ended exactly unchanged.
But here's what has me concerned: $74 of movement is still priced into options for the remainder of this week.
Think about that. We had a Fed meeting. Nothing happened. Yet traders are still betting on massive volatility through Friday.
They're not wrong.
This is the largest gamma expiration in market history hitting during triple witching. We're talking trillions of dollars in options contracts coming off the books Friday morning and afternoon.
Here's the setup that's keeping me awake:
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Multiple trillion-dollar expiration with massive open interest in strikes close to current levels
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66 hundred calls: 23,000 open interest, 28,000 traded today
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65 fifty strikes: Enormous size continuing to trade
The risk builds exponentially as we approach expiration. Market makers have to hedge these positions, and when trillions are on the line, small moves create violent reactions.
Today proved the danger is real.
We dropped 50 points to 6611, then rocketed back up 50 handles. All to end unchanged. That's not normal price action. That's gamma pressure creating chaos.
But here's what really scared me: The advance-decline line stayed positive even when the S&P was down big.
At one point today we had 65% of stocks advancing while the index was down 50 points. That means if those other stocks start selling, we could see an absolute massacre.
The math is brutal. Just two stocks, Nvidia and Broadcom, can drag the entire market underwater. Nvidia was only down 2.5% today and Broadcom dropped 4%. Those tiny moves nearly overwhelmed positive performance across hundreds of other names.
Dollar strength is accelerating. That's poison for both stocks and commodities. I actually put on a short position in GLD today that's already up 10% in just a few hours.
The next 24 to 48 hours will be violent. We're sitting on a powder keg of options risk, tech rotation pressure, and currency headwinds all converging at once.
đŸ‘‰ Click here to watch me break down exactly why this rare setup screams big moves ahead.
To your success,
Don Kaufman
Chief Market Strategist, TheoTrade
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