Eleven consecutive weeks inside the expected move. The longer a spring compresses, the harder it releases. Don breaks down what this means for next week.
| | Eleven consecutive weeks without touching the edge of the expected move. | Let that sit for a second. | The expected move is the range the options market prices in for any given week. It is a specific dollar number derived from implied volatility, the market's own estimate of how far it expects to move. When the VIX sits above 25, that is one and a half percent daily movement translated into an upper and lower range for the week. | For eleven straight weeks, the S&P 500 has not breached either edge. | Not because the market was calm. Because it was coiling. | Here is the physics. The longer you compress a spring, the harder it releases. Options gamma, meaning the rate at which option deltas accelerate, builds up the longer a market stays inside a range. | When the market has not touched an expected move edge in eleven weeks on the largest options product in the world, the gamma risk is not shrinking. It is stacking. | I said this morning that the gamma risk heading into today's expiration was probably the highest we have ever seen on record. That is not a prediction. | That is arithmetic: eleven weeks of compressed range, a quarterly expiration, $5.7 trillion in notional value rolling off. | The market was not going to stay quiet forever. | Most traders see a flat market and think nothing is happening. Wrong. What is happening is that market makers are building larger and larger hedges to stay neutral in a market that refuses to move. | When the range finally breaks, in either direction, those hedges unwind all at once. That is not volatility. That is a trap door. | We are now at the edge. Today's close gave us the first real test of 6611 on the SPX. The market held it this morning. | But here is what I know right now. | The next trader who asks me where the market is going will get the same answer they always get. I don't know, and nobody does. | What I know is the expected move is going to be big. The spring has been loaded for eleven weeks. | When it releases, you want to be positioned around the structure, not chasing the headline. | All eyes will be on the expected move next week. Make sure to watch last night's session on SuperFly. You'll see how I use it to make fast overnight profits on 0dte options. | Check it out here. | Don Kaufman | P.S. Eleven weeks inside the expected move. The coil does not care which direction it releases. The expected move will tell you how big. | | | |
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