An Unprecedented Lack of Liquidity: What the Options Market Tells Us About What Comes Next

[00:00:00] So this is the bid-ass depth. It has gone to zero. And if you look at the bank metrics, you're seeing liquidity that is as low as it's ever been. People are hedging out the worst case scenario. Well, the worst case scenario is worse than everybody expected. And so that led obviously to major volatility spasms. VIX can be sticky, vol can be sticky. And what's really happened is we've entered a new regime. I think there's a lot of people that are just selling their stocks and saying,

[00:00:27] kind of like 2022, like I'm just not even going to own stocks. So I don't have any reason to hedge. That support again is going away. And that's the framing that we have here now. We're really much in this zero gravity situation. So Brent, I haven't been paying much attention. Has anything happened in the markets since we talked last time? Yes, Jack. We have been looking for the opportunity to use flames in our thumbnails. And I think we've finally been given two opportunities last month and then this month, bigger flames for this month.

[00:00:55] So you've been sleeping through quite a bit. Yeah, well, it ended up being the opposite of the CNBC one. You know, the CNBC one, like the returns one year out are like 20% up across the board whenever they break that thing out. And like for us so far, it is a massive negative. The market is significantly down. So we're going to put it in again just to see if we can maybe get a little good luck for the market here.

[00:01:18] That's right. And and we're talking about how the bearish channels generally do very well on on YouTube for some reason. They're having their heyday now. They can say finally after four straight years of calling farm again, they're they're close to right. So kudos to all of them and kudos to us for being able to use flames legitimately now. Yeah, that's what's great about the bearish stuff is you pretty much you pretty much can be wrong all the time.

[00:01:43] And like when you get that one moment where you can be like, remember when I was right back in 2025, then then that leave that'll carry you for like the next five years. Yeah, there there's actually a contingent of people who also just say buy every dip. And that historically has worked out very well until it doesn't, which is, you know, I'm not going to name names Tom Lee, but that is kind of how that sort of sort of goes as well, which is interesting. So call for the one thing. And then when it happens, I told you.

[00:02:11] Yeah, the general rule is being permanent. Anything is probably not great. But if you're going to be permanent, anything bull is probably the better thing on something that goes up all the time over time, at least in various. So at least at least go with the permable one over the permabare one. Yeah. And there's a value investing joke in there somewhere, but I'm just going to leave that. Yeah, don't don't hurt me anymore. We did a little outperforming value day yesterday, though, so I'm going to latch on to that. Don't worry, this slide is coming in this presentation when value finally has its day. I'm going to slip it in there without telling you. We're going to have like value rides again and then do this thing.

[00:02:40] I'm excited for the day that Ben happens. So I'm interested in talking about what you've been seeing behind the scenes, because there's been obviously been so much stuff going on. Decoration day was after our last episode and all kinds of volatility, which I assume has been fueled by options. So I'm interested to talk to you about what you've been seeing behind the scenes, because I haven't been seeing that in terms of what's been going on. Yeah. And I I was thinking of ways to to put all this into context, I guess.

[00:03:06] And I want to give a shout out to Chris the deal because he had a he had a very interesting Twitter post. His Twitter's been blowing up recently because I was there's vol traders dream market. But what it what clicked when I was reading his his post was about, you know, don't always expect vol to mean revert. Right. Don't always expect things to go from like, hey, VIX spike. So we got a short VIX, quote unquote, and that's how we always make money because VIX can be sticky.

[00:03:32] Vol can be sticky. And what what's really happened is we we've entered a new regime. And I think that's all obvious when I say it. And maybe you already like no, no doubt, Brent. But the the idea here that we've entered a new volatility regime, we've entered the new regime in terms of, you know, investing. You know, what do we invest in? And so, you know, we shouldn't expect things to go back to normal anytime soon. And that's really what we're seeing in the in the data.

[00:03:58] And I think that it particularly impacts us when we're trading options because, you know, options are forward looking instruments. Right. And so what is cheaper, what's rich as an option has totally now changed over the last two weeks. And so I think when you go into that regime shift, it causes a lot of damage. But now everyone can start to sort of adjust to this new regime. And so, you know, while the what sort of the the the field is larger in terms of what our expectations are,

[00:04:24] I think people can now sort of start to reengage with the market now that we kind of understand what the what the rules are, the rules are not right. It's just, OK, new regime. How do I trade this now versus going through the pain of getting into this new regime? Yeah, it seems like people are still left from the old regime like this. This tendency to short volatility every time it spikes is still there, I think. And, you know, I know nothing about options, but usually that ends badly eventually for everybody who doesn't. Yeah. And, you know, there are always these accounts on Twitter that gain a following because they'll just go on there all the time.

[00:04:53] They'll be like, OK, short, you know, naked short this VIX product or vol product. And a lot of them are gone now. And so, you know, that could be a very painful position when you're finally wrong. And the idea that it takes volatility a lot longer to fully mean revert. Right. Everyone thinks and has been conditioned over the last two, three, four years that as soon as a VIX spike sell like in August. Right. August VIX 60 and it goes back down to 20 in two days. And that's, you know, where a lot of people like, oh, that's what we're supposed to do.

[00:05:23] But this is a much different regime. This is a lot more like 2022 in that that elevated vol is very sticky now. Right. Because there's all these unknowns that have to be processed and it's going to take a lot of time to process those. So we're going to get the presentation before we do. I just want to make sure the listeners know that you're kind of a big deal now. There's been a lot of stuff going on here. You know, first of all, 27000 views in the last OpEx effect, which blew our record away by a lot. Yeah. Second of all, in Times Square, spot game was up on the big screen. We'll put we'll put the picture in.

[00:05:51] And then third, you were involved in the app, the outing of Captain Condor in the Wall Street Journal. So it's been it's been a big month since we last talked for you, Brent. It is. Yeah. The Nasdaq thing was pretty surreal. So thank you for allowing me to talk about myself. They were nice and they put us up. We launched a new product, a brand new product a week ago. So Nasdaq was very kind and they put our name up on the Billboard Times Square. So that was an amazing experience. It was kind of funny because Webull launched the IPO yesterday.

[00:06:21] So we're on the same screen in Times Square. I didn't IPO anything yet. So I can't I can't buy a beer yet. But, you know, one day. But it was it was it was a wild experience. And then the Captain Condor was really interesting because I'd been working with the Wall Street Journal on that story for a while. And so they finally put it out last night. I thought they were going to ice it because of all the tariff stuff. But they said everyone's tired about talking about talking about tariffs. So they discussed this gentleman who sells a lot of iron condors.

[00:06:46] And, you know, it's a it's an interesting strategy to zero to the option selling strategy and go and read about it in the Wall Street Journal there. And the rub of that is that the trader uses a Martingale strategy, which I think if you're familiar with gambling, you know that when you lose, you double down the next trade or the next bet. And so that's what this person does. And it's a potentially a very risky trade for him in his discord room. So it's it's a it's an interesting read. Did he out himself to the Wall Street Journal? Is that or did someone out him or he just decided to come home?

[00:07:16] So I came up with the name Captain Condor, which the Wall Street Journal didn't mention. I was like, come on, guys, you can mention that at least. And then this person appeared on Instagram holding a snowboard with the words Captain Condor and SPX on it. So he he kind of dots himself with that. So that's why I didn't feel too bad about referring to the Wall Street Journal who we thought this person was. And they spoke to him and did all their due diligence stuff.

[00:07:39] So apparently he's a guy that lives out in the middle of nowhere in Nevada and runs this trading room and, you know, has this condor strategy. It seems to be doing, you know, serving him pretty well. So we'll see how that ends. I fear man badly, but time will come. Your comments in the article didn't didn't seem to suggest it's going to end well for Captain Condor. I mean, you literally start to do the math on it and you're starting to talk about 10, 20, 30, 40 plus million dollars of risk on a single trade.

[00:08:06] And, you know, the doubling down, obviously, it just continues to ramp that risk up. And so you have the issue of he just runs out of capital, if he's long, if he's wrong, like seven, eight times in a row, you know, volatility is just higher than he expects. And and or the bank just saying his broker just being like, look, dude, you're done with this. Right. Same thing as the casino just being like, hey, Jack, you know, stop doing this. You know, keep your bets consistent, I think is what they say when you start messing around with your bets. Right.

[00:08:34] And they kick you out of that high roller room that you hang around. And so, yeah, yeah, both of those are in the high roller room. So it works well with my value investor style to be to be in the high roller room. That's true. Depends on what the value is. Deep value. Maybe you want to double down. So before we get off too much of a tangent, we probably should get into the content that people expect from us here, especially given what's been going on in the market. But yeah. And in this first slide, we're talking about why all this is so important and this idea that the use of options has risen a ton, especially since 2020.

[00:09:04] Yeah. And obviously, explosive options growth. February was a record. I believe March was another record. You know, it's just it's just more and more and more options volume and the. Growth of the options market is significantly outpacing the underlying stock market. And the other issue here we're talking about momentarily is we're having record options volume, but very, very, very poor liquidity now in the underlying, which I think is exacerbating movement.

[00:09:33] And the deal that the way that just essentially works is everybody gets on their brokerage platform, they buy or sell options in 90% of those trades are done by options market makers. And so when they are trading those orders in real time, they have to start hedging. And so as you can see here in this example, if everyone just buys small lots of AMC that can add up to be a significant amount of an overall position, in this case, 100,000 calls of AMC.

[00:09:57] If you look at that and say, OK, these are what we call 50 delta options, that would mean that the market makers in this case may have to buy up to 5 million shares of AMC. So that's all just basic math, but basically it's that hedging flow that translates options volume into impact in the underlying stock. So here's that math there. Delta is just a number that comes out of a Black-Scholes calculation that tells us how many shares you have to buy to hedge your options position.

[00:10:21] And so you could see there that is that basic math. And then the other thing to take away here is that that 5 million shares hedges you right here, right now, if the underlying stock price moves up or down, or if time simply passes, they have to adjust those shares. And that's where this idea of gamma hedging comes in. Gamma tells us the share adjustment that market makers have to put into place, right, how they have to adjust their hedge. And so that, again, is the underlying, the impact to the underlying stock, right, when options trade, that's why it moves the underlying.

[00:10:51] And as we're seeing these big moves back and forth with all these tariffs and everything, I have to assume the options market is exacerbating that probably in both directions. Yeah, because as a market maker, you still have to hedge, right? Now, you're not hedging one for one every single option that trades. You don't have to go out and immediately buy stock. But it's about exposure. When the exposure gets to be within your limits of what you're comfortable as as a market maker, then you have to start taking action.

[00:11:12] And so when you have to take action in this market, when liquidity is so poor, you know, you're sort of having to buy into a market that has very limited liquidity is gapping significantly higher, right? So you're really chasing a lot to the upside and chasing a lot to the downside. And you oftentimes may not have the liberty of saying, let's go wait this out, right? Because, you know, the market can move so much. So you really have to take action into an illiquid environment, which can obviously impact the way that things are trading.

[00:11:41] And so, yeah, I'll flip through these real quick just to get it out of the way. And please look at previous videos you've done on this. But they're very, you know, set ways that market makers hedge. And this explains how that hedging flow can shift and impact if you want to take a snapshot of these or you can. Or I figured with the episode we was recently, Jack, we really went through this, I think, mid last year. I think it was October, I believe. Yeah. So we'll pop through this because I know there was a lot of banter there, if that's cool. But this explains how that hedging flow exactly works.

[00:12:10] Yeah. So on this next slide about the OPEX cycle, I mean, this is why we do these things on the OPEX, on the options expiration week is because things can change with this cycle. But can you just talk a little bit about what the cycle is and kind of where we are right now? Yeah. The general idea is that the third Friday of every month, which is today, Thursday the 17th, and it's early this month because tomorrow is a good Friday. So there's no trading tomorrow. So today's expiration and the positions build up into the third Friday or the monthly options expiration. And with that, options hedging flows build up into that expiration.

[00:12:39] And then also in the expiration, the options expire and the hedging flows associated with that expiration need to be adjusted, right, or removed. And so around this third Friday period, there's generally a lot of what we believe options hedging flow. And then the options impact kind of flexes, right? It's a little bit bigger around this timeframe. And we have a bunch of stats that kind of support that idea. So generally right now, we think that the flows have been supportive in the market. And with VIX expiration yesterday and OPEX today, we think that support is kind of wearing away.

[00:13:10] And the idea is like the types of options that are expiring, whether it's puts or calls and how in the money they are, like all that plays a big role in this, right? Yeah, that's exactly right. Generally speaking, when you have big imbalance in calls or puts, that can lead to mean reversion of the market. So if you think about recently, we've had a ton of puts in the market, right? The market's been crashing. So put values are very extreme. When we get into expiration, those puts start to lose value very quickly and they're removed. And so that allows market makers to buy back short hedges that can help the market to lift. And so that's the general idea.

[00:13:40] Similar with everyone's kind of buying calls, right, into an options expiration. In expiration, market makers are buying stock to hedge. If all those calls expire, they don't need that long stock anymore, right? So they sell the stock and that's what creates a short-term market high. And you can see back in time, there's a lot of significant market events that are tied to these options expirations. Not every expiration is a huge, meaningful event, but there has been several instances of major turning points related to expiration in the past.

[00:14:08] So as we look to April, I know I've learned something here. This is not a quarterly expiration, and so I'm assuming this is probably significantly smaller than last time. It is. You'll read in some of the publications about a trillion dollar expiration, and they generally don't state that in a great way, like Goldman puts out, you know, $3 trillion expiration. We like to measure the expiration in terms of delta, which is stock share equivalent. And so what you see here is a couple of takeaways. Number one is we were very skewed towards puts a couple of days ago.

[00:14:36] Now we're more in the, you know, 60%, which means that that put pressure is not as big now into this expiration, which relieves a little bit of the bounce fuel that I would think would come. Second, you know, the obvious takeaway is just looking at the size of the S&P 500 expiration versus all other indices, stocks and ETFs, you can tell that the expiration is really an S&P 500 event, particularly in this market. Which makes sense because I think people are really focused on that, you know, macro equity environment.

[00:15:06] Like what is the S&P doing as opposed to worrying as much about what individual stocks are doing, right? This is sort of a do I own equities or do I not? And that pushes focus on that spider S&P 500 more so than Tesla or NVIDIA or the individual shares. So it would be fair to say this is an expiration where you may not have high conviction in terms of what's going on. Like I think back to the COVID expiration, we were just selling like crazy. You know, I think I've learned from you, we have huge momentum to the downside. Those puts are worth a lot of money or on the upside with the calls. Like that's where you have a better chance of a turning point.

[00:15:35] We did have a big sell off now that we've kind of rallied back. It seems like maybe a little more unclear. Is that true? Yeah. My feeling was that this expiration helped the market to rally on Monday and Tuesday. And we wrote this in our founder's notes. So it's not kind of a hindsight statement with the idea that we had a lot of VIX expiration options to crush, right? And those got crushed on Tuesday. VIX broke 30 for the first time in quite a while. And then that night we got more bad tariff news on NVIDIA and this $5 billion charge.

[00:16:03] And, you know, I don't know a ton about that, but that kind of sent the market kind of back down. So we really chewed up any fuel there. We got a mild rally out of this. And now that, you know, that fuel that was being offered by expiration, which was buying support, I think it's just gone now. Does that mean that we plummet on Monday? You know, I don't think that's clear because it's not so much notional size. But the idea of options expiration being supportive to the market is now gone.

[00:16:30] And so I think that that leaves us in a little bit of a no man's land as we move forward. So I think there was a tradable rally based on options expiration, but that that tradable rally is now likely gone. And this seems like a tough environment for anybody, no matter what you're doing. Like if you look at the technicians right now, they're having a hard time figuring this out. Like the macro guys are kind of throwing their hands up. Like they don't love what's going on long term. But in the short term, you know, we could get a tariff announcement one way or the other every day. Like it just seems like this is a tough environment to figure out no matter how we're looking at it.

[00:16:57] Yeah, I went to Twitter and I said that, you know, the idea that you should use technical analysis in this environment, you know, is probably going to fail. And some people don't like that if you're a technician because of the idea that there's all this headline jumping and headline risk. And, you know, we usually monitor the market in a similar fashion by looking at gamma by strike as support and resistance zones. And for this whole month, we've been telling people you got to step away from that discipline and really look at options volatility as the guide here.

[00:17:27] Right. How are vols shifting as a signal of, you know, fear and greed. Right. And that's really, you know, when the when the when you all you have is a hammer, you just see nails. Right. That's the famous expression. And so you really have to change in these regimes. This goes back to regime shift as the way that you you navigate these markets. And so I saw a hilarious technician, he put up a said, oh, the 562 day moving average has really served me well in this market.

[00:17:53] It was really hilarious. And I was so glad he put that out because it just highlighted this moment. Right. Where, you know, it's a different regime. You got to change your discipline a little bit accordingly. So the next slide is single stock. So what do you see in there? Yeah. The big thing here is just showing you the size again by Delta Notional. So this is a bigger monthly expiration we normally see, but this is the June OPEX. So it's not as big as the June expiration to. So to your earlier point, it's a good size expiration, bigger than it normally would be for a monthly.

[00:18:19] But it's not, you know, one of these stamp the put a put a flag in the ground in terms of, hey, everybody, you know, pay a ton of attention to this. But it is definitely, you know, a pivot here, mainly because the the VIX complex was pretty big going into this expiration. So in this section, as we look at predicted volatility, you know, we it's funny when I look back, like we've been talking about calmness like before last episode forever. Yeah. It has just been like you and I are trying to think about stuff to talk about because it's so calm out there. And then like now we're way to the left again. So, you know, this to your point earlier, like this volatility is sticking for now.

[00:18:50] Exactly. And so what this basically shows you is our gamma index. So how positive or negative is gamma in the S&P 500? The the more negative or the lower gamma is, the more market making flow is inducing volatility. Right. And so in this case, it's like, look, we have this volatile environment. And the argument in the statistics suggests that the options hedging flow is just making volatility larger. Right. And there is a lower bound to this when we really crash.

[00:19:18] And I think we tested that lower bound over the last few weeks. And it's interesting. I was bringing up here that I think that lower bound and this is simply where the volatility starts to actually reduce if we get negative gamma, enough negative gamma. The idea with this is that options market makers have to net own options. And so they tend to own a lot of tail risk. Right. Such that if we open up down 50 percent tomorrow, the market makers will all survive. Right. Because they own these really teeny options. And so when you stress vol enough and if you get, say, VIX 50 plus.

[00:19:47] Right. Those tail risk options start to add a lot of value to the market makers portfolios. Right. And they can start to offer better liquidity. Maybe tighten spreads up a little bit. They're kind of protected in that environment. So I think that's why you can have this kind of lower bound in volatility where gamma gets extremely negative because those those hedges start to kick in for them. I never heard that, actually. That's really interesting. So really crazy levels of negative gamma. It actually can reduce volatility. That's yeah, that's something new.

[00:20:15] Yeah. And, you know, they have risk just like anybody else. And so if you're just short a whole bunch of puts. Right. And that's it. And you come in and S&P is down 20 percent and the VIX is at 100. You're going to have business. Right. And, you know, we all know there's stress tests of portfolio. So if you just close your go home one day, your risk manager is going to come over like, dude, you're sitting here and, you know, naked short all these puts. And if this scenario happens, you got a business. We're not allowing that. Right. So you'll lose your job or whatever.

[00:20:45] But the risk managers are just not going to allow that type of positioning. Right. So you always have to carry these hedges such that when you stress test your portfolio, you survive. And that's what that's about. So on this next slide we're talking about, I think you just mentioned the VIX was ahead of OPEX this time. Right. So the order they're in matters a lot. Yeah. And when VIX expiration occurs before OPEX, the direction of the market will generally reverse the week into and out of OPEX. So what that essentially means if we sell off into OPEX, two thirds of the time we rally the week after.

[00:21:14] And so, you know, that is the suggestion here that. I would argue we kind of it's a murky whether we rallied or sold off in this expiration. Early this week, it was clearly a rally. You know, we've kind of traded a little bit lower here. We're kind of grinding, you know, in this case. And so, you know, there is some statistical evidence that, you know, market does respond to these options expirations is the takeaway from this slide. So I might have my part of my title here, I think, on this next one. This is that the cover is dead might work very well on YouTube.

[00:21:44] So I always find something every time we do this. I always find something in one of your slides and I'm like, I'm going with that. So I think I could probably come up with me and my LLMs could probably come up with some variation. This is going to work. Yeah. And this chart here, the reason we post this is because we try to emphasize that there is something important about VIX expiration and options expiration. And so if you look back here just in short-term history, you could see the big market shifts, right? And oftentimes they could be fairly short shifts. But look at FebOpex.

[00:22:11] That was clearly the pin that was pulled that allowed the market to just tank. And then there was a rally into March OPEX and March VIX expiration. You can see here. Then we had to digest the JP Morgan collar, which was at the end of the quarter. And then, you know, obviously there was Liberation Day, which was this kind of huge event, right? And the market basically trended sideways into that. So in this case, we had a major rally off the lows off of the 90-day pause, right? The tariff pause. And you can see that the market high was on Tuesday night.

[00:22:40] VIX expiration is expiring Wednesday morning. Okay, yes, we got the bad headline. But the point here is that the rally fuel that was offered by options expiration was, in my view, or I would argue, burned up or used up on the final leg of this rally into Monday and Tuesday. And then there's just nothing left there to support the market. So a little bit of a bad headline just suddenly fills into a void or a vacuum because there's literally no options flow there to help us out. And so now, you know, we've, again, trended lower here.

[00:23:10] S&P is at 5325 as I talk. So that optics has indeed marked a short-term high. So as we look back to last time, yeah, we were talking about this idea of known unknowns. And it's interesting, like they can make a rally stick. There was, they became known, but then they became unknown again. And it's been, we've had a little trade-off here between known and unknown because I think Liberation Day was a lot worse than people thought it was going to be. Yeah. And when you go back and we talk about known unknowns, it's such an important thing because when we have a single event, right, you can hedge that.

[00:23:39] A CPI or even Liberation Day, right, was this event. It was this day we could say, okay, I need to hedge the downside of this date. I can point to it. In this situation, like a bank crisis or, you know, Silicon Valley Bank, for example, it was one we were always using. We know what the unknowns are, right? Tariffs. We don't know what the effects of this is going to be. And so, you know, you have to hedge that in a much different environment.

[00:24:06] And that's why you want to own volatility, longer-dated options as opposed to playing in the zero DTE space. And so, you know, when does all this get resolved? No one knows, right? Until we know what the problem is. And the hope was that in March we would turn the known unknowns into knowns, right? Trump was just going to say 10% for everybody, let's move on. But he took the nuclear route and now we have this just giant mess.

[00:24:32] So we were thinking and the idea here was that we were going to clear out a lot of this hedging around this tariff situation. But he raised the bar in terms of it being a much bigger tariff tax or bigger situation than anybody was pricing in. And, you know, now there's been this reckoning with that. So a lot of what we were looking at in the March timeframe was these extreme hedges related to that date, Liberation Day, with the idea that people were hedging out the worst-case scenario.

[00:25:00] Well, the worst-case scenario is worse than everybody expected. And so that led, obviously, to major volatility spasms. So as I flick through these charts for March, what you're seeing is, you know, elevated realized volatility in front of this tariff analysis, right? High volatility premiums. We started seeing some stabilization in the volatility space into the tariff deadline, right? Because we all knew the event was. People had hedged it. Okay, I'm just waiting for the event now, right? I'm prepared for it. I'm waiting for it.

[00:25:26] And then it, you know, obviously turned out that people's bearish expectations or hedges were not bearish or big enough hedges based on what we were served up. Were you seeing – I'm just curious. I forget from the last episode. Were you seeing tons of hedging into Liberation Day? Like how would you classify, like, how much hedging there was into that? It was – there was never a peak, and we can show you a couple slides. There was never this incredibly massive open interest for puts or VIX call open interest.

[00:25:53] It was at or near highs that we've seen, but it wasn't new records. And this chart here is showing you skewering. And what that shows you is how expensive were puts relative to calls. And the fact that most of these stocks, these are individual stocks, are clustered at this bottom right area into March was telling us that, yeah, people were bearish on stocks and they were owning puts, right? Put prices were quite high into this event.

[00:26:14] But, you know, that was giving us on a relative basis, it was pretty bearish positioning, meaning that if you look back over the last year, this was very bearish positioning relative to the last year. Well, when Trump comes out and says, hey, everybody, you are bearish enough. I'm really going to take a wrecking ball to this whole situation. Then you suddenly go from being like, okay, I was looking for a brown bear and this, you know, grizzly polar bear thing just walked up on me. And, you know, now I'm in trouble, right?

[00:26:41] And that's kind of what, that's kind of like my metaphor, I guess, for what happened. It's interesting because like with these events, most of the time when people hedge the events, they end up being not as bad as people think in the market rallies. And to your point, like when people, when he started talking and people thought it was going to be 10%, you saw a rally in the market, you know, and then we're tariffing penguins. And then like basically the whole thing like fell apart, like the chart made no sense. And like, so obviously it was, you know, normal thing would have been fine. It's just, we went so much worse than what people expected. Right.

[00:27:10] And here you can see is the term structure from March and, you know, FOMC was, was, was just a nothing burger in front of the tariffs, right? Everyone just doesn't matter. And tariffs had this like, you know, and granted this was a few weeks out, but it had options market because he was pricing in some volatility around that event. So it was a known unknown, this, this date, this thing, we all have a range of expectations. And the bank said, this is what we're looking for. And nobody was bearish enough. Right. And that was the thing.

[00:27:38] I think, you know, we certainly didn't see that, that coming as well. It looked to us like people were taking profits, right? This was HYG put volume. People were selling HYG puts. And, you know, now you look at this and you go, well, that trade worked for like two weeks. And now HYG then had a big spasm, right? Because the credit market started to crack. So, you know, there's all this evidence that the market was stabilizing because people thought they were pricing in enough risk. Turns out they weren't. You know, we certainly didn't see not enough risk being priced in either.

[00:28:07] The other thing that was interesting too, you know, we had the big JP Morgan collar position, which expired the day before the tariff announcement. The market really used that as this downside shock absorber. If you look back at the charts, you can see that we really stuck to that level through a couple of days. So there was this options, this feeling in the options market that people had a bearish stance, but they were bearish enough, right? They were hedged enough, you know, for what everyone perceived was going to happen.

[00:28:34] And obviously our perceptions have all just been totally eviscerated with what's happened over the last couple of weeks. And so, you know, that was really the quite interesting takeaway, I think, from looking into March, feeling that everyone was ready, and then coming out of that tariff thing saying, turns out nobody at all was ready across any discipline. I don't care if you were macro, technical, analyst, whatever. So on this next slide, we're getting forward to April here and what you're seeing, into the known unknown. Yeah.

[00:29:04] And the theme here is vol regime change. And I think that, you know, when we talk about vol, we're talking about volatility, and I think that's the big thing. The big rally, we just talked about this, you know, the high of this short-term rally over the last week where we were really in the abyss last week. We got the tariff pause, these options flows, which, you know, when the credit market is wobbling, I'm not going to point to options hedging flows as saying this is the driver, right?

[00:29:32] But when we got the 90-day pause and the credit market kind of calmed down a little bit, do I believe that the options flows the last couple weeks were supportive? Yes. And that support, again, is going away, and that's the framing that we have here now. We're really much in this zero-gravity situation where there's nothing obvious to tether us to this general 5,300 price range, right? And so that, to me, is the takeaway right now. Like, this sticky vol is going to be here, and it's if-then statements.

[00:30:00] If you give me a rally, I have a very comfortable feeling on how to react to the rally. If you give me a drop, I can have some insights into what we do, you know, into a lower market. But right here, it's very much, you know, undetermined and unstable is the word that I would use. So this next one's interesting because for people like me, we hear all the time liquidity is terrible beneath the surface, but I wouldn't know how to quantify that or how to look at that. So how are you looking at that in this slide? The bank's put out a couple charts.

[00:30:28] The CME offers this thing called the liquidity tool, which is they offer book depth in the ESE Mini Futures, which is, you know, the benchmark for hedging S&P 500. And what you see here is the-so this is the bid-ask depth. It has gone to zero, and if you look at the bank metrics, you know, you're seeing liquidity that is as low as it's ever been. And this occurs at the same time that we've had record stock volume.

[00:30:53] So you have record stock volume into horrible liquidity, and you have record options volume into horrible liquidity. So why are we getting the biggest moves that I've ever seen in my life, right? Right. And, you know, Jack, feel free to say I've seen this before or not, but you're talking 400 S&P handles in seven minutes. We've had several instances of that to the upside and the downside. And, you know, what is happening? What is driving that? Its liquidity is a zero.

[00:31:22] So when they come out and they say, hey, I'm going to pause tariffs, there's a massive short cover that has to take place in the stock space. And there's also optionist hedging flows that have to occur into this no liquidity environment. And the result is you get this, you know, some of the biggest, you know, moves that I've ever seen in my career in terms of magnitude, right? 400 handles in seven minutes. I mean, that's happened three, four times in the course of a week. It's just something that you've never seen.

[00:31:49] Literally, the data was like you have to go back to the flash crash, which I think was like in 2014 to start seeing moves of similar magnitude. That move when he took off the tariffs or when he paused, the tariffs was insane. Like I was at a rest stop and I went to like get some Shake Shack. It was the market was down where I went. And then when I got back, come on, what just happened? Yeah. Like the move was, yeah. I mean, it gets to your point though. Like if you have great liquidity, like that's probably not happening. It's absorbed. Right. And so in this environment spreads, why not? Right.

[00:32:16] Instead of offering a nice, you know, 10 cent wide bid ask on some option that you're offering a dollar wide. Right. And so I think the market makers actually, this is a very nice environment for them. The options market maker because they widen the spreads out. People are forced to pay those spreads to trade with them. So I think they're probably doing great in this environment. But that liquidity is so poor. That is why there's so much volatility.

[00:32:37] And until the credit market sort of regulates itself and goes back to normal, that liquidity can't really improve. Right. Because, you know, rates are moving all over and, you know, risk margins are increasing. And so, you know, there's all this stuff shifting. And so not only, you know, do you have just the equity volatility, just general equity volatility, the fundamentals of the ability to sort of price liquidity, like, you know, what is my borrow rate?

[00:33:04] All that sort of stuff is totally kind of up in the air and shifting with rates jumping and all sorts of other oddities. Right. So it's very unstable. I think liquidity will start to improve a little bit here. Is this going to go back to the highs of, you know, late last year or whatever? No. But I think, you know, we were on the abyss in terms of the credit market and this basis trade and all this other bizarre stuff happening. Right. So I think liquidity will improve a little bit, which should bring vol in a little bit.

[00:33:30] But again, this is going to be a new normal of higher volatility regime as opposed to, you know, something a la last year where things were really quite stable. So looking at this next slide of realized volatility, I mean, I would have guessed we didn't see anything like too much in the year 2020 or the COVID thing in terms of realized volatility. But it looks on this chart like maybe we did. We did. Yeah. Realized vol, one month realized vol was there in green. It's at 46.

[00:33:54] And you have to go back to literally the COVID crash March of 2020 to find that same thing with that short, short-dated five-day vol. And so, you know, that puts into context just how extreme this is. You literally had the world shutting down and the S&P loss, you know, equities lost 20 to 50% of their value over the course of like two weeks. Right. And so, you know, we all realize this is extreme.

[00:34:18] But the reason that this is interesting from the options perspective is because when you have one month realized volatility at 46, you can directly compare that to the VIX. And the VIX was right now around 30, right? 32. And so, if we've been moving at a rate annualized volatility rate of 46% and the VIX is looking forward in time saying, okay, 30, you can make an argument that VIX is now maybe a little too cheap. Now, should we have the same spasms as last week because we have the 90-day pause? Well, no.

[00:34:46] But it just generally is explaining to you that 30 VIX now is actually kind of normal as opposed to overbought, so to speak. Do we have more? It seems to me like we have longer periods of low volatility than we used to in the history of the market. And then the spikes are much bigger. But, like, I've only been through what I've been through, so I can't say, you know, maybe someone who knows the history better would say that's not true. Do you think that's true?

[00:35:11] I think that historically there is this kind of post-great financial crisis mindset that the Fed has our back or the policy tools come out. And so we always are very safe buying dips, right? And so that is a general framework that, you know, people view the market. And then there are all these new tools that you can use to express trade ideas, right? I can use zero DTEs to bet on mean reversion. I can short, you know, I can buy VIX puts.

[00:35:39] I have these vol ETNs, right, that I can play mean reversion with. And so I think that we get a volatility regime where vol mean reverts very quickly. And then all of a sudden when vol doesn't revert very quickly, people are really caught off guard and it takes a lot longer to sort of absorb that stuff. So it's sort of a view almost more on vol of vol in the modern environment as opposed to anything else, right?

[00:36:05] You know, going to zero vol, as you can see in this chart, would happen very quickly. Like August, the August vol, you know, VIX 60, you know, spike mean reverted so quickly, right? Because everything is safe, right? When Powell came out and saved Silicon Valley Bank, vol got squashed immediately. But now we don't have that implied, you know, government support, right? And now the cat is out of the bag and no one can make vol mean revert. So it's pretty interesting. The regime shifts are pretty interesting.

[00:36:32] Yeah, and it's interesting because neither Trump nor Powell has been telling people, you know, equity investors, at least what they want to hear in terms of like, we're coming to the rescue here. Like you're not hearing too much of that. Nothing. Yeah. And there's not even bad news to anchor to. And that's a problem, right? If people just need certainty, traders, business, if the deal is the tariff is 500% for everybody and that's just the deal, like stamp it and we can move on, then we'll figure it out, right? But we can't figure anything out because you just don't know. There's no deal. There's no concrete, anything.

[00:37:01] And so how do you price that? Well, you really can't. But you're just as scared of the right tail and a 10% market rally as you are of a 20% decline. And so, you know, there's just nothing to absorb that uncertainty at this moment. And again, speaks to the new vol regime. Yeah, I feel terrible for people running businesses. First of all, who are dependent on stuff from China because obviously they're having a tough time.

[00:37:23] But even other people, I mean, if you have to make decisions that, you know, span a period of a year or even six months or five years or anything with a business, like how do you make that decision right now? I mean, you just can't. You have no idea what the regime's going to look like. Yeah. And to that point, in 2022, we never knew when inflation was going to stop, when Powell would stop raising rates, right?

[00:37:42] And so what's interesting here is when you look at where the VIX is, again, around 32, that was pretty much where we were, VIX, you know, upper 20s, low 30s from the COVID crash all the way up until late 2023, right? When Powell finally said, okay, I think I'm done with raising rates, then suddenly vol collapsed, right? VIX collapsed.

[00:37:59] And so the oddity here, you could almost argue the outlier was the extremely low volatility we had in 2024, which is also the time where the semiconductor trade really kind of picked up and the AI trade gave everyone this hope, right? So, you know, the new regime is actually almost in some ways more of just a normalization to what the environment we had in the last, you know, five years as opposed to what we saw last year. So what are we seeing on this next slide with the no longer pricing and extinction event?

[00:38:29] I talked before about, you know, looking at realized vol and why that's important. This is SPDR, realized vol in red, so again, up in that 40 area. And implied vol, which is one month implied vol, what are traders pricing in for 30 days in the future is about 25% annualized implied vol. So there's a huge gap between those. And yes, you know, we're unlikely to see VIX 50 again in the near term, in my view, at least in the next, like, let's say, month. I don't believe we'll see that.

[00:38:57] But that does not mean that we should see that full mean reversion to levels where we were before. So when realized vol is above implied vol, that oftentimes can signal that traders aren't pricing enough volatility in the future. Now, because we came off this super spike, you know, you got to give a little leeway to that. But this idea that we should now see kind of volatility stable at these higher levels is what you're seeing in this data.

[00:39:21] In other words, there's no reason for this blue line to go back down to where we were last year because realized vol or how much the market's been moving is likely to remain so elevated. So, you know, VIX 30 is not expensive anymore is kind of what the takeaway is, you know, from this chart. Even though VIX 30 is lower than where we've been last week, it's kind of like that's, again, just the new normal. It's the new regime that we're in. Yeah.

[00:39:46] Going back to your point about Chris Cidial earlier, like he had a great tweet recently where he looked at a bunch of market events historically and showed like vol can stay up in these events. I mean, people think it's just going to come right back down, but there's been extended periods and a lot of different types of markets where it just didn't. Yeah. And you look at 2022, the VIX spike was the high was when Ukraine war kind of end of January started. Right. And there's a huge office expiration rate there, of course, January 22. And right in this FOMC, there was this weird period where VIX spiked.

[00:40:16] And even though the equity market continued to go down, down, down, down, down the rest of the year, VIX never made a new high past January. Right. Even though the equity lows, I think, were in November of 22. So, you know, we could have that very similar situation where people just sell their equities off. If the credit market doesn't roil or freak out again, I don't see another reason for VIX to have a huge spike. Right. Right. But we could still have materially lower equity prices. Right. Even if VIX just stays around the 30 area and we don't set a kind of a new high.

[00:40:47] So on this next one, we've got another title for me here. Abyss on hold is another strong one. Yeah. The yellow line is one month S&P SKU. So what are one month options prices? What were they priced at? And, you know, put prices which on the left of this chart always have a higher price than relative calls. Right. That's just what we call the SKU. And so the gold line is where SKU was or options prices was on 4-2. So the day before Trump's tariff announcements. Right.

[00:41:15] Gray line was last week when when the VIX was at 50 and we're all really feeling, you know, nervous about the situation. So what has happened since Trump announced the pause? The teal line is where we are today. So what have people done? They've sold puts. That tail risk that we're talking about is getting sold. Right. Because of the fact that this 90 day pause has really taken. Again, we stepped off. We stepped back from the cliff. So those put values have come in a lot.

[00:41:42] You can see they're almost to where they were before the tariff announcement. Right. But at the money vol, sort of the vol of options for where we are trading right now is flat. Right. Is equal to where we were. So that's where we're trading right now is where we're trading right now is where we're trading right now.

[00:42:08] There's just demand for upside because people want to buy the dip. It's not necessarily a hedge. Whatever it is, there is a bid for those upside options. Right. Over the last over the last week. And I think that's super interesting that you see that starting to reflect in the options prices because it says that they're still positioning for like this a little bit of hope. And I think that is, you know, if that's just a hedge, it kind of makes sense.

[00:42:32] But I think the idea that we rally back to, you know, near all time highs in the next 90 days doesn't seem to be on the table because every update we get from Powell and from Trump is like worse news. Right. Not a constructive update. Right. And so I just thought that this pricing was really interesting. Right. The abyss has been taken off and people are adding some type of expression of hedging the upside or playing the upside here.

[00:42:59] So this next slide, you referred to the zone earlier, and it seems like the zone is a little bit more challenging now, given how crazy things have been. Totally. And I said you need to, you know, you need to change your lens. Right. We always talk about gamma as this important flow, right, in options market. And now it's more about vol. And so the only place where I see gamma representing something significant is all the way down under 4,600 to 4,800. See, there's these big positive lines, right, in these curves which measure gamma.

[00:43:27] They're positive down under this 4,800 level. That is telling me that funds have sold put options in that zone. So when the market dropped down, we saw traders selling this. So when I look at this, they are expressing this view and it's pretty good size of saying we don't think that the options market or we don't think the S&P rather is going to go below 4,800, 4,700 in that general zone. It's a wide zone, but that's where we're seeing big put options. And, you know, look, that's about 10% lower from here.

[00:43:54] We never really visited that area so far in this decline. But that is an area where, number one, from a sentiment perspective, clearly some traders think that's going to be low. And then the second one is options hedging flows could actually start to support the market if we get down there because they're going to be big enough to confront, you know, whatever else may be happening. And then to the upside, remember I talked about it looked like call buyers were stepping in here. This options expiration is going to clear out a lot of those calls, right, a lot of those long calls.

[00:44:24] So the driver of upside equities in the form of short of dealers being short calls, right, and having to buy stock into rallies is being sharply reduced now. And the way you could tell that is see this blue line is today, right, after expiration, the gamma shifts to that yellow line. So what that is telling me is gamma for the upside is getting less negative, which means that calls are being closed up, right?

[00:44:50] So that tells me there's now less upside fuel to the upside, particularly get up over in the 5,700 area. So that kind of right tail now seems to be being reduced from the positioning perspective. Hopefully I was able to relay that and it makes sense.

[00:45:07] There's a very muddy picture in this 5,400 to 5,500 area, but we did see some call sales in that zone, 5,400 to 5,500 when the market rallied, which seemed like people were saying, okay, I think that this is probably, you know, fair value, right? I don't think the market's going to rally all that much more if we get to just that pocket.

[00:45:26] Right. And so I'm really operating off of 4,800 support and 5,400 to 5,500 being resistance now over the next call it month based on this options positioning. So this next one, VIX volume, it didn't spike as much as you thought it would have? Yes. This goes all the way back to 2020. In blue is call volume. Here is the record VIX spike that we just had, you know, one of the largest that we've seen in some time.

[00:45:53] But you can see that we're certainly elevated in volumes, but we're nowhere near record. August was still bigger. Last year was still bigger. And you can see there's a bunch of other situations over 2023 and 2024 where VIX call volume was bigger than what we had over this last spike. And my takeaway from this is that what we're seeing is while the volume is still large, I think there's a lot of people that are just selling their stocks and saying kind of like 2022, like I'm just not even going to own stocks.

[00:46:21] So I don't have any reason to hedge this because I'm just selling my equities, right? I don't have anything to hedge. Then why buy VIX calls if I'm not hedging something? And that's a theme that's going to pop up here a few times as we look forward. I was pretty surprised to see that we didn't set a record VIX volume because options volumes continue to set records, right? And it was pretty amazing. We didn't set a new high. It seems like you could pour one out for VIX volumes or whatever.

[00:46:45] So our good friend Donald Trump is back here to tell us that all these people telling me that zero DTE is what's causing this, they are not correct? Yes. I just think this meme is hilarious. I had to include it to bring a little levity. CMBC put out an article that I took issue with. They said, and they quoted an RAA guy, it's kind of a weird quote because someone that doesn't necessarily seem like they're linked to options analysis, said that, yes, I've never seen volatility like this. Zero DTE is causing all this volatility. And that to me just doesn't make any sense.

[00:47:16] Our data says that zero DTE brings mean reversion. What does that mean? It's like when there's a low zero DTE call buyers come in, they make the market rally. Same thing with a high. When the market rallies, zero DTE pushes the market back. So it almost suppresses volatility in a way. And then Goldman put this chart out that shows the percentage of total volume that's zero DTEs. They declined sharply this month, which makes total sense because if you're going to hedge out what's happening these days, zero DTEs doesn't do you any good, right?

[00:47:45] Because you're hedging out some event on a known unknown that is going to occur at some point in the future, a date that you don't know. So you have to own longer dated options, longer dated VIX calls, longer dated puts to hedge that out. A zero DTE doesn't do you any good because if no headline happens today, no deal happens today, that hedge is worthless, right? And further, most of these things are just headlines in random tweets. They're not actually like two o'clock on, you know, Liberation Day was the day we could hedge, right?

[00:48:12] Everything else since then has just been headlines, seat of your pants, whatever is kind of coming up. So the key here is that when VIX spikes, and this is what we've seen before, zero DTE volume goes away, right? Because the focus goes on longer dated options, zero DTE options get more expensive, so there's less reason to trade it, et cetera, et cetera. There's a lot of reasons for this inverse correlation.

[00:48:37] And also, we expect like the effects of zero DTE to mostly be, by their definition, right, contained to that day, unless they cause some sort of flows and other options that then like the decline, they triggered, like triggered more flows or something, right? Yeah. The fear is that they create this cascading effect because everyone's buying zero DTE puts and that puts on this exposure that just blows the market up. And there's just no evidence to show that's ever happened. Like, does it add maybe to a little bit of intraday movement? I think there's some evidence to that.

[00:49:05] So it's like intraday ranges may be a little wider in some cases or even tighter in some cases based on zero DTE flow. Like, there's clearly sometimes when zero DTE dominates the price action. But to say that VIX 50 and the calamity that we've had has been really like driven by zero DTEs to me seems just factually incorrect. And on part of this, obviously, you see that the volumes have been subsiding. So that kind of points to that as a phantom or fake news, as Trump may put it.

[00:49:36] So in this next slide, we're getting back on this idea of finding the zone. Yeah. The takeaway from here is that we see evidence of call selling stepping up 5,400 to 5,500, which is to me traders saying, OK, I think that's the cap for this market right now. And I'm going to continue to operate that off of that belief in the next month. And then support, you know, we continue to just see this 40,100 area as an area where people were selling puts, funds were selling puts. And that should bring, we think that should mark a key support level for the market.

[00:50:05] Obviously, if the credit market blows up and you see, you know, credit default swaps in, I don't know anything about this basis trade, but that all rears its head. And then these support levels don't mean anything because when the credit market starts to break and people start to worry about company credit, they buy equity puts. And they're insensitive price buyers, I believe, in these situations. And that's because the equity goes to zero before the bonds go to zero. So you can hedge your credit, your bonds, right, by buying equity puts.

[00:50:33] And so that is when you start to see the super spikes, right, is when the credit market starts to have problems. This next one, I think, gets at the question, you know, both for people like you and people like me as well are asking, which is how does all this impact earnings? And again, we're looking at a quarter that ended before Liberation Day. But guidance, I think, is going to be incredibly crucial as we go through this earnings season. Yeah, and I'm not going to pretend to know what people do here or companies do here, but the information is going to be clearly very valuable.

[00:51:01] It's going to be maybe the most important earnings season of your lifetime, Jack, you know, to be determined. But, you know, clearly there's going to be a lot of updates here. There's been some people have mentioned, hey, maybe companies just kitchen sink stuff because they have cover under this tariff uncertainty. Just like any bad thing I can, let me get it out there. Maybe that's true. I really don't know what to expect, but I do think that options prices will be more elevated into this earnings season because of the uncertainty.

[00:51:27] When you look at individual companies in terms of whether you see them in the overall options market, I mean, is NVIDIA the only one that you really see? Maybe there's a spike overall because they're reporting? Yeah, there's still, you know, maybe Apple a little bit in this situation could be really key. But NVIDIA is still the only one that the whole market, the market as a whole, the S&P as a whole, will show any role, like a shadow, a pricing shadow when those earnings come up. And I remember it's a while, right, before they report.

[00:51:55] They report a lot later than everyone else. Yeah. Tesla is, you know, Netflix is tonight, which. They're always first, I remember. Yeah, and they don't, I don't think they're always worried about their tariff response. But, you know, Tesla's early next week, along with VRT's, a semiconductor-related business. And then, you know, you have IBM and Texas Instruments. So you're going to start to get more material tariff-related earnings next week. And that is going to be a moment where single stock importance is going to pick up.

[00:52:23] But I think what people are going to be pulling from there is the macro implications of the single stocks, right? Not so much do I want to buy IBM because of this or do I want to sell Intel because of this. It's like, okay, how do I look at U.S. equities as a whole because of what all these companies are telling me, right? It's going to be a macro response to these earning updates, which I think is going to be really interesting. Yeah, it's interesting. You're going to see way more earnings reports move in the overall market than normal because we're going to try to read into every single one of these and say, what does this tell me about what's going on in the overall economy because of the tariffs? 100%. And to that point, this is correlation.

[00:52:53] We talked a lot about correlation last year when I was at lows. And now correlation has picked up. But now we're just back to where correlation has been over the last, this is 10 years of charts, right? So it's this idea of do I own equities? Do I own bonds? Right? Those are the asset classes. When correlation goes to the lows, it's like, I got to own NVIDIA because that's the best. It's such a safe equity environment that we start stock picking. Now in this situation, we are in a do I own equities at all or do I own something else?

[00:53:21] And that's another part of this regime shift, right? How do I invest? Do I own stocks at all is what this is really reflecting. And it's just a normalization really is the way to look at it. And arguably the aberration was 2024 and early 2025, not so much now being unusual. It's actually the calm that we had, which is weird. So what are we seeing in this heat map on the next slide? This is entering into the macro fray.

[00:53:50] And as you know, I try to steer clear of that. But what I found was interesting to look at correlations is this is historical correlation. So 2020 to now. And these are all different products, right? So we have VXX as a volatility instrument. Then we have TLT and SHI. Those are bonds, US bond ETF, SPIDERS. Then we have Bitcoin, gold, Chinese stocks, European stocks as EZU ETF. And then DBA, which is just a commodity index ETF.

[00:54:15] And what's interesting to me is this top left quadrant over the last month has become extremely correlated. So Bitcoin, gold, Chinese stocks, European stocks and commodities have this suggest have all become very positively correlated in the last month where they are not correlated in any specific fashion. If you look back over the last five years, this is kind of suggesting that US assets, stocks and bonds are becoming correlated with themselves.

[00:54:43] And then anything that's not a US stock or US asset is becoming correlated. So the idea that, hey, I don't want to own US stocks. I can go own European stocks, Chinese stocks, gold, which is killing it, commodities, something non-US seems to be really picking up in the data, which is interesting because the US is bringing all this kind of chaos into the market, right? Or into the economic trading environment.

[00:55:10] And you're really seeing that in this correlation, which I think is fascinating. From an options trader perspective, if I want to bet on a rally or if I want to look for upside movement, do I go play European stocks instead of US stocks because they could do better? Do I allocate more to Bitcoin or gold and trade those options or trade those assets because they may be the more stable asset going forward? It really speaks to this, again, high correlation, right? Because now it's like, do I own equities or not? And do I go trade?

[00:55:40] Is there more tradable opportunities in non-US assets? Yeah. And it's really interesting. I mean, I think the US is an emerging market. The arguments are pretty overblown. But the same token, dollar down, US bonds down, US stocks down, it's not something you commonly see. And it is something you see sometimes in emerging markets. So it is an indication that people don't want to be in the US right now. Yeah. And these correlations really speak to that.

[00:56:07] Again, this is more so this interesting macro trade maybe than something out of the options space. But usually I'm looking at correlations among individual stocks and assets in the US. And like, OK, consumer staples are overbought relative to defense. And maybe there's a trade in there. But in this case, just the macro signal is really fascinating. So I included that there. And then I'm going to end on gold, which has just been ripping. It's up, I think, 12% this month in April.

[00:56:34] And what caught my eye here is we've been waiting for options prices to get overbought as a signal that gold may be ready for a pause. And Jack, I'm happy to announce that gold has now become overbought, I would argue. We're seeing now implied vols in the 99th percentile, which is very expensive. And so that generally tells me that options are now very rich. And it's hard for names, I argue, to sustain their momentum when you start to get these high implied vol ranks.

[00:57:03] Essentially, traders are now pricing in extreme movements on top of the extreme movements, which is usually not sustainable. And so you can see these are a bunch of the other US and international ETFs here. They're all clustered in the same pocket, right, in terms of volatility expectations. But in this case, gold being at the top of this chart and somewhat to the right tells us that calls are getting expensive and options prices are very expensive. And so that, to me, is generally a sign that this asset may be ready for a little bit of

[00:57:33] mean reversion here and some consolidation. So the next GameStop over there, Brenton, gold is? It very well may be, Jack. And that obviously extreme could never happen. I'm joking. It looked like that chart, that chart you put up, it's like, it just keeps going. Yeah, there's something very ironic about this being, you know, in this modern day of technology, it's like the yellow rock is what we all want. It's kind of fast. And it's like, I can hold it in my hand. It's real. It's not. It's very comforting, I guess.

[00:58:03] So that wraps it up for us here, Jack. And, you know, we'll definitely have a lot to talk about next time. I don't think neither you or I can guess can have any idea what's going to happen between now and then. But what I don't think is going to happen is you and I talking about low volatility in boring markets and nothing going on. Yeah, I think we're done talking about that for a while. Yeah, that is exactly right. So I do think, you know, I think my highest conviction ideas are if we rallied at 54, 50, 500 area, that's likely to be a top. And I think call selling in there makes sense.

[00:58:32] And then gold just seems to be expensive. So there may be some options opportunity in there. But other than that, it's very unstable. I wouldn't expect vol to mean revert at all. It's going to be, you know, it should remain stable at current level. So VIX should hover around 30. And then, you know, once we start to get updates, hopefully have some clarity over the next, you know, a couple of weeks in tariff terms and we can all move on with our lives. Well, that's a good note to wrap up on. You know, I hope you don't get even more famous, you know, before the next episode. I mean, I'm going to be like dealing with your publicist or something at some point

[00:59:01] here instead of talking to you directly. But hopefully at least a little pause in that. I would love to refer you to my publicist. That would just give me great satisfaction. Thank you, everybody, for joining us. And we'll see you next time. Thanks so much for tuning into this episode. If you found this discussion interesting and valuable, please subscribe in either iTunes or on YouTube or leave a review or a comment. We appreciate it. Jack Forehand is a principal at Validia Capital Management. No information on this podcast should be construed as investment advice.

[00:59:31] Securities discussed in the podcast may be holdings of clients of Validia Capital.