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The S&P 500 managed to rise a bit on Friday, which was also OPEX. However, once the index failed to move above the 20-day moving average, that marked the sixth straight day it failed to close above that level — and the fourth time it traded above it intraday but couldn’t hold the gains. Perhaps that’s the hand of systematic sellers, but whatever the case, the index has been unable to clear the 20-day moving average, which for now appears to be an important resistance level.
The index has been consolidating sideways over the past week, likely due to the pinning effects from OPEX. Now that OPEX has passed, it’s possible the trading range could begin to expand.
The spread between dispersion and correlations remains historically wide, but as we move further into earnings season, that spread should begin to narrow. This would imply falling dispersion and rising correlations — a combination that typically points to lower stock prices.
That’s because the VIXEQ is currently nearly double the VIX. As companies report earnings, their individual implied volatility will decline, while index-level volatility should rise — or at least fall less. This will cause the ratio to contract, and historically, when that ratio falls, stocks tend to follow lower.
We’re also seeing the classic rotation away from out-of-the-money tail-risk hedging toward more immediate at-the-money protection, as reflected by the sharp collapse in the SKEW/VIX ratio.
This week will also include two Treasury settlement dates, on October 21 and 23, which means liquidity will likely tighten again. As a result, usage of the Standing Repo Facility could pick up on both Tuesday and Thursday.
For now, rates and the dollar have been cast to the side — that could change toward the end of the week when the CPI report is released, but until Friday, that’s not the market’s main concern.
MIke
Glossary by ChatGPT
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At-the-Money (ATM) Protection – Options contracts with strike prices equal or very close to the current market price of the underlying asset.
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Correlation – A statistical measure showing how closely two assets move in relation to one another.
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Dispersion – The degree to which individual stock returns within an index differ from each other, often reflecting idiosyncratic volatility.
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Earnings Season – The period when publicly traded companies release their quarterly financial results.
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OPEX (Options Expiration) – The date when options contracts expire, often leading to increased market volatility and positioning adjustments.
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SKEW/VIX Ratio – A comparison between the CBOE SKEW Index, which measures perceived tail-risk, and the VIX, which measures overall market volatility.
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Standing Repo Facility – A Federal Reserve program allowing eligible counterparties to borrow cash overnight in exchange for Treasuries, providing liquidity to money markets.
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Systematic Sellers – Algorithmic or rules-based investment strategies that automatically sell assets under predefined conditions.
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Treasury Settlement Dates – The days when the U.S. Treasury issues and settles new securities, temporarily draining liquidity from the financial system.
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VIX (Volatility Index) – A measure of expected 30-day volatility in the S&P 500, derived from option prices.
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VIXEQ – A volatility index derived from individual equity options rather than index options, representing single-stock implied volatility.
Disclosure
This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.
Subscribe to receive this FREE daily commentary directly in your email
This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.
Gamma Collapse and Thinning Liquidity Raise Market Risk - Advanced Topics
Mott Capital's Market Chronicles October 17, 2025 3:44 PM