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.
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.
