RinoTaglia

Good Morning! If you ever had doubts about the power of option hedging, yesterday should have shed them. The day started with an equity selloff, likely catalyzed by a recalibration of SOFR futures to express the higher likelihood of a 25bps FOMC rate cut instead of the 50bps that some were hoping for. We even dipped below the 0DTE LIS for a minute before a rapid and sharp recovery that closed 150 points off the lows and up 58 points on the day in $SPX. While I was saying we would bounce all day, and Volland was flashing it, the magnitude of that rise was even more than I anticipated... but helps with the 5650 overvixed signal that is now 95 points away. Despite the bullish overvixed signal, I will be closing my bullish bets before FOMC. This is because dealer aggregate vanna is dropping like a rock, as I said could happen 2 weeks ago. We went from a peak of $30B notional down to $20B in less than a week, and as of now are looking at $10B after Sept. opex. Further, there is no put support after opex either. We are set up for a major vol event sometime after Sept. opex (not necessarily the day after) Agg vanna is a strong leading indicator, probably the most actionable metric in Volland for swing trading. The stats and reasoning are too long to explain here, but can join the discord and watch the vanna video for more details. In short, vanna is where you identify future hedging, not gamma.