Crude oil prices are rising, bond yields are increasing, and the stock market is facing pressure, particularly in the tech sector following disappointing earnings reports. The 10-year Treasury yield has reached 4.7%, the highest since January 2025, prompting concerns reminiscent of a previous market downturn in March.
Despite these pressures, the S&P 500 remains only about 3% off its record high, trading above last month's lows. Options traders are analyzing the positioning of institutional traders, particularly around the 7,500 level in the S&P 500, which has acted as a support and resistance zone.
Market makers have been 'long gamma,' meaning they have options that benefit from volatility, but this could shift if the index moves significantly away from their comfort zone. A critical point is identified at 740 for the State Street SPDR S&P 500 ETF Trust (SPY); if it falls below this level, the risk of a significant sell-off increases.
Brendan Herbert from Barchart noted that we are currently in a 'negative gamma regime,' which could exacerbate downward movements. Brent Kochuba from SpotGamma highlighted that while some positive gamma remains, the S&P 500 has dropped below a 'risk pivot,' suggesting a bearish outlook and prompting him to recommend short-dated put options with a bearish bias