Aug. 25th, 2025 Option Outlook

JackHole Rally

Good Morning! The thin, cool Wyoming air made JPow feel like a dove, suggesting a September rate cut is on the table. The markets rallied 1.5%.

My ideal scenario would have been for JPow to be hawkish, because that would have presented an amazing buying opportunity. Instead, we went straight to the upside as JPow was a bit dovish. I presume his companions around the world who already started cutting had an influence on him, as did the very poor jobs report. I guess JPow doesn’t have the same concerns about methodology as Trump does, but I think that undermines the narrative that the jobs report will be suspended.

JackHole was a huge catalyst, and I suggested taking a wait and see approach going in. What is next for markets over the coming week?

I’m sure many are expecting me to harp on the rally to 6500, which could still happen in September, but this week dealers are net short those 6500 options. This makes vanna a negative force over the coming week.

However, for the rest of the month, 6500 is still a strong resistance, but also a magnet.

In the end, 6500 should be a magnet for most of September, and this week has a chance to be more volatile. That can give some opportunities to put on a 6500 butterfly for September expiration on a swing timeframe. Any kind of rally could present opportunities to sell call verticals also for some more premium selling. This week seems light on catalysts, so premium selling seems like the right direction to go in the short term.