Feb. 19, 2025 Option Outlook

Opex week shenanigans begin

Good Morning! Some late-day shenanigans in markets with a 15-point rise in the last 5 minutes to close 15 points higher.

The 0DTE chart was bullish all day, but individual stocks and the higher tenor vanna environment is quite bearish. As a result, the market was flat and boring all day long until that last breakout to the upside to close at all-time highs. Were there any changes to the March opex month outlook?

The first thing to note is that with the rise yesterday, aggregate vanna took a strong dip. it is roughly at $5B when yesterday we were looking at $12B in aggregate vanna. Sometimes it happens that the market will test its absolute limits. If we get much higher, we would be looking at neutral vanna, which is quite bearish, signaling a top is very close. 6100 seems to be the first stop on the way down with some put support.

There is now a little put support for March opex starting at 6100 on the downside, but the strong negative vanna still will take precedence past 5900. There might be some relief at 6000, but the March opex picture still looks quite bearish, with the slight possibility of that breakout high at 6250. If I were to handicap the bearish scenario vs. the bullish, I’d say 85% chance of bearish drop, 15% chance of bullish breakout. Not much chance of a flat month, but the downside might take a little time to develop if there are no catalysts.