Jan. 15, 2025 Option Outlook
Was CPI all that great?
Good Morning! Yesterday saw a lot of whipsaw with a favorable PPI number, but ultimately, we closed relatively flat.
In the premarket today, CPI came in at expectation, but the market was ecstatic, rising almost 2%. All this week I had mentioned that 5900-5930 would be a target if inflation was seen favorably. I would call this neutral, yet the market skyrocketed just shy of 2% in the premarket. This demonstrates the power of vanna in event vol situations, where the “results” of the catalyst itself many times mean less than the hedging that was put on for it. Should we expect a blowoff top now?
The weekly and the “all expiration” vanna agree, it doesn’t look like we are set for a breakout. 5900 will likely be a pin going into opex. There is so much vanna there that it is the most likely scenario. Any sort of selling will cause a retracement back to 5900. None of the earnings from here on out should move markets significantly either. This burst to 5930 would count as “peeking”, so I expect a retracement probably today, but at worst during opex.
We extended a little further than I thought we would, but all signs are pointing to a pullback. I think will see 9500 by Friday, but we were pulled up a little further from 0DTE positioning.
Hello! Thoughts after the close today.. we did breach 5930 and closed above it, do you still anticipate a pullback towards 5900.. thank you!