Jan. 24, 2025 Option Outlook

Did a late day surge burst break the 6100 wall?

Good Morning! Yesterday played out mostly how I thought for 6 hours and 20 minutes, then a late day MOC surge added 18 points to SPX, bursting through 6100, closing another green day at all time highs.

Late day MOC surges are not new. They happen probably once per week, sometimes positive, sometimes negative. This is why the late day straddles cost 8-10 points even though there’s only 5 minutes left in the day. That is rarely a free steak dinner. But the one thing that is hard to determine… will this MOC run sustain? Or was yesterday a fake breakout?

Today is 0DTE, and any existing position (including the daily iron condor put on after close yesterday) can get drowned in excessive 0DTE traffic. Today’s 0DTE looks fairly neutral, and next week’s option outlook is still a little bullish. There was a lot of positioning put on yesterday, moving the maximum vanna point to the upside a little. 6100 is still very strong, and again, I wouldn’t be surprised to see a pullback to 6080 today into next week with 6050 as a bottom area. However, there are a lot of catalysts next week with tech stock earnings and FOMC. I think there’s a high bar for FOMC to be bullish, but with tech stock earnings, they will likely have idiosyncratic reactions. Ultimately, I think it will be tense, but FOMC ultimately will direct the trading next week. If the market drops past 5900, that’s when we would see a rapid drop.

Overall, the market is positioned for neutral to slightly bearish back to 6100 with a chance to drop 6080, particularly for next week.