Jul. 15th, 2025 Option Outlook

Tariffs don't matter?

Good Morning! After a pre-market selloff due to Trump tariffs against Mexico and the EU, the market recovered to close .2% in the green.

I noted yesterday during the Market Moves show that the market and the economy measure two different things. While they are related in some sense, the market in the short and intermediate term in particular are more about flows and liquidity. The economy and fiscal/monetary policy affects flows in a longer term, but the markets are more about perception and flows. Sometimes there are quick reactions to economic news, but you need tools that show things like positioning to anticipate the next move in the markets, and right now, tariffs don’t matter until they affect liquidity.

Today we have an inflation report. SPX is not anticipating much movement, what is the default move for post-CPI?

Yesterday’s movement got the markets closer to the 6275-6280 ideal opex pinning area. The premarket so far looks like it wants to test the 6300 resistance. The 0DTE straddle is currently priced at $32 when there are bank earnings and the CPI print before the market even opens. That’s quite complacent, but at the same time skew is rather steep. On the 0DTE timeframe, the first bid is at 5970, which is a 5% move projection. Yesterday that was at 3%. These are just hints at how customers are looking at the market, as the wings are beginning to get bought but closer to the money we are seeing premium selling. This can cause choppy, but flat markets over the immediate term.