May 11th, 2026 Option Outlook
New ATH on opex week
Good Morning! Friday accelerated to new ATH with a .8% advance.
I’m reading in several places that “GEX” is near its own ATHs. I cannot stress this enough; GEX is a false indicator. The general assumption is that all calls are sold and all puts are bought makes the indicator nothing more than accumulated OI. After going to a couple of institutional conferences, the MMs, exchanges, and real data analysts are giggling at everyone who believes GEX is indicative of anything. The underlying assumption is obviously not true, so what do the options actually say about current markets?
Over the past several weeks, the weekly option outlook has dominated. Any IV further out than 1 week has remained quite sticky, which has allowed some large strikes to be passed on a longer-term tenor. That does get paid back eventually but wouldn’t happen until closer to that timeframe. This week, with May opex, is lightly bearish down to 7300, which could be tested this week. This means that there could be a slow burn to the downside this week as we begin to retreat from 7400, which has slight resistance. The VIX is skyrocketing today and has acted strangely all last week, reinforcing this potential.
As for gamma… yes, we are strong positive gamma, but most of that is below current spot. That is a topping sign due to the negative vanna that these same options have. When we were in the same boat in 2021, that positive gamma was roughly in the midpoint of the rise and there were a lot more customer bought calls mixed in there, making it a false indication of what was happening. This is very different from 2021. During the April short squeeze, I don’t think dealers were hedging their long calls aggressively. Why should they? They were making money, which is a different scenario than downside negative gamma loops. If that is the case, they will find themselves a little more underwater as IV degrades, and they will be forced to sell as these strikes get closer to expiration and 1 delta. That huge strike at 7000 is a June expiry, as are most of those calls. I think we will test 7000 before June expiry, and that will be a huge test. If it fails, a swift move as low as 6500 can come. Yes, I know that is a 900 point drop, but the macro environment supports it as does the geopolitical environment. The inflation prints and China summit this week could push it over the edge.