May 4th, 2026 Option Outlook

The war that isn't a war?

Good Morning! SPX opened up a lot but after a series of lower highs and lows, it only closed about .3% up.

The Friday morning burst to the upside definitely had more shades of a short squeeze, but it settled as time went by. This was after Trump rejected Iran’s peace proposal and said the blockade was “genius”. As I said a while back, supply chains seem to find a way, and right now we are seeing China start to supply their neighbors with oil. There are still natural gas, fertilizer, and helium problems, but the market seems to be focused on AI. When geopolitics are so obviously bearish, it seems to complicate flows between short squeezes and actual selling. How are participants handling this?

This week is the last week where we don’t have negative vanna. From that standpoint, 7275 is a nice target area with the chance to pop to 7300. If we do reach 7300, I’ll feel better about getting bearish. Next week is slightly negative for May opex where we can see cracks starting to form, but June opex is extremely bearish and we should at least see a test of 7000.