Oil is rising, bonds are selling, and stock markets are under pressure. Investors sold Big Tech stocks following the results. 10 year government bond yield It reached just 4.7%, the highest level since January 2025.
In many ways, this is similar to the picture from March, when stocks presaged a month-long slide as the Iran war escalated beyond investors’ expectations. nevertheless, S&P500 It’s less than 3% off the record. The index has surpassed last month’s low and is at a level not seen since May.
S&P 500 in the past month
Looking for clues about whether the stock market will become more volatile or fall further, options traders are watching what the buildup of trades around certain levels in the S&P 500 says about the position of large institutional traders, who provide liquidity by buying and selling securities.
Evidence suggests that these market makers were likely “long gamma” for at least a month prior to this week, meaning they owned options that profited from volatility. When the market falls, you buy stocks to balance out your puts. When the market crashes, they sell stocks to balance things out. Based on data analysis from SpotGamma, Barchart, and Cboe LiveVol, the largest positions were concentrated around the S&P 500’s 7,500 level.
These areas of activity can act as guardrails on the highways of trade and create areas of support and resistance, but they are not indestructible. Options traders see this as the main reason the S&P 500 index has remained within a roughly 200-point range since mid-May.
If the index moves too far from the market maker’s comfort zone, its positive gamma can flip to negative. This means market makers, often referred to as dealers, need to try to catch up by creating more volatility, rather than reducing it.
According to the bar chart volatility model, that tipping point is at 7,500, meaning traders may no longer be able to count on consistent bullish buying. if State Street SPDR S&P 500 ETF Trust (SPY) If dealers fall below 740, where they are most exposed to gamma radiation, the risk of a significant drop increases.
“We’re in a negative gamma situation,” said Brendan Herbert, options products manager at Barchart. “If it goes down, market makers will have to sell to cover the delta, which could theoretically make the downside even more intense.”
Spot Gamma founder Brent Koczuba said in a note to clients Thursday morning that while the market’s degree of positive gamma has declined, there is still “a fairly mild amount of positive gamma” up to the 7,300 level.
Kočuba added that with the S&P 500 index below the “risk pivot,” it will add “flies” to short-term, cheap, out-of-the-money puts with a bearish directional bias.
