Mid-Week Thoughts Are So Back!

Back by popular demand—Mid-Week Thoughts are back! The recent subscriber survey made it clear: you wanted more frequent insights beyond just 'The Week Ahead,' so here we are. I'll keep these updates sharp, focused, and actionable… just enough to keep you ahead of the market without unnecessary noise. Let's dive right in.

After putting on risk via equities and the recent SPX call spread risk reversal for 3/21 expiry (5700P 5800/6000C) filled at -22, I'm increasingly confident that the recent sell-off is entering its late innings, and it's finally time to rally. While I'm not quite at 100% conviction—I’d ideally like additional confirmation—markets do look considerably better.

It's been a vicious cycle for markets as of late… CTAs relentless sellers, dealers short gamma, and the endless headline risk around tariffs creating an exhausting backdrop. The silver lining? Positioning is now significantly cleaner and there’s been some relief on the tariff front today.

I've emphasised positioning repeatedly lately because it's key to understanding the next market move. Recent data I've seen highlights substantial de-grossing and monetisation of hedges, particularly VIX trades and rates. Such a scenario typically signals an over-hedged market environment, one primed for a rapid unwind that can trigger a sharp rally. The recent spike in volatility-of-volatility (VVIX ~130, now 110) further confirms this over-hedged condition, meaning the unwind from here could be swift and powerful.