MARKET WRAP

One of the more uneventful days we’ve seen in a few weeks as traders dialed back on some near term fear in a number of ways. On the day: SPX +0.8%, QQQ +0.7% and IWM +1.1%. The much tighter range intraday added to a crush in near term volatility and the VIX back near 30. Bonds also showed some lessening fear, at least for a day. The US10Y yield was lower by -0.10, back to 4.38%. Oil was pretty quiet. The dollar was slightly lower but within range of Friday’s prices. Gold was slightly lower but not volatile. (more on potential lower vol trading opportunities at the bottom of the email)

• RiskReversal Pod: Guy and Dan discuss key earnings reports from major banks and tech companies, as well as the potential ripple effects on consumer spending and corporate strategies.

• MRKT Call: A look at tariff exemption confusion, recent dollar and yields moves, consumer sentiment, analysis of the market following last week’s rallies and as always, your questions answered.

MRKT MATRIX: April 14, 2025

Today’s Top Stories:

• Stocks Rise in choppy trading (CNBC)

• Auto stocks rise as Trump says he wants to ‘help’ some car companies (CNBC)

• Fed Governor Waller sees tariff inflation as ‘transitory’ in ‘tush push’ comparison (CNBC)

• Citigroup Turns Cold on US Equities, Joining Wall Street Peers (Bloomberg)

• OPEC Cuts Oil Demand Forecasts This Year and Next Amid Trade War (Bloomberg)

• More than 60% of CEOs expect a recession in the next 6 months as tariff turmoil grows, survey says (CNBC)

• Bank Trading Bonanza to Continue After Record Ahead of Tariffs (Bloomberg)

• Nvidia to Make AI Supercomputers Entirely in U.S. (WSJ)

• Trump’s Trade War Is Threatening to Derail the Office-Market Recovery (WSJ)

Today’s MRKT Call is Presented by MoneyLion

Trump's Smartphone Tariff Exemption Boosts Tech

The show begins with discussions over the tariff exemptions, and the confusion that was introduced to those exemptions over the weekend. Discussions on the troubling action in yields and the dollar and what that means for confidence in US policy. 

• Call of the Day 1: Wall Street Updates S&P targets lower

• Call of the Day 2: Historically low UoM Consumer Sentiment 

• Call of the Day 3: Wall Street downgrades in US Automakers and suppliers (GM, F, STLA)

• Call of the Day 4: Evercore upgrades in NFLX and DASH

• Analysis: AAPL, US10YY, TLT, NVDA, DXY, UUP, GM, F, STLA, GS, JPM, GLD, NFLX, UBER

• Your Questions Answered: 

  • Thoughts on Goldman’s results?

  • What can derail the Gold trade?

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Today’s RiskReversal Podcast is Presented by CME Group and SoFi

Bond Market Volatility: A Wake-Up Call for Investors?

In this episode of the Risk Reversal Podcast, Dan Nathan and Guy Adami dive into the latest market-moving developments, including bond market volatility, the impact of tariff uncertainties, and the implications for global trade and investor confidence. They analyze the Federal Reserve's role, rising U.S. Treasury yields, and how these trends could signal broader economic risks. The discussion also covers key earnings reports from major banks and tech companies, as well as the potential ripple effects on consumer spending and corporate strategies. Tune in for a comprehensive breakdown of what to watch in the markets this week.

What’s Next?

The recent collapse in the VIX has been notable. Unless we see a sharp sell-off in the next few days, this drop could continue into the long weekend. While the move may prove premature and even overshoot, these kinds of sharp corrections in volatility aren’t unusual. What’s arguably even more interesting in the short term is the even steeper drop in short-dated implied vols.

Keep in mind, the VIX reflects 30-day implied volatility. But if you look at IV in SPX, SPY, and QQQ options with shorter durations, there’s been a dramatic pullback in near-term crash premiums. For example, tomorrow’s SPX 0DTE implied vol is around 31, down significantly from last week when it was often above 100.

This helps explain why today’s relatively calm price action isn't so surprising—options markets are pricing in far less immediate fear this week.

From a trading and investing standpoint, this sets up a few potential short-term opportunities if the trend continues into Thursday:

1. A second chance on Hedges here or (even better) on further strength
   If we drift higher from here without any major news, it could be a good chance to reload on hedges at better prices. A VIX in the 20s is a much more attractive environment for buying protection than it was when VIX was in the 50s just last week. That applies to both index and single-name exposure. One possible structure: buy puts at recent lows and sell further out-of-the-money puts (10–20% lower) to offset premium.

2. Selling Upside Premium Against Longs Bought Lower
   If you initiated long positions at lower levels, consider selling upside call spreads against them. We mentioned this last week when vol was higher, and it still holds up with VIX above 30. If the market grinds higher into resistance—and it looks like that might already be happening—vol may continue to compress, but at the moment, it’s still pretty high. That sets up a potential scenario where you win both on your longs and on your short call spreads on a grind higher. And on a reversal lower from here you will be glad you sold some deltas. The levels are the same as last week, SPY above 560 and QQQ above 475 with expiries this Thursday. (this is only against longs bought lower)

3. Longer Term Bullish Call Spreads on Pullbacks From Here
   If we get a modest pullback—say 5%—but it happens in a way that doesn’t spike volatility, there could be chances to put on bullish call spreads in individual names. Last week’s chaos recalibrated expectations, so a 5% move lower from here may not feel volatile. If vol stays reasonable, you might get “second chance” entries into names you missed, with decent risk/reward setups at much lower vol than last week out. This could be the type of entry where you’re looking out 2-3 months on expiries with a call bought nearer to the money and a call sold at obvious resistance levels higher to mitigate higher than average vol.

For the rest of the week options are pricing about a 2.5% move in SPX/SPY which is really extraordinary given what we were seeing last week. Much of that may have to do with Easter Week and everyone assuming a bit of a news breather happens this week, but it sets up some potential opportunity that would have been impossible in last week’s environment. The vol collapse may end up being too far to fast and offers a second chance at a few things.

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