Look at semis now.

A guy I worked with got duct-taped to a chair.

This happened more than once across about 20 years. 

He could not stop himself from closing positions early, so a few of us literally taped him to the freaking chair until the trade played out. He was not a small guy either, and it took a number of people every single time.

I'm going to tape your hands to your seat today, because you need it.

This morning in the chatroom, I walked through what is happening in SPX. The big trading firms, the dispersion shops, are selling boatloads of naked options in SPX and using all that premium to buy calls in single names like AMD, Intel, Nvidia. They are taking premium in one place and applying it somewhere else.

That part has been going on. Fine.

Here is the part that got crazy. In the last few trading sessions, retail piled into zero-DTE SPX calls, not the singles but the index itself, and the size trading through with nominal open interest is massive. 

They're not opening contracts and holding them, they're opening, closing, opening, closing, all day, just churning calls.

And it has distorted the skew in SPX to the point where calls out-of-the-money are pricing at almost the same vol as at-the-money. That is the closest thing to an inverted skew you will see in this product without a war breaking out or something.

When calls get that expensive, the entire world looks at it and goes "up yours, I ain't buying it." That's where retail is right now. The bid disappeared. The dispersion shops are happy to sell you those calls all day, and now there's nobody on the other side.

So what happens?

You get the rollercoaster I called for this morning. By noon today, the iShares Semiconductor ETF was down 5%, Qualcomm was down 13% (the worst session since 2020), and Micron was down 10% after leading the market to record highs yesterday. AMD down 6%, Intel down 8%.

The gamma feedback loop did not need a war to break. 

The calls got too expensive, the bid went away, the whole setup unwound in a session. 

And the gamma risk in this market has never been recorded at a higher level, so every day you're going to keep getting this until that gamma works itself out. 

Up 2%, down 2%, up, down, sideways, no thank you.

You cannot trade your gut in this kind of tape. You will get whipsawed both directions and end the week wondering what happened.

Define your risk, size small, write the plan down before the open. Anything bigger than that and you'll be the guy I'm taping to the chair next.

If you want me to walk through this with you directly, book a call with TheoTrade.

To your success,

Don Kaufman