The Next 24 Hours Are Critical.

Added: 2026-05-18

[00:00:00]Tomorrow is the major May expiration and we may be topping. There's an important level here in the morning positions that suggests that we need to hit this level and cross it or we might be at risk of a reversal. In this video, I'll explain to you why that is and I'll show you where to find the data yourself in VS3D. What you have here is the May SPX AM position. Now, every single day in VS Pro, we talk about the zero day position using VS3D. Every single zero day position is going to have some influence, but still to this day, the third Friday expiration expiring in the morning is the biggest driver of a market dynamics. It's the largest place for institutional players to play. This is a position that expires tomorrow morning. What you see on my screen right now is a market maker position. This is the position whose hedging is driving most of the actual market dynamics right now. On the right-hand side, you have dealer longs. On the left-hand side, you have dealer shorts. And each strike is labeled. Might be too small for you to see right now, but this here is 7,500.

[00:00:54]Exactly where we are right now. Now, this red range, the whole range of inventory is dealer short inventory.

[00:01:02]These are options that are net held short by market makers. And up here, the top, this is all dealer long options.

[00:01:12]Now, what's important about this range here is you can see there's another cluster of dealer long options below this important level here, right? So, somewhere down here around 74 1/2 to 74 55, there's a cluster of dealer longs. Now, the tendency for the market when it's being hedged like this is to test these major levels.

[00:01:33]Now, either we resolve the test and then what happens next is that the decay of the options, the delta unwind of the position, forces market makers to keep buying futures, pushing us towards this area here at 75 20. Now, if we get there, this also changes the dynamic based on the positioning that's living behind this in June, importantly. Now, if we fade here, which is kind of the assumption.

[00:01:58]If we fade here, the decay works the opposite direction.

[00:02:01]All of the delta the market makers have bought, the futures that are long to hedge this option here at 7,500 has to be sold back out between today and tomorrow morning. And the selling happens through a range that's kind of locally negative gamma. What that means here is that this is an area that we're more likely to slip through quickly.

[00:02:19]Because in a negative gamma environment, dealers have to sell when the market goes down and that forces market down more. The tricky part here is that this position expiring tomorrow might actually cause the selling to start by itself. Usually what we talk about when we talk about gamma, we recognize that it's conditional. It requires somebody else to start the ball rolling and then market makers either absorb the motion or they exacerbate it. But this is different. When you have positions that are expiring soon and big positions with big amounts of futures tied to them, it's the unwinding of that hedge because the position tomorrow doesn't need any hedge. It's gone.

[00:02:54]That can start the ball rolling itself.

[00:02:56]This is a situation where this is a critical inflection point. If we remain below it today, then the market makers' own position can kick off a reversal into tomorrow. And if that happens, you have a nice neat target here at 74 half waiting for a potential pin setup in the morning. Now these levels set important ranges for the market, important boundaries for example. When the market's caught in a vault up cycle like it has been recently on this rally, it tends to find the largest cluster of dealer short options and it happens to be between May and June at 7,500, this level that's important tonight. When the market settles down, when vol relaxes or as time passes, it tends to find balance at the market makers' longest option position. So heading into tomorrow, as vol has climbed every single day basically with fixed strike moving higher on the entire rally, we are right there at that short vol target and now is a critical test. Now again, the this data is not magic. It doesn't give you the answer every single day. What it does, it gives you better probabilities because these flows actually have to happen as part of the business of market making. When you have the right positions, you actually know where there's buying and selling and when to expect that pressure in the market. Now, if you want the data yourself, just sign up for a free 7-day trial to VS2D. The link should be in the description. And if you want to see how to put this in practice every single day, join us in VS Pro.