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Don Kaufman here. |
Last year, S&P would move 50 points overnight and that was it - chicken was done. |
You'd wake up, see the damage, and there was nothing left to trade. This year? The complete opposite. |
Nothing happens until the cash opens, and that changes everything about how you need to approach this market. |
I've been watching this shift play out for months now, and most traders are still stuck in last year's playbook. |
They're reading pre-market moves like they mean something. They don't. Not anymore. |
Look at this morning. |
PPI comes in hot. S&P drops 30 handles pre-market. Looks scary, right? Then the bell rings and boom - NASDAQ goes positive, tech stocks ignore the whole thing, and we're buying the dip again. |
Here's what's really happening: options order flow is dictating everything now. And I mean everything. |
The Overnight Era Is Dead |
Remember last year? |
You'd go to sleep with S&P at one level, wake up 50 points away, and that was your trading day. The futures told you the story. The overnight session actually mattered. |
Not anymore. |
The overnight session has become completely irrelevant. |
We're massively unchanged going into every session now, then all the action happens when options start trading. |
This isn't some subtle shift - it's a fundamental change in market structure. |
Speaking of things that don't work like they used to - these trading platforms keep breaking because nobody that works there actually trades. |
Options Tail Wagging the Stock Dog |
Yesterday we put a trade into Altria Group - one options trade - and that thing was moving markets. |
The order flow from individual options positions is having an outsized impact on underlying stock prices. That never used to happen at this scale. |
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In fact, that MO in/out spread yielded a 30% profit in just 90 minutes. |
But here's where it gets really interesting: when options drive the bus, everything becomes more reactive, more violent, and less predictable from traditional analysis. |
You can't read overnight futures and assume anything about the trading day ahead. |
This morning proved it perfectly. Microsoft, Apple, Amazon - none of these stocks took the hit that the S&P futures were showing. |
Why? |
Because the options order flow hadn't played out yet. The futures were lying to you. |
Which is why it's so important that you have access to high quality order flow data like Brandon's surveillance console. |
I'm fighting mouse problems, symbols switching around, and basic functionality that just doesn't work. |
It's frustrating as hell, but it also tells you something important: when the tools don't work properly, you better understand the underlying mechanics even better. |
The New Trading Reality |
Here's what this means for your trading: |
Instead of: Seeing NASDAQ down 140 pre-market and assuming tech weakness
Do this: Wait for cash open, watch if individual tech names ignore the index move - that's your signal the overnight read is garbage |
Stop making decisions based on pre-market action. Just stop. |
The pre-market volume isn't telling you anything about how the cash session will develop. Even when we dropped over 30 handles this morning, the S&P futures didn't even do 200,000 contracts. That's nothing. |
Wait for the cash open. |
That's when the real order flow shows up. That's when options activity starts driving actual price discovery. |
Watch individual stock behavior relative to index moves. When tech stocks are flat while the index is down 30, that's when options flow at work. |
The tail is wagging the dog. |
Why This Matters More Than You Think |
This shift isn't just about timing your entries better. It's about understanding that the entire feedback loop between derivatives and underlying assets has changed. Options used to follow stocks. Now stocks follow options. |
The VVIX hit 100 this morning while we're five minutes removed from all-time highs. That's not normal market behavior - that's options-driven volatility creating feedback loops that didn't exist in the old overnight-move era. |
When Altria options move the broader market, when individual tech stocks ignore index weakness, when pre-market volume becomes meaningless - you're seeing a completely different market structure than what worked last year. |
It Was A Great Run |
The overnight era is dead and buried. |
Trade the new reality or keep fighting ghosts while the options flow eats your lunch. |
To your success, |
Don Kaufman |
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