We're sitting on a $224 bomb that's about to explode

We're supposed to move $224 this week.

Actual move? Zero.

I woke up really early this morning, pulled up the screens, and I'm looking at this thinking: what the hell is going on here?

You got the spoos down 53 handles overnight. VIX heated up around 26. Everything's red across the board.

But here's what's got me baffled - and I don't say that lightly after trading this stuff since 1998.

Nobody's rotating capital anywhere.

I'm talking real money. Not crypto where fund managers can't even play. Where's the multi-billion dollar capital going today?

I spent ten minutes this morning trying to figure this out. S&P down over 70 points overnight, we're close to some significant lows, volatility's amped up... and there's no massive rotations happening.

No huge panic into bonds. No rush to safety. Nothing.

You know what that tells me? We haven't actually sold off yet.

In a real sell-off, you see trails of capital rotating everywhere. Flight to quality. Sector rotations. Panic flows. I'm seeing none of that.

But here's the kicker: Gamma don't give a damn.

You got a 224-dollar expected move this week. The actual move right now is zero. That leaves a lot of room on the table, and it doesn't work the way you think it does.

It's not like we just get paralyzed with fear and don't move at all. That's not how gamma risk works.

If we start rolling down the hill, we're gonna sell off huge. If we start rolling up, we're gonna have a rip-your-face-off rally. There's no in-between here.

You're not gonna be sitting unchanged tomorrow. If we're unchanged tomorrow, it's because we sold off massive today and then rallied back up overnight. Or we ripped today and sold back off.

You're about to move huge. Easily 100-150 handles in the S&Ps.

This is possibly the largest gamma risk I've seen in considerable time. Yesterday we did 62,000 contracts. The average year-to-date is 69,000 contracts. You had volatility the last couple days, and we're not even trading average contract size.

But gamma risk doesn't care if you trade smaller size. Gamma risk is just being rolled forward week in and week out. And right here, it's huge.

Last week we were in a very similar position. Right here on Thursday, same spot. What happened over two days? Right to the lower edge of expected move.

I'm not saying we're going down. I'm saying we are sitting on a crap load of risk.

How I'm Playing This

When you're supposed to move over 200 points and the actual move is zero, that's not sustainable. The market will collect that movement one way or another.

In volatility like this - VIX north of 25 - you better be open-minded to two-sided trade the entire day. The most fierce moves ever are gonna be rallies, but you gotta trade what's in front of you day-to-day.

Just be aware: you're about to move huge.

I'm positioning for this explosive movement right now. Want to see exactly how I'm playing the gamma bomb?

You can find them here.

To your success,

Don Kaufman

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We're sitting on a $224 bomb that's about to explode

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