on March 21, 2025

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The End Of The Quarter Pin And The JPM Collar Fund

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Our View

There’s an old saying: if trading were easy, we’d all be millionaires. That’s certainly not the case. Some of the best traders I know are not making money. The headlines, the volatility, and the constant pops and drops are killing people. Sure, some traders are making money, but if you’re a trend follower, it’s been confusing.

The ES sold off into bear territory, then popped like it wanted to go higher—just like it did on Wednesday—only to get bushwhacked by a retread healing that I mentioned in the OP earlier this week. I did everything right yesterday: I let the ES downtick after the lower open, bought at 5688, and got out of half my position at 5702 and 5712. As always, I didn’t hold long enough. The ES then rallied 80.75 points up to 5765.25, and the NQ rallied up to 20,105. The key to making real money is holding when the trade goes your way, but that is my main nemesis.

Just after the NQ made its high, I started trying to sell, but my risk aversion got the best of me. I got out with a few very small losses, and then the headline hit the tape. The ES sold off down to 5695, and the NQ dropped to 19,795. I had it right at both the high and the low.

“To put into context how dramatic the rotation out of the US and into the EU has been, CTAs are now short -$34bn of US equities vs. long $52bn of European equities. That spread is the largest we have ever seen by a decent margin.”
— Goldman Sachs

But, and there’s always a “but” in trading, I started buying the NQ and went from up to down more than I was up. It was a choppy mess, and I broke all my trading rules—something I’ve tried very hard not to do. As they say, old habits are hard to break. Later, the ES acted like it wanted to rally. The NQ would uptick as the ES went bid, but then it would just drop.

This headline didn’t surprise me; we already knew what was going on. But it spooked the market as we headed into the $6 trillion March Quad Witching. I think it’s apparent that traders have already been rolling their puts. My guess is they rolled 25% on Wednesday, another 25% on Thursday, and today they will knock off the remaining 50%—or maybe this up-a-day, down-a-day price action means they’ve been rolling all week. I just don’t know for sure but the last two days have been more pronounced, as has the auto-hedging.

During quadwitching the goal is to manage the risk of sudden price moves driven by the expiring derivations. I have to admit, I don’t fully understand all the mechanics, but here is a snippet:

Static Hedge with Futures

Short Hedge Example: Suppose you’re short 100 shares of SPY (S&P 500 ETF) at $500, and the market’s climbing today due to witching-related buying. You buy one S&P 500 futures contract (e.g., /ES on CME, multiplier $50 per point). If the S&P 500 jumps 20 points to 5200, your short loses $2,000 (100 shares $20), but the futures gain $1,000 (20 points $50), cutting your net loss to $1,000.
Long Hedge Example: If you’re long 100 SPY shares and the market drops 20 points to 5160 on expiration selling, you’d lose $2,000. Selling one /ES contract beforehand nets you $1,000 as it falls, reducing your loss.

Expiring contracts can “pin” the market to big strike prices (e.g., S&P 500 at 5200) as market makers hedge their books, causing choppy moves.

There is more about this in the Guest Post section below with our guest today, SpotGamma.

Stay vigil.

Our Lean

Yesterday was an extremely volatile, choppy day, and I expect more of the same today. The formula at play involves SPY dividends in relation to put/call parity and the optimal exercise of American options:

P + S = C.

If D (dividends) is exercised, you lose put exposure to earn the dividend. I understand parts of this, but like many of you, I need to re-watch the video for a deeper understanding. What I do know is that this process used to be done manually, but now it’s all handled electronically—no human intervention.

Our lean: There are no economic releases today but according to the stats, the Nasdaq has been up 7 out of the last 10 March Quadwitchings. I expect big moves in both directions and selling on the close.

I don’t think it pays for me to take a strong directional stance but if there is a gap down, I would look to be a buyer. If we gap higher—which seems more likely—I may lean into selling. That said, after the kind of trading day I had yesterday, I want to get a look at the price action. What I do know is there’s going to be high-volume printing at both the open and close—and a whole lot of shakin’ in between!

MiM and Daily Recap

The overnight Globex session for the ES futures showed weakness, beginning at 5731.75 and initially rising to 5709.75 by 08:30 AM before a pullback to 5684.50 at the cash open (09:30 AM), marking a decline of 25.25 points (-0.44%). A sharp reversal followed the open, as buying momentum surged, lifting prices steadily through the early hours to a notable intraday high of 5765.25 at 10:48 AM, gaining 80.75 points (+1.42%) from the morning low.

Following the high, profit-taking emerged, leading prices downward to 5735.50 at 11:36 AM, a 29.75-point drop (-0.52%). After a modest bounce to 5755.00 at 11:48 AM, selling intensified into midday, pulling ES lower to 5714.75 at 12:48 PM, down 40.25 points (-0.70%). A brief midday recovery peaked at 5731.00 by 1:09 PM before bearish pressure again took over, pushing the index to a new afternoon low of 5695.00 at 2:30 PM, declining by 36.00 points (-0.63%).

Late-session trading featured increased volatility and smaller swings. The ES briefly recovered to 5721.50 at 3:21 PM before dropping back to 5703.50 by 3:27 PM. Buyers made one more assertive move, raising ES to 5724.75 at 3:54 PM. However, the market closed somewhat lower at 5714.50, up only modestly by 22.50 points (+0.40%) from the regular session open but still down 16.25 points (-0.28%) from the previous day’s cash close.

The overall market tone was mixed-to-bearish, dominated by intraday volatility and a lack of sustained bullish momentum. Traders exhibited caution after early-session optimism quickly dissipated. Notably, the MOC data revealed a strong dollar imbalance favoring buyers at 68%, though symbol imbalance was modest at 52.9%, not crossing the significant ±66% threshold.

Trading volume was robust, with the regular session showing over 1.2 million contracts traded, reflecting heightened trader participation amidst choppy conditions. Total session was a total of 1.5 million contracts. The substantial dollar buy-side imbalance at the close failed to significantly lift the ES, highlighting underlying bearish pressures. Market sentiment remains cautious heading into the next session, with traders likely monitoring closely for clearer directional signals.

How to read the MIM

Technical Edge

Fair Values for March 21, 2025

SP: 51.99
NQ: 207.03
Dow: 343.57

Daily Breadth Data 📊

NYSE Breadth: 36% Upside Volume
Nasdaq Breadth: 48% Upside Volume
Total Breadth: 46% Upside Volume
NYSE Advance/Decline: 42% Advance
Nasdaq Advance/Decline: 37% Advance
Total Advance/Decline: 39% Advance
NYSE New Highs/New Lows: 35 / 37
Nasdaq New Highs/New Lows: 53 / 113
NYSE TRIN: 1.20
Nasdaq TRIN: 0.60

Weekly Breadth Data 📈

NYSE Breadth: 46% Upside Volume
Nasdaq Breadth: 51% Upside Volume
Total Breadth: 49% Upside Volume
NYSE Advance/Decline: 32% Advance
Nasdaq Advance/Decline: 32% Advance
Total Advance/Decline: 32% Advance
NYSE New Highs/New Lows: 85 / 345
Nasdaq New Highs/New Lows: 132 / 804
NYSE TRIN: 1.10
Nasdaq TRIN: 0.94

Guest Posts:

SpotGamma Founders Note:

Get instant access to our partners’ real-time market data and insights not available anywhere else. Here is last night’s Founder’s note getting you ready for today’s market and explaining the constraints in yesterday’s market. – MrTopStep

Founder’s Note:

Futures are 30bps lower ahead of today’s OPEX.

A large portion of SPX options expire at 9:30AM ET, with all other positions expiring at 4PM ET.

From the SPX perspective, you can see VIA TRACE the impact of SPX AM expiry. It serves to clear out the positive gamma nodes at 5,700 and 5,500, which have been offering relative resistance/support in those areas over the past week(s). Accordingly, the map is 100% red after 9:30AM, which infers fluid movement is available across the board. In all likelihood we will see some quick 0DTE options come in after the open, along with some new longer dated positions to fill in what has expired (i.e. fresh support/resistance levels).

What is left below is the big 5,565 JPM put that expires on 3/31, which we still think combines with 5,500 to offer support into end of March.

We’ve been trying to talk down the impact of March OPEX as it shifted from a put/vol heavy expiration last week, to now rather neutral. Backing this idea is our IV Rank vs Skew Rank plot, which shows IV’s reducing for top single stocks. Compare this plot to the one on Wednesday AM, and you will see that plot points are shifting from bottom right (high IV/expensive puts) to bottom left (low IV/cheap calls).

This also highlights the suggestion that the expression for this past week was indeed “short puts” as vols could come in a bit, but there wasn’t necessarily going to be a big a rally (long calls need a rally & don’t like the IV decline).

Clearly IV’s are still somewhat high depending on the name/tenor you select, but OPEX may serve to zap another tranche of elevated IV’s, pushing plot points more left.

As far as “the play” going forward, we think the available risk to play is right tail. This is because we see & like cheap calls/call spreads that are available into April OPEX, and these calls should do well if stocks bounce higher. While the world waits for 4/2, we are concerned that a sneaky, positive tariff tweet could spark an early move.

We of course have no real reason to materially believe such an early deal happens, we just see some call positions seem cheap “here and now”, which suggests that the cost of carry for >=1-month calls is minimal (particularly if you go call spreads). Semis seem particularly attractive from this aspect: SMH, NVDA or AMD as highlighted last night.

If you are worried about downside, puts have certainly gotten cheaper over the past week, but nothing that reads “cheap”. There is also a difference between if you are hedging something (like long stocks), or just looking to initiate a trade. If you are in the former camp (hedging), then adding some protection via SPY/QQQ put spreads is reasonable at these prices. If you are not hedging then we’d argue nothing looks particularly attractive. Its likely that over the next week this put-price dynamic changes.

Get instant access to our partners real-time market data and insights not available anywhere else. Here is last night Founder’s note getting you ready for today’s market and explaining the constraints in yesterday’s market. – MrTopStep

Trading Room News:

Polaris Trading Group Summary – Thursday, March 20, 2025

Morning Session: Strong Bullish Momentum

The session opened with precise fulfillment of Daily Trade Strategy levels.
Key Bull Scenario: Holding above 5730, targeting 5760-5770.
Key Bear Scenario: Holding below 5730, targeting 5705-5695 (not triggered).
Early Trades:
- @CL OPR Short Target 1 filled
- @NQ ORT Long Trigger activated
- @ES ORT Long Trigger activated
Market sentiment: Bullish price action with traders noting snappy, trappy movement.
Key Levels & Performance:
- Pullback to 5734 was anticipated and tested (low tick at 5735.25).
- 5760 Target tagged per Daily Trade Strategy (RTH).
- Further upper target at 5770 identified.

Midday Session: Balance & Mean Reversion

Cycle Day 3 Hi-Lo Range Projection fulfilled (screenshot shared).
Market Shifts:
- 5747 Pivot retested as price action turned into 2-way traffic.
- Point of Control (POC) shifted to 5754, indicating balance between buyers and sellers.
- VWAP Mean Reversion strategy played out successfully.
Traders advised to stay flexible heading into lunchtime as market slowed down.

Afternoon Session: Choppy Consolidation & MOC Imbalance

Market chopped around VWAP, resembling a rhythmic range-bound day.
Key support at 5705-06 held as a triple bottom.
Major Market On Close (MOC) Buy Imbalance of $1.1B surfaced late in the session.
Price closed mid-range, wrapping up a day of strong early bullish momentum followed by consolidation.

Lessons & Takeaways

Trade strategy levels were highly accurate, providing solid targets and reversal points.
5734 was a critical pivot support, catching the exact low tick before the next rally.
Mean reversion back to VWAP was a key opportunity for traders who stayed patient.
Adapting to market conditions was essential, with early momentum giving way to range-bound action.

Overall, a well-executed day with strong bullish setups early, a tactical midday pullback, and choppy afternoon action. Great discipline shown by traders.

DTG Room Preview – Friday, March 21, 2025

Markets Struggle to Hold Fed Gains
Stocks faltered after Wednesday’s Fed-fueled rally, with the Nasdaq down 0.3%, S&P 500 slipping 0.2%, and the Dow Jones finishing just below breakeven. Trade tariff uncertainties continue to weigh on sentiment.

Key Headlines:
- Trump on the Fed: The former president broke his silence on monetary policy, urging rate cuts as tariffs take effect.
- Nike (NKE) Earnings: Beat lowered estimates, but tariff concerns linger, as CFO Matthew Friend issues caution.
- Micron (MU) Outlook: Raised Q3 revenue forecast on strong demand for high-bandwidth memory (HBM) chips.
- Corporate Earnings: Carnival Co. (CCL) and Jabil (JBL) report premarket.
- Economic Calendar: A quiet day, with NY Fed’s John Williams speaking at 9:05 AM ET.
Market Sentiment & Technicals:
- Volatility Declining: ES daily range remains above 100 points, but overall volatility has ticked lower for the fourth consecutive day.
- Whale Activity: Bullish bias into the US session open on larger-than-average overnight volume.
- S&P 500 Futures (ES): Failed to extend its bullish move, retreating to form a short-term swing high.
Traders will be watching tariff developments, Fed policy expectations, and key earnings releases for further market direction.

ES – Week over Week

The bull/bear line for ES today is at 5717.25. This is the key level to watch closely, as sentiment remains bearish while the price remains below this point. Currently, ES is trading around 5690.00, signaling mild bearish pressure.

If ES continues to hold below the bull/bear line, expect sellers to target the lower range target of 5650.75. Below this level, support comes in at 5625.50, and further downside pressure could lead toward 5588.00.

On the upside, buyers need to reclaim 5717.25 to establish bullish momentum. Resistance above this key pivot is located at 5728.50, followed by 5765.25. Sustained strength above these levels would bring the upper intraday target of 5783.75 into focus, with additional resistance at 5811.50.

Overall, remain cautious until ES reclaims the bull/bear line at 5717.25, with bearish momentum intact below this level.

NQ – Week over Week

The bull/bear line for NQ today is at 19,895.50. This key level determines bullish or bearish sentiment for the session. Staying below this level indicates bearish pressure, and rallies toward this line should be viewed cautiously.

Currently, NQ is trading around 19,779.00, which shows mild weakness below the bull/bear line. Continued trade below this level opens the path toward initial support at 19,735.25. If this support level is breached, look for an extension down to the lower range target of 19,602.25, with a potential pause at intermediate support around 19,661.00.

On the upside, initial resistance stands at 19,879.25, with further resistance near 19,949.75. Should buyers push above the critical 19,895.50 bull/bear line and sustain, the next major upside target would be the upper range level of 20,189.00. A break and hold above this level would suggest renewed bullish momentum.

Overall, cautious trading is recommended below 19,895.50 until proven otherwise by sustained bullish activity above this pivot.