Yo Pit Crazies,
The July PPI landed this morning and it wasn't in line. It came in cooler. Producer prices, meaning what companies collect for the stuff they sell, were flat for the month against expectations for a small rise, and the annual rate slowed to 4.7 percent from 5.5 percent.
That's the print that knocks a September rate hike down the list for a lot of traders. Investors took it the same way. The S&P 500 tagged a fresh record at 7,816.70 and closed up 0.65 percent.
Call Buyers Beat Me To The Coffee
Below is the Edge Hunter Skew-o-later sheet. It showed a steady pop in implied volatility (the price of an option, quoted as how much movement it's paying for) in the out of the money calls (contracts struck above where the market's trading now) through most of the session.
The early print in the SPX was steep. Call buyers poured in at the bell. The SPDR S&P 500 ETF Trust (SPY) finished up 0.70 percent, a bit under that morning pop.
Sep 11 upside IV in SPY
The blue line is the first skew curve I recorded in the morning. It sat well above Wednesday's close and above where Thursday finished.
SPY jumped, pulled back, settled. The skew curve did the same thing. Market makers priced what they saw in front of them.
3 day SPY chart
Cheap Upside Isn't Cheap Anymore
Here's what a rising call skew actually tells you. The people selling options are charging more for the right to own upside, and they don't do that when they expect the tape to sit still.
They're not making a forecast. They're telling you where they think they'll get run over.
The Names Without Hyperscaler On The Résumé
Chips carried the day. SanDisk (SNDK) ran 13.7 percent, Micron Technology (MU) added 4.2 percent, and the Philadelphia Semiconductor Index gained 2.07 percent.
Now look at the Russell 2000. It opened Thursday at a record and it's up 22.7 percent this year against 13.2 percent for the S&P 500. The money's already rotating out of the obvious names, and it isn't getting written about.
I've got a list of names lined up for the next leg. The skew tells me when they're ready.
Traders buying calls is fine by me. It means they think stocks go higher. Tap this link to see how I trade it.
You want to know if I think stocks go higher Friday? I do. The people writing the options seem to agree.
To Your Trading Success,
Andrew Giovinazzi