Don Kaufman here.
I woke up this morning and the S&Ps were up 40 points.
By the time I hopped on my live trading room session, they were already cut that in half. But here's what's got me perplexed - and this is the signal everyone's missing.
The Market That Doesn't Trust Itself
When you're watching the S&Ps, trade on low volume in the pre-market, it tells you something. Lower contract size means there's just not a lot of capital confirming what you're seeing on the screen right now.
But here's the kicker - and I'm dead serious about this: trust nothing you've seen in the pre-market.
The Vol Signal Nobody's Reading
Here's what's got everybody perplexed, including me: the vol futures. When I say volatility futures are "on fire," you're thinking, "Dude, they're flat. What the hell are you smoking?"
Exactly my point. They're flat with the S&Ps up 23 handles, with the Nasdaq up 0.6%. Why is vol basically flat with markets up 30? Because the marketplace is telling you: these rotations are completely open for interpretation today.
The vol futures - they're being bought for a reason. It doesn't mean the market's gonna tank, but it definitely means you're gonna get two-sided trade throughout the course of the day.
This Is Spread Trader Heaven
You have volatility elevated in a marketplace that's elevated - that's a hell of a way to start off your Monday. This is exactly the environment where spreads shine.
Look, I picked off that scalp inside Citi on Friday - $105 puts for a dollar, got out at 2.01, 2.03. The last two I didn't do quite as well, but those were up about +60%. That's the kind of trade I like to take, I want to take more of.
The expected move today is $34 for the S&P. We're at $26. In this elevated vol environment, I'm setting up multiple spread opportunities - energy put spreads already working, Home Depot hanging off the edge of a cliff right where I want it.
Why Spreads Work When Vol Says "Trust Nothing"
When the marketplace doesn't even trust itself, that's when spread trading gives you the edge. You're not trying to pick direction in chaos - you're defining your risk and taking calculated shots.
I may step in and actually short something inside tech on an intraday basis. Not talking about holding overnight - let's not get crazy. But tech on an intraday basis could be shortable with the right spread setup.
Bottom Line
The market's telling you exactly what it thinks: don't believe anything you're seeing. But volatility this elevated? That's your opportunity. The smart money is buying protection while taking profits.
When vol futures stay bid while markets rally, that's your signal to start thinking spreads. Not government shutdown noise, not sector rotation stories - pure price action and volatility telling you: two-sided trade is back.
And here's the thing - when you can't trust the rally, when you can't trust the dip, that's exactly when you can trust your spreads to define the risk for you.