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With the uncertainty of market direction has investors doing a double take at the options market, US options exchanges have seen record daily volumes with one strategy that's been gaining interest among traders, Mu Mu Mu Mu Do I have that right, Neil? Did I do that? Neil McDonald joins us now for the Options Pit sponsored by Tasty Trade Neil. Maybe start big picture. Viewers, they're listening at home right now. They're thinking, you know, what are the smart options strategies as as indices now approach these new all time highs? What would you tell them?

Yeah, I mean, it's been a obviously a very volatile month. I think when you see the VIX hit 60, um, it attracts for us. It attracts lots of our active traders, you know, you have SMP being 10% high to low intraday. That really brings um, our active, more professional traders. Um, it kind of may have scared off that kind of volatility scares off some of our more, uh, tactical traders. We saw lots of, um, calendar selling, which is selling the front month, by the the the the second month. But as that's normalized, and I said, I was here three months ago and the S&P is exactly where it was three months ago. So as if nothing happened in the middle guys. Um, so as as the skew has normalized, as we fix down at 18 and the S&P being up on the year, given the uncertainty going forward, we've seen what's happened in the past month, both the huge rally after the inauguration, the sell off from a from Feb, the rally back, the sell off from from Liberation Day. Um, if you're looking to protect your portfolio, given skew has normalized, given vol has come down so far from its peak back on the 18th of of April, it's probably a good time to think about, um, protecting your portfolio with some three, six, 12 month puts.

Talk to me then about the year to date snapback and just the record break. I think it was the snap fastest snapback since 1982. Uh, it feels like this moment is the Super Bowl for options traders because of the volatility. But how should investors be thinking about risk in this moment as well?

Sure. I mean, it's certainly been the Super Bowl for options exchanges. Obviously, uh, make money just on volume. Um, I think short gamma was a big that the the the huge intraday move you saw, I think one of the largest S&P moves last month, uh, intraday, uh, almost at 10 plus percent. Um, I think a lot of the market makers were short volatility. That's a lot of clients trading these short dated, zero DTA options. And, uh, if you get taken out of gamma in a one day option, there's not a lot there's not a lot of place you can go to cover that as a market maker. And so I think they've made money by being short, the zero DTAs most of the year. I think they got caught and they exacerbated the moves to the upside and then they moved to the downside.

Neil VIX under 20 here. Where where do you think we head to next? Going back to low teens? What do you think?

Yeah, I think I think resistance or support is 15 and a half. Um, I think momentum is, you know, obviously is sometimes the opposite of volley. So we may overshoot to the downside, but the risks are still there. These aren't trade deals that trade negotiations. Uh, it seems that, um, not just intraday news, but, um, post market news, you get lots of opening market gaps, which we haven't seen for a while. Um, so it it's I think the market's still volatile. I think buying options to certainly to protect, um, at this level is, uh, is sensible and certainly economically makes sense more so than it did two, three weeks ago when when the front month was really, really elevated. So

Yeah. And you mentioned something I want to follow up on, you talked about how market makers sometimes when they are caught offside, they can exacerbate moves both to the downside and to the upside. And something I think we all want to know right now is whether or not there are any hedges going on in this market that are exacerbating the moves to the upside. What are you looking at to suss out how real this current rally is?

So so look at the open interest and around this level, you see a real dampened activity in the last four or five trading days where, um, we have a huge 25 million person community at Momo. And, uh, it's very active. So I look at the SPY1 every day, and everyone's putting up their trading ideas. A lot of our shorter term traders, um, express frustration that it hasn't moved, that we we've hit a a section of the market where the market makes a long gamma. So the the past two expirations, it's been pinned into into one strike and very little movement. We had a decent sell off yesterday. Um, but I think there's been an equalization in in the gamma profiles between the the the the retail owners of the very short term zero DTEs and the market makers.

Neil, always great to see you, especially on set. Thank you, sir.

Thank you very much, guys. My pleasure.

And coming up Coinbase CEO Brian Armstrong joins the program to discuss what's next for potential stable coin legislation. Stick around much more market domination still to come.