Tesla, MicroStrategy and An Inside Look at the Biggest Options Expiration in Market History

The December seasonality chart from Goldman Sachs (going back to 1928) shows the last week of December is historically bullish, but the options complex (particularly in the last 20 years) has become powerful enough to override or delay seasonal patterns through gamma pinning effects.

“I would contend that the JP Morgan collar strike which is really big um you know it's only been around maybe the last two years and if you look at the history of that strike uh we we traded well above it in two of the last four years and we pinned the strike into the end of the year I think 2023 so the proximity to the collar matters and the reason I bring this up is because even though the seasonality is very bullish I think equities maybe could have a bullish move you could argue but I still think the S&P is likely to pin that 6055”

In 2021, the S&P 500 printed its high on the very first trading day of the year despite a year of rising inflation expectations, suggesting market tops can be made at counterintuitive times when sentiment is already priced in.

“in 2021 it was interesting because you know we we print at the high of the January 2022 so 2021 was so bullish we print the high the day I think on the first session of the day and then we just went straight down right um violently down”

Market breadth has collapsed to negative 11%—meaning only 89% of S&P 500 constituents are up versus 11% down—with this negative breadth occurring for 11 consecutive days while the S&P 500 index itself is up 80 basis points; this is unprecedented since the late 2021 period and has previously only occurred alongside major market declines

“when you look at this this just came out from from nura negative breath in the s&p500 is hit 11% that's unprecedented since I think that's late 2021 which I think is then you start talking about the stock the the internet bubble right”

Volatility skew (the differential between put and call prices at different strikes) is rising as investors buy downside protection, indicating emerging concerns about downside risk despite overall low volatility.

“the problem is is that and I shouldn't say it's the problem but what we see is the at the money volatility is very cheap uh as we mentioned before record low in today's zdt options but people are starting to buy a little bit out of the money puts and so that's that's messing with some of these uh these skew metrics um yeah it was was interesting I saw Chris cidal tweeted I think like today um he was saying that he he thinks 2025 might be a big year for volatility”

The Federal Reserve will cut rates at the upcoming FOMC meeting (98% probability in Fed Funds futures) but forward guidance is more uncertain, creating ambiguity about whether rate cuts will continue or whether policy will shift to a more hawkish stance in the face of Trump administration expectations for looser policy.

“SEI fed wash tool I think is literally at 98% and so that that cut is a given the Market's expecting that and and and consequently there's not a lot of volatility that much volatility associated with this print but the Ford godance I think could be really interesting um because it you know it's a murkier it's a more murky picture that we've had”

December 2024 options expiration represents the largest options expiration ever measured at 1.9 trillion in delta-notional value (roughly 10:1 call-to-put ratio across all contracts expiring), making it larger than any previous monthly expiration and surpassing even the combination of monthly, quarterly, and annual cycles

“we have roughly 1.9 trillion in value expiring and this is stock equivalent value so what we do here Jack is we take the calls and we look at the call Deltas so how big are the call positions uh relative to puts from from a a value standpoint and as you can see here it is really dominated by call positions one to 10 roughly ratio”

GameStop's meme status has diminished from its 2021 peak, with the Roaring Kitty return generating call buying that moved the stock but not achieving the same organized squeeze dynamic that existed in 2021, indicating the meme era of coordinated retail has fragmented.

“I queued up a te an arc chart because we we were talking about Arc having such a big uh Tesla uh position right and and Arc is up 25% since the election which is right here so you know Arc is just a uh I'm trying to think of what the term is for um a product of the Tesla environment here”

The value trade did not participate in the Trump rally as expected—the expected Trump-election-induced value rally (similar to 2016-2020) has not materialized, with value indices (Russell 2000, IVV) down while mega-caps rally, suggesting a structural breakdown in traditional Trump trade positioning.

“I was told um we we would get a repeat of 2020 when Trump won in the small capab value space um and I had not gotten that um so that's one thing part of the Trump trade that is not working my favor right now”

Realized volatility in the S&P 500 has compressed to 30 basis points for a 0-DTE straddle, the lowest level observed since before the COVID-19 crash, indicating the market is pricing in virtually no expected movement despite record options positioning

“we had a 30 basis point0 DTE straddle what does that mean that means that the S&P was pricing in in the options Market only 30 basis points of movement which is the lowest that we've seen since before the co crash”

There is a JP Morgan caller (large block of call options) expiring at the 6055 strike with approximately 45,000 contracts, which acts as both a support level and a structural pinning force on the S&P 500 into the December 31st quarterly expiration, similar to how the 5750 strike pinned the index in September until options expired.

“the JP Morgan caller the call strike so there's 45,000 calls that expire at 1231 so if you go back and look at our September Opex episode you will see that we Pinn 5750 from FMC into the end of September because that's where the call was positioned”

When retail sentiment becomes extremely bullish and people openly discuss using leverage to buy speculative assets (as seen in Micro Strategy and Bitcoin tweets), it signals peak euphoria and historically precedes major reversals, as evidenced by Brent's experience during the 2006 real estate bubble.

“I read this which you know um in 2006 I was telling somebody else this I worked at a bank and I was like hey I'm doing I'm doing pretty well relative to my friends we had just graduated college but I had this one friend who dropped out and he had an escalator I'm like how did you get this this car and he's like doing uh real estate transactions in Scottdale Arizona at the time right and so it's like oh man like I missed that one and then GameStop was the same thing it's like I'm gonna take my you know my mortgage and I'm gonna put in GameStop or I'm going to put into ethereum 5 10 years ago or something and the point is is that”

55% of S&P 500 options flow is now zero-DTE (same-day expiration options), representing a structural shift from traditional monthly options that creates more frequent small events rather than one large event per month

“I do think that you know there is some kind of front running some of these the these uh these positions as well right people now everyone's aware that these position are going to shift and so maybe there's some games in ship related to it um so I think there's a couple of different factors and and that to me is all you know it's all Theory I don't know for sure you know why the why the timing shifted a little bit but you know look here Vick's Opex you know the the the low is often times made in the vix expiration day right so you know you see these fingerprints all over and and so like you know it's coming um and you can't always totally pinpoint the why but at least the timing is obvious CU he knows exactly when the expiration is coming”

As options become more complex and positions become more extreme, Wall Street institutional players (French quants, prop trading shops) are increasingly the marginal movers, not retail investors, despite superficial appearances of retail mania around Micro Strategy and other stocks.

“it starts to become a professional institutional game right it's not Wall Street kind of like GameStop and when those walls got to 400 guess who comes and plays in that sandbox well like the French quants and stuff not really you know Johnny retail driving this thing anymore and I think that's kind of like what I see here with micro strategy as well um The Vault could come down out of this thing”

When VIX options expire after standard monthly options expiration (as occurs this December), historical data shows 2 out of 3 times (approximately 67%) the market changes course from its recent trend, suggesting statistical likelihood of reversal after December 31st when pinning support is removed

“I went back I think 5 years in time and we found when the vix expiration occurs after Opex uh we see two-thirds of the time we see the market change course so here we've been rallying into Opex vix occurs after vix expirations after uh December options expiration this year so we would expect statistically the market to change course uh going from a rally to selling off based on based on this uh dynamic”

Micro Strategy is not fundamentally a software company but rather a Bitcoin financial strategy vehicle being valued at 3-4x its actual Bitcoin holdings; this financial engineering through repeated convertible bond issuance and leveraged Bitcoin purchases has created a bubble that will collapse if Bitcoin declines meaningfully

“it's not because of its SAS business which is officially what their business is is because of the financialization of the Bitcoin strategy which maybe that's a good strategy maybe it's not certainly doing well for the stock”

January 2025 expiration is also very large with significant leap positions tied to the inauguration and FOMC meeting, creating another potential major market pivot point that investors should anticipate beyond the December expiration.

“number one the December expiration is huge but the January expiration is also very very large there's a lot of leaps that people put on right uh long data position the Pelosi trade we've talked about this a lot in the in the past uh so there's a lot of value in options tied to the January options expiration which times with uh the inauguration and a big fomc at that January time frame”

Micro Strategy's valuation has become financialized through leverage, with the company issuing more convertible bonds than any peer, and the stock now trading at 3-4x its Bitcoin holdings rather than 1x, creating a house-of-cards situation where Bitcoin volatility becomes amplified and a decline to $75,000 would create significant damage to levered retail positions like those purchased with car loans.

“the big position was at 400 we flagged that as the the major high this exact giant position now the biggest position is at 500 as we talk now Tesla is at 469”

Elon Musk has effectively doubled Tesla's stock price since the November 2024 election and increased his net worth by 60% (approximately $4 billion per day), demonstrating superior asset management and political alignment with Trump administration, regardless of broader market implications.

“regardless of what you think about musk or his political beliefs I mean he from a perspective of his assets that he holds he's played this basically perfectly and he essentially has doubled his stock since the election um he now has tons of influence in the new Administration”

Equal-weighted S&P 500 (RSP) has declined while the price-weighted S&P 500 index (SPX) has rallied, with RSP down for the month while SPX up, creating 'crocodile jaws' chart pattern showing divergence where only the largest-cap names drive index gains

“this is the equal weighted S&P 500 ETF um I mean that is the polar opposite to what you get from the NASDAQ right I mean they literally look like crocodile jaws now because NASDAQ has gone up every day since the month started uh but the RSP is now negative on the month”

Apple's current valuation of 10x sales represents an all-time high valuation multiple and is presented as evidence that mega-cap tech stocks have reached valuation extremes comparable to historical bubble peaks.

“this is the highest Apple valuation ever uh at at 10 times sales um that that seems you know this chart certainly makes it seem pretty extreme extreme things by the way you had a valuation chart that be our first uh that might be our first”

Chris Caesaro (options expert) recently tweeted that 2025 might be a significant year for volatility, and he is not characteristically alarmist, making his assessment noteworthy.

“I saw Chris cidal tweeted I think like today um he was saying that he he thinks 2025 might be a big year for volatility and and he's not one although he runs a long Vol strategy he's not one to be like always saying he thinks it's going to be you know a big year for volatility he's pretty back and forth or pretty straight about it so it was interesting I thought that he thought 2025 might be a big year for volatility”

Elon Musk has doubled Tesla's stock price since the November election and increased his net worth by approximately 60%, with his wealth increasing at a rate of approximately $4 billion per day, representing a textbook execution of advancing his personal financial interests.

“he essentially has doubled his stock since the election um he now has tons of influence in the new Administration so regards of what he believes this is this has been like textbook work by him and in advancing his own personal causes”

When the VIX expiration occurs after options expiration (as it does this December), statistical analysis shows that two-thirds of the time the market changes course from its recent direction, shifting from a rally into selling, suggesting a high probability of market reversal after December options expiration.

“I think 5 years in time and we found when the vix expiration occurs after Opex uh we see two-thirds of the time we see the market change course so here we've been rallying into Opex vix occurs after vix expirations after uh December options expiration this year so we would expect statistically the market to change course uh going from a rally to selling off based on based on this uh dynamic”

The NASDAQ added Micro Strategy to the NASDAQ 100 index despite a rule that the index should not include financial services companies, suggesting that index methodology is being influenced by companies' current popularity ('memes') rather than strict quantitative criteria, as evidenced by SMCI being added in June and removed after 6 months due to accounting fraud.

“NASDAQ is not supposed to allow Financial companies into NASDAQ 100 index uh they do have PayPal in there as someone told me but you know you think about why is micro strategy a you know billion multi-billion dollar market cap it's not because of its SAS business which is officially what their business is is because of the financialization of the Bitcoin strategy”

MicroStrategy's hedging strategy through convertible bond issuance creates negative gamma that is sold to market makers, who then hedge by selling calls or shares, putting downward pressure on the stock's volatility and creating technical support at round numbers like the 400 and 500 strikes

“from my perspective is micro strategy keeps selling these convertible bonds and the way that you hedge these convertible bonds is by selling stocks are selling calls and that's positive GMA which just sort of like drops the volatility out of the stock so you know there's all these interesting you know like like here I'll show you an example of that right u i mean this thing should be the most volatile stock in existence right uh it certainly was into this period but look what's happened here um we've just pinned 400 over the last month right and if you look at where the biggest positions are into Opex well half of the gamma in micro strategy as a whole is going to expire and most of that is tied to the 400 strike”

Tesla has appreciated 75% since the November election and now trades at valuations that are extreme relative to historical norms, with options implied volatility rank at 81% despite the stock rallying (typically only seen during crashes), indicating that while Tesla may continue higher, the entire multi-year positive scenario is already priced into the first two weeks of a new administration.

“Tesla and meta Apple uh Amazon Google all at all-time highs um so you know th those stocks have all ripped and and I was making fun of you in the value complex before we're some slides like iwms are down and Dows down right 10 days in a row or something like that um but but these Mega caps which is where all the options trade are at at all-time high so there's a real Divergence here”

Front-running of options expiration effects has become more prevalent, causing the market to anticipate position shifts 1-2 days before Opex rather than reacting on Opex day itself, and this shift in timing is likely driven by awareness of the mechanics among traders and zero-DTE positioning that resets daily.

“I do think that you know there is some kind of front running some of these the these uh these positions as well right people now everyone's aware that these position are going to shift and so maybe there's some games in ship related to it”

Tesla has appreciated 75% since the November 2024 election, driven primarily by options positioning and call buying rather than fundamental improvement, with implied volatility at 81% and valuations that are 'really extreme' and represent 'too much too fast'

“look what Tesla's up 75% itself uh since the no November election right and and meta Apple uh Amazon Google all at all-time highs”

The S&P 500 is experiencing artificial pinning at exactly 6055—the JP Morgan call strike expiring December 31st with 45,000 calls—which is suppressing market movement to tight daily ranges and constraining upside to roughly 50 basis points per day due to positive gamma positioning

“if we don't shake under 6,000 or over 6100 by Friday's Clos and I think we're just pin 6055 in the JP Morgan strike into 1231 expiration cuz there's so much gamma there”

The NASDAQ-100 has compromised its index integrity by adding Micro Strategy (a primarily financial strategy vehicle, not a traditional operating company) while removing SMCI (a chip manufacturer added in June 2024), suggesting the NASDAQ is chasing meme stocks rather than applying consistent quantitative criteria

“NASDAQ is not supposed to allow Financial companies into NASDAQ 100 index uh they do have PayPal in there as someone told me but you know you think about why is micro strategy a you know billion multi-billion dollar market cap it's not because of its SAS business”

If the current market rally has been justified entirely by options positioning and gamma pinning rather than by fundamental improvement, then once that positioning unwinds post-Opex, the market will lack structural support and will be vulnerable to sharp reversal

“once that pin is pulled then what should tether us to this general area again right so we can have a situation where pal actually says some kind of hawkish you know has a little bit of a hawkish tilt but the market doesn't react that much and then people like well why is the market kind of pinning and I don't know I'm going to eat like my you know holiday cake or something uh and forget about it and then you know we pay the piper maybe in in January right because we lose that pinning support that is so strong in the market right now”

55% of S&P 500 options flow is now in zero-DTE (same-day expiration) contracts, with short-dated positioning shifting how and when options Opex effects occur; traders are front-running expected position shifts 1-2 days before expiration rather than on expiration day itself

“55% of the S&P flow now is zero DTE which is crazy in single stocks depending on the stock you look at it can be a little bit different”

When traders and investors are getting angry at bearish commentary (as happened with GameStop bears being called 'boomers'), it is a sign that sentiment has reached dangerous extremes and a reversal is likely imminent

“I also know that that we're getting to some point because when people start getting angry with me for saying this is all getting a little crazy um you know that's another signal I remember trying to talk to GameStop people and saying like you know be careful here uh all is at 400% like you've done incredibly well you know um and they would just I was called a boomer”

When volatility has been severely compressed and traders have sold volatility short to extremes, a small negative headline that would normally be absorbed by a healthy market can trigger large volatility spikes because short volatility positions force covering; conversely, when positioning is heavy long, headlines have less impact

“if we had a big headline come across a negative headline that negative headline has all of this positive game of padding which could absorb a lot of the kind of anxiety around a bad headline right like a drone attack in New Jersey or something right but if we lose all this positioning then if we get a bad headline we could see a lot more volatility related to that right so it's the positioning combined with the event that has to kind of line up to really let things SP over”

Media outlets consistently misrepresent options expiration size by reporting 7 trillion notional (based on open interest × 100 multiplier), which vastly overstates actual hedging flows; the true delta-notional measure of 1.9 trillion is more accurate for understanding actual market impact

“when you hear from from the General Media they're going to say that this is the biggest options expiration ever true uh and they're going to throw a number at you like 7 trillion now the way that they arrive of at that number is they take the amount of open interest and they assume that to that one contract of open interest is equal to 100 shares of stock in terms of notional value”

Fed futures are pricing in 100% probability of a rate cut at the December FOMC meeting (Thursday), but forward guidance regarding future cuts remains uncertain and contested; the Fed is likely to cut but guide toward a pause, with the rate path becoming much more murky than the prior year of clear expectations

“100% odds that we get a rate cut right tomorrow I think is pretty much what's being priced in excuse me on Thursday um but now do they cut again you know are the cuts off the table like that part seems to be there's more uncertainty around that part”

Put options are extremely cheap to buy as portfolio hedges, with 1-3 month puts at 12% implied volatility (near historical lows), making this an attractive risk/reward opportunity for investors who have experienced significant gains since the Trump election to hedge their portfolios affordably.

“I can hedge my portfolio for really cheap and not only can I hedge it for really cheap I've been fortunate enough to probably have a lot of gains over the last six weeks since or four weeks since Trump took office or not took office but was uh was elected right um so the cost to hedge your portfolio is also now very cheap so maybe Brent is totally wrong that we're going to have a reversion reversal in the market around December options expiration but the cost of hedging that that bet is very cheap right now uh you're talking about 12% implied volatility for you know one to three month puts in the S&P 500”

If the S&P 500 breaks below 6,000, the downside thesis becomes active and a significant correction is likely, whereas holding above 6,000 suggests the pinning thesis is in control and the market continues in the status quo, making 6,000 the key level to monitor for determining market direction into year-end.

“so you know it'll be definitely an interesting period there's a lot of of controlling the options Market here and and again I think my my Takeaway on this whole thing is if we break 6,000 then then the downside thesis is on uh and I and I think we we have a pretty significant correction if if we hold above that level uh you know then then um then that's the sign that it's just business as usual”

January options expiration will be significant because it converges with FOMC and presidential inauguration timing, creating a secondary catalyst window for volatility and market moves after the December expiration pins and subsequent position shifts.

“there's a lot of leaps that people put on right uh long data position the Pelosi trade we've talked about this a lot in the in the past uh so there's a lot of value in options tied to the January options expiration which times with uh the inauguration and a big fomc at that January time frame so that is something to think about”

The concentration risk and earnings call guidance uncertainty present medium-term risks for the mega-cap tech stocks that are driving the market, meaning that if these names experience guidance misses or earnings disappointments, the entire index could face significant downside pressure

“I feel like we're trying to figure out like what Nvidia chips do and how everything works with AI and then it's like oh you now let's have Quantum Computing so now I got to figure out what that is like which I have no idea I think that's very much a long-term thing but uh yeah it's just yeah it seems like things are moving at such a rapid Pace that every day you've got like some new development here yeah they they really are and uh I think that's tricky for investing in some respects”

Nvidia's underperformance relative to other mega-cap names since November Opex, despite massive equity market rally, is attributable to rival companies (Google, Amazon, Meta, Apple) announcing competing chips and quantum computing initiatives that have stolen narrative momentum from Nvidia

“I mean I'm not joking about that uh you can see here from November Opex it's actually significantly lower um Amazon you know announced new Chips Google announced new Chips Quantum Computing stuff I don't I don't really know but that Thunder was really stolen from uh from the semi”

The meme stock/crypto/leverage phenomenon (GameStop → Tesla → Micro Strategy → Bitcoin rotation) is driven by fractured investor attention and speculation, with capital flowing toward whatever narrative is currently winning rather than underlying fundamentals

“you know GameStop trying to get squeezed right and I think that a lot of the meme energy has now moved to uh the attention's fractured now and moved to things like GameStop or excuse me um crypto and micro strategy”

The 'gamma blanket' created by positive gamma positioning in options will be removed after December 31st expiration, which will shift gamma from positive to negative, causing volatile swings as gamma hedges must be unwound and potentially triggering position adjustments across the portfolio

“that Blanket's going to get removed a lot of stuff can shift and and that is why we think this could be a topping time for for a for a top in markets”

Consumer leverage metrics are hitting extreme levels with examples of consumers taking zero-down auto loans at 49% APR to finance cryptocurrency and Micro Strategy purchases, paralleling the pre-2008 housing crisis leverage patterns and indicating retail investors are highly overextended

“he basically said I'm going to take the zero down 49% APR for 60 months and I'm going to take that cash instead I'm going to put it into uh Bitcoin and a lot of these people are saying micro strategy”

Interactive Brokers chairman Peterffy has noted that his platform's marginal loan balances are 'up by a ton,' suggesting extreme leverage and extension are current market conditions; if brokers begin raising margin requirements (as happened during GameStop meme spike), it could trigger a sharp correction

“he basically said that their marginal loans are up by a ton and to him that meant that this thing was kind of overextended meaning Equity prices”

GameStop meme mania of 2021 was initially deflated in part through platform restrictions (Robinhood stopping purchases), not through market fundamentals; similar restrictions could theoretically be deployed again if leverage extremes worsen

“why didn't GameStop get taken down is because they stopped letting you buy it on the platforms right”

The risk of Fed hawkishness or a guidance shift toward rate hikes (rather than cuts) represents a key catalyst that could break the S&P 500 below the 6000 support level, overriding the JP Morgan collar pinning effect.

“if Pal's really hawkish and we break 6,000 before kind of deex like is really bad then then I think the caller is a nonevent”

Roaring Kitty (Keith Gill, GameStop meme leader) returned to social media with a '69420' joke, and traders immediately bought $30 million of January 2025 GameStop calls, but GameStop's subsequent recovery is not approaching 2021 levels due to Kitty's lost credibility from his failed livestream

“royan Kitty came back with some weird 69420 joke um and we saw a staggering amount of calls trade in GameStop somebody bought something like 30 million dollars of January 1225 calls on on uh on Monday night five minut before the close so these guys are all back”