Episode summary
The 10-Year Hit 5.35%. OpenAI Came Up $20 Billion Short. So Why Is Nobody Buying Puts?
Excess Returns
· · 1 hr 1 min · Hosts: Brent Kochuba, Jack Forehand
Summary
Brent Kochuba argues that the market is calm on the surface but increasingly fragile underneath. He says the S&P 500 is being supported by passive flows, put selling, and dealer hedging, while the AI trade has been doing most of the heavy lifting. That matters because OpenAI’s revenue expectations were reportedly cut from $70 billion to $50 billion, and the NASDAQ and semis reacted sharply as tech call skew fell and positioning shifted away from the most crowded AI names.
The conversation frames October options expiration as a possible turning point, even though this month’s expiration looks fairly typical and not especially one-sided. The guest says volatility is unusually subdued right now, with one-month realized volatility near 10 and core index options pricing little movement, but he expects that to change around CPI, earnings, FOMC, and the election window.
The key bearish trigger is not macro stress alone, but a shift in positioning: if call demand fades and traders begin to buy puts rather than sell them, he thinks the market could move quickly lower. He gives 7,700 on the S&P 500 as a risk pivot and says a loss of AI leadership would leave the market with little else to lean on.
Key takeaways
- The guest says the market is still being held up by AI leadership, passive inflows, and net put selling rather than broad participation.
- OpenAI’s revenue expectations reportedly fell from $70 billion to $50 billion, and he says that helped hit NASDAQ and semiconductor sentiment.
- October options expiration looks fairly normal in size, but he thinks it could still act as a turning point for volatility and direction.
- He says realized volatility is very low now, but CPI, earnings, FOMC, and the election could break that calm quickly.
- He places 7,700 on the S&P 500 as the downside risk pivot if positioning turns more defensive.
- He argues that the biggest market risk is losing the AI trade before another bullish leadership group emerges.
Notable quotes
“if you lose that AI trade, then the idea that we could have a fairly sharp rally, sharp correction, excuse me, uh, I think is pretty legitimate”
“we're seeing record options volumes. You know, in August, we had the record call volumes. Uh, and and the options growth continues to just pick up”
“October expiration is going to be about a trillion dollars worth of value”
“We are totally not in a protective stance anymore and arguably the risks maybe I would argue seem higher at this moment”
How the episode opens
Welcome to the opex effect where we take a look at the flows behind the scenes driving markets. I'm Jack Forehand and I'm joined by the person who actually knows about what I just said unlike myself uh Brent Kachuba. Brent, what's going on?
A lot of stuff's going on Jack. We were saying it feels like time is passing faster and faster. I think we actually said the same thing last OPEX effect. Uh but it seems to be more true. Uh where you know the the the times are flying, the yields are flying, equity is not flying. Uh, but I suspect that we are going to see a shift in that soon as we're going to cover here.
It's like this this wall of worry thing is is like what I've been thinking about a lot. I mean, it's just like all this stuff is going wrong and like nobody cares. Like markets are near all-time highs. Like in your space, no, nobody's really hedging much. Like it's just an it's an interesting dynamic.
Yeah. And you know, the AI trade as our savior um has been a theme really since the March lows. you know, we sort of pushed aside the Iran situation at higher rates because AI was was really growing and you know, there's a there's a in the armor uh here with yesterday an and open AI apparently has 20 billion less in revenue according to the FT and
20 billion between friends though Brent really is is it really anything you know it's just 20 billion — On 20 on 50 um you know so to have 70 they came they came with 50 it's still a ton of money but expectations are quite Yeah. And you know when you whenever you get this game of expectations too with these companies that have very high expectations like a a much smaller miss than that is even important.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- rising rates
- ai leadership
- options expiration
- put selling and sentiment
- s&p 500 risk pivot
Companies and tickers mentioned
- SpotGamma
- OpenAI
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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