Stocks declined on the day, with the S&P 500 falling about 10 basis points. It wasn’t a particularly large move, but the index had been trading higher earlier in the session before giving back those gains and then some during the afternoon.
Implied volatility rose throughout the day ahead of Micron's (MU) earnings after the close and Friday’s PCE report. The VIX1D finished around 20, a relatively elevated level that could provide a tailwind for the market tomorrow if we see the typical post-event volatility crush.
Micron has been beaten up over the past two trading sessions, with the shares falling sharply on Tuesday and trading around $1,000 on Wednesday ahead of earnings. As a result, the risk/reward profile has shifted significantly since last Thursday. However, the call wall remains at $1,200, which could prove to be sticky.
The results were far better than expected, and they may be strong enough to override the options positioning. Still, with the call wall at $1,200, the positive gamma positioning could create hedging flows that work against the stock at that level, and in the end, that may be all that matters. If the stock stalls or potentially reverses lower, the $1,200 region is where it is most likely to happen.
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