Insights 
VT 
US equity futures have increased, with S&P 500 futures rising by 21 points, or 0.35%, and Nasdaq futures up by 0.4%. The Russell 2000 is performing strongly, with futures climbing by 1.2%.
The rise follows Fed Governor Waller’s comments suggesting a July rate cut is possible, and that tariff-related inflation will be temporary. Additionally, today marks the expiration of monthly options.
Early Signs Of Rate Cut Reactions
Waller’s remarks hint that cuts to interest rates might come sooner than was priced in just days ago. His downplaying of tariff-driven inflation suggests that the Federal Reserve does not see these pressures as a lasting headwind. That perspective has given equity markets a jolt, particularly in areas like small-caps, which tend to react more sharply when policy is seen turning more supportive. The Russell 2000’s outsized move is tied to expectations that lower borrowing costs could ease pressures disproportionately for companies with tighter margins and domestic bases.
Monthly options expiry adds extra momentum, and not just in the direction of the move. When major derivative contracts lapse, like they are today, positions are often forcibly closed or rolled forward. This causes dealers to adjust their hedges—especially if the underlying assets are moving quickly, like today. That means we’re not simply seeing positioning unwind, but rather deliberate recalibration by participants needing to stay delta-neutral.
From our view, the composition and timing of these moves suggest they’re not purely reactionary. This is not trend-chasing. There’s an element of recalibrated probability, especially as traders build in the likelihood of a rate cut much earlier than September, previously seen as the first realistic window.
Shifts In Market Indicators
It’s important to understand what this means for volatility traders and those working around complex options structures. With expiry now behind us, open interest will reset at fresh levels. We can expect gamma positioning to look different next week. There may be less hedging pressure in both directions, which usually allows spot prices in major indices to move more freely—i.e., wider swings intraday. In turn, that often leads to implied volatility creeping back up, unless new flows suppress it.
Looking at forward rates and Fed Funds futures, assumptions have shifted in the last two sessions. Short-dated yields are falling, and that is not from random noise. The move aligns too neatly with Waller’s comments and expiry-related flows. If a front-loaded path for cuts is now back on the table, the term premium on longer tenors may continue compressing. That widely influences how index-linked derivatives behave, particularly during macro data releases.
We’re also watching skew behaviour. With rising equity prices and falling VIX, calls have been gaining value faster than puts, pulling skew towards flatter or even inverted territory in some strikes. This conditions the OTC space, as dealers need to adjust vega exposure accordingly. If realised volatility stays contained into next week, this flattening may continue, but we’d caution that any hawkish surprise or yield spike from Treasury auctions could snap those assumptions.
In short, the week’s end has offered more than surface-level gains. We’re seeing early signs of a directional shift in both sentiment and positioning. Expect next week to reflect new baselines in rate-sensitive instruments, more active delta and gamma flows in the morning sessions, and a broader reframing of downside coverage appetite.
