Valor View – NG – Aug 27 – Opex Vol Crush & Straddle Collapse

27 Aug 2025 • 3 min read

Opex Review

I think what Opex would bring was clear on Friday itself, when vol got smashed bringing the straddle down to 12 cents with a weekend and 2 business days still out there
Whoever, did the smashing made money on that 12 cent straddle as well
Lately, all of the moves have mostly become about V/F and I have been wondering what is happening
My initial theory was that with BON retiring and the other market maker not having a big size, we may see some fireworks into V/F expiry
But, what if the stress is already present. Without proper delta hedging, this -0.75/-0.85 area is the worst for market maker(s)

And this is right where we have been settling for last two years. So, any decent risk manager at a FCM would flag these positions and force over hedging etc through margin increase

So, all these theories about spec being short winter etc may have a simpler but deadlier explanation of V/F CSO hedging
As V/F becomes less and less liquid, the moves will be even more volatile going into expiry
The OI last year was much much higher, but it was much cleaner and the market makers were at bigger shops
This is the only way I can explain V/F contracting on down moves, other than the theory that it's so bearish that people want to sell more winter premiums than the front

People who had sold Q4 and Q1 winter premium are not stupid
I see live calls being bought now, potentially covering the shorts
Smart people cover when they get away with stupid trades, otherwise you risk becoming optionsellers.com
Q1 6.00 calls were lifted for 16.8 cents
Sumer'26 2.50/4.50 fences were bought for 19 and 19.3 cents lifting the calls
People seem to be taking profits on this move down as well
V 2.50 put got sold for 0.071
X 3.00/2.50/2.00 put fly got hit 0.105
Someone, even paid few tics for V 3.60/3.75 cs, bet or hedge against V/F?
With weather and production levels what it is, a rally seems unlikely, but prudent people are at least taking profits/increasing length on Q1 and JV26
With last EIAs bullish miss, people will be intently looking for signals if there is phantom production or not in the data

Let's hope for a better future expiry than the option expiry that we just witnessed