The Team Can Lose, But SPY Must Not Fall
"Stock God" Leopold was margin-called and forced to transfer his holdings — Citadel Securities swooped in and picked them up at a bargain price. The very next day, the market rebounded sharply with a massive surge.
There's something worth reminding everyone about: Citadel Securities acquired Morgan Stanley's options market-making business in 2025 and is likely the largest options market maker in the market today.
As we all know, options liquidity is provided by market makers, so Leopold's large block buy orders were essentially visible chips in the eyes of the market makers. This reminds me of the old saying — "the mantis stalks the cicada, unaware of the oriole behind." The large block trades I've been tracking might just be fat lambs waiting to be sheared in the eyes of the market makers.
Leopold is just a well-known minor episode in this semiconductor crash. What's noteworthy, however, is that this semiconductor plunge surprisingly did not drag down the S&P 500. Since semiconductors were able to lift the broader market to 7600, logically they should also be able to crash the S&P back to 7000. Yet the lowest point this time was just 7316 on FOMC day, and the very next day shorts got squeezed and the market rebounded back to 7400.
Comparing this to the Nasdaq's pullback to its 120-day moving average, the S&P 500's resilience looks quite unnatural. Scanning through the past month's news on the U.S. stock market, you'll find that Trump's "Baby Account" has been launched. The account is described as follows:
Children born between 2025 and 2028 can receive a one-time $1,000 deposit from the Treasury Department, as part of a pilot program aimed at kickstarting long-term savings.
Parents, guardians, grandparents, and others can also contribute up to $5,000 per child per year. These contributions will be invested in exchange-traded funds (ETFs) that track the performance of the S&P 500 index.
Additionally, the U.S. Treasury Secretary specifically had CNBC release a press statement saying that as of July 27, 7 million children had already registered for the new tax-deferred child savings and investment accounts.
So, for the sake of political correctness, SPY absolutely cannot fall!
That said, a political mandate doesn't necessarily mean it can't fall. For example, comparing the Korean index and the semiconductor crash, SPY's rock-solid stability is enough to convince the general public to open accounts.
However, bearish positioning on SPY doesn't care about politics — it hedges at whatever levels the data suggests. Thursday's surge proved unable to dispel the dark cloud of a potential drop back to 700. The bearish outlook for August remains poor.
Bullish positioning has also been very subdued, consistent with our earlier speculation that SPY will stay below 760 through August. Interestingly, QQQ saw a new bullish block trade yesterday $QQQ 20270319 715.0 CALL$ , opening 14,000 contracts. This expectation isn't excessive — it essentially implies QQQ rebounding back to pre-pullback levels, analogous to SMH rebounding back to 600.
So can SMH rebound back to 600? August might be a stretch. On Thursday, the options block trade on SMH was selling the August 21-expiry 550 call $SMH 20260821 550.0 CALL$ . On the same day, there was also a buy-side block opening for the January 2027-expiry 595 call $SMH 20270115 595.0 CALL$ .
Block openings on Micron are sparse, but looking at the overall open interest data, the stock will most likely oscillate in the 700–900 range for another two to three weeks.
Despite Thursday's surge, call options on Hynix reacted with indifference — instead, put open interest surged significantly. For example, $SKHY 20260807 100.0 PUT$ $SKHY 20260828 110.0 PUT$ — targeting a drop back to 100–110. Generally speaking, a short-squeeze rally requires a retest for confirmation, so it makes sense to look at puts on an up-move. That said, I think it will be hard to break below 100, given the massive open interest at that level.
So for bottom-fishing Hynix in August, selling puts on SKHY would be more appropriate.
August is still expected to oscillate within the 80–100 range. The reference point remains the large sell call order $INTC 20260918 100.0 CALL$ . INTC is the type of stock that grinds out a long-term bottom — typically a three-month grind.
Open interest on NVIDIA is also fairly subdued. It will be hard for the stock to exceed 210 next week — selling the call $NVDA 20260807 210.0 CALL$ could be considered.
Bearish positioning continues to target 180.
Semiconductors still need to wash out, but SPY can't fall, and Apple has already priced in its upside. So a new batch of stocks needs to step in to support the market — and the major cloud giants are all suitable candidates. Additionally, these companies have further financing and debt issuance needs, which require a higher stock price. In the near term, MSFT has already held above 430. Google is likely to rebound back to around 370 $GOOG 20260828 375.0 CALL$
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