What’s Next for Stocks into August Options Expirations

August 11, 2025

What does quantitative Market Structure data say happens next to US stocks?

Quant traders, “market structure” is another way to say “how the stock market works.”  Let’s take Demand and Supply at EDGE (key quantitative short-term market measures). On Aug 1, Demand, our 10-point algorithm for measuring buying and selling, topped at 6.0. Supply, which is Reg SHO Rule 201 short volume in the S&P 500, was 52.2%.

Yes, more than half the trading volume was short, borrowed. High short volume doesn’t predict a decline. But it DOES tell us about the nature of the money causing prices to rise or fall.  More on that in a moment. 

And Demand at 6.0 nearly always means gains stall. Demand last rose to 6.0 Jul 3. SPX was 6,250 then, and 6,210 Aug 1.  Flat.

And how about this: 

On Jul 31, SPX was $6,320.  On Aug 8, 6,370 and change.  The high price Jul 31 was 6,398. On Aug 8, the market closed at the high price of the day, 6,377, highest price since Jul 31.  The midpoint price Jul 31 was 6,351. The midpoint Aug 8 was 6,357. Flat.  

Yes, SPX is up 0.52% since Aug 1. But a closer examination shows price hasn’t moved much as Demand has fallen from 6.0 to 4.6, Supply has risen from 51.9% to 52.7%.

My head is about to explode, you say.  Is this going somewhere? 

Yes. The short, sharp spate of volatility Aug 1 when SPX dropped 100 points coincided with month-end expirations (and the benchmark got it back when they reset Aug 4).  Monthly expirations for August hit stocks this week, the 14^th-15^th, with VIX expirations spilling into the next week on the 20^th.  Four times a year generally, we get them in two different weeks.  It occurred in Jan and May and will again in October. 

And SPX, the futures contract defining the benchmark, isn’t matching the underlying basket. The average S&P 500 stock has closed below its average midpoint price four days in a row, signaling selling.   

Let’s put it all together.  SPX is up since July month-end but only off the Aug 1 low.  In the S&P 500 there’s been net selling under the “skin” of the stock market.  Demand has fallen to 4.6 and probably bottoms soon, depending on what happens in the next day or two.  Supply peaked and ticked down Friday. A day isn’t a trend.  And options expire this week. 

What does all this tell us about the NATURE of the money behind the market here in August?  It’s misleading. Beware.

So, what happens next? I wrote last week for the IBKR quant blog that the drop Aug 1 was month-end true-ups, and everybody got a step-up Aug 4 out of that. If no new money follows it, the market will decline. Otherwise, the law of large numbers will migrate the market toward the expected outcome, which is up.

Despite what the market shows on the surface, market structure nuts and bolts say no new money followed. If this assessment is correct, the market is about to lurch.  Otherwise, it won’t. My confirmation bias is an expectation of a slide – so my interpretation (my heuristics?) of the data may be skewed!

PS – Visit marketstructureedge.com and sign up for our free daily Market Desk Notes.