- Solve real problems with our hands-on interface
- Progress from basic puts and calls to advanced strategies
Interactive Options Course
Posted October 20, 2025 at 1:04 pm
The other morning, someone asked me why we were trading higher. I made the flippant comment, “they rang the opening bell, that’s why.” Taking that a step further, on a morning when stocks are higher on a rally that began modestly in the pre-market but accelerated rapidly after the regular session opened, it is reasonable to wonder whether there is indeed a Pavlovian quality to the current market environment.
For those of you who might be unfamiliar with Pavlov and his experiments, here’s a brief primer. Around the turn of the 20th century, Ivan Pavlov ran a now-famous experiment where he showed that “dogs could be conditioned to salivate at the sound of a bell if that sound was repeatedly presented at the same time that they were given food.”
In short, Pavlov’s dogs became conditioned to associate a bell with a reward. Does that sound all that different from equity traders right now?
This brings about a bit of a follow-up question: why wait until the bell rings when there is active futures trading in the pre-market? The chart below shows how December ES (S&P 500 E-mini) futures began trading higher throughout the early morning in the US, then accelerated sharply once 9:30 EDT rolled around.
Source: Interactive Brokers
Some of this morning’s move in the regular session could have been technical in nature. The stock orders that were filled on or just after the opening bell were enough to push ES futures to new intraday highs, presumably triggering some stop-loss orders that further accelerated the gains. But there was no fresh news to propel stocks at that particular moment.
The ostensible reason for the rally was that there were perceptions that the trade disagreements between the US and China were softening. The President made relatively conciliatory comments over the weekend, and it appears that a high-level meeting between the US Treasury Secretary and the Chinese Vice Premier may be in the cards for this week. Those are certainly good reasons for a positive outlook on stocks, especially in the absence of government data and sparse Monday morning earnings reports ahead of a busy week on the earnings front.
Why though, did we take another leg higher as soon as the bell rang and why is this a common occurrence? Three factors come to mind.
Bottom line – there are several conditions that make it easier for a market that is already displaying positive momentum to accelerate that momentum.
Also, looking at the chart above, I’m reminded of another bell that could yield a Pavlovian response among traders – one’s alarm clock. Note that ES took a leg higher in the early hours for US-based traders. I put forth this rubric in May, and I believe it holds today:
Item #3 in the list above is off the table during the government shutdown, but the other items remain in effect. Pavlov’s dogs learned to anticipate a reward when the bells rang. So have stock traders.
*One other note: today is the 38th birthday of the “Fed Put.” I gave a talk about that at last weekend’s MoneyShow conference. It was based upon a piece that I wrote three years ago, which is available here: Happy 35th Birthday, Fed Put | Traders’ Insight
For specific platform feedback and suggestions, please submit it directly to our team using these instructions.
If you have an account-specific question or concern, please reach out to Client Services.
We encourage you to look through our FAQs before posting. Your question may already be covered!
The analysis in this material is provided for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IBKR to buy, sell or hold such investments. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Interactive Brokers, its affiliates, or its employees.
Futures are not suitable for all investors. The amount you may lose may be greater than your initial investment. Before trading futures, please read the CFTC Risk Disclosure. A copy and additional information are available at ibkr.com.
Any discussion or mention of an ETF is not to be construed as recommendation, promotion or solicitation. All investors should review and consider associated investment risks, charges and expenses of the investment company or fund prior to investing. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
Options involve risk and are not suitable for all investors. For information on the uses and risks of options, you can obtain a copy of the Options Clearing Corporation risk disclosure document titled Characteristics and Risks of Standardized Options by going to the following link ibkr.com/occ. Multiple leg strategies, including spreads, will incur multiple transaction costs.
Related Articles
I would add this morning reminded me playing a game of fetch with a dog. When WH Admin rep Hassett commented on CNBC at 7:45 am CT that he expected the Gov’t Shutdown to end sometime this week, S&P Futures began moving up then exploded higher at the open of regular hours. It seems like any time a WH mouthpiece says anything positive, whether with substance or not (when will we learn), it is like the owner throwing the stick or ball, dogs will always chase it.
I find it curious that of all the newsletters, articles, and insights that hit my Inbox every day, the ONLY mention of the AWS outage and it’s impact was the “Cryptotwits (by Stocktwits)”. And it’s the one I usually fade because it’s mostly noise. Maybe that’s everyone’s topic for tomorrow??? Hopefully it’s irrelevant by then.
No, I think you got it right with your “flippant comment”. No sense to this market other than FOMO. All gonna come crashing down. When, who knows.
Agreed. It’s quite annoying actually, particularly when high yield is being hit. Example, APLD looked weak this am after pulling back last couple of days, so I figured wait and see. It hit yesterday’s close and then exploded up.
Haha, great read as always! If Pavlov had known how well his theory applies to human behavior, he might’ve skipped the dogs and headed straight to Wall Street. Thanks — love your articles!
We hope you continue to enjoy Traders’ Insight!