Notes · Aug 16, 2026
The Vanguard SPX ETF (VOO) Beat the Vanguard Morningstar Total Stock
Educational only. Not investment advice. Not a trade recommendation.
A Shift in the Balance of Power: Why VOO's Reign May Be Coming to an End
The Vanguard S&P 500 ETF (VOO) has been the dominant force in the ETF landscape for the past four years, outperforming the Vanguard Morningstar Total Stock Market ETF (VTI) in each of those years. However, a closer look at the underlying market structure and dealer positioning suggests that this trend may be on the verge of reversal. If VOO is trading just below a key resistance level, and the Confluence Flow Index (CFI) is indicating a surge in dealer hedging activity, it may be a sign that the balance of power is shifting in favor of VTI.
One key factor to consider is the impact of dealer gamma on the market. When dealers are long gamma, they are incentivized to buy dips and sell rallies, which can lead to a tightening of the expected move and a reduction in volatility. However, if dealers are short gamma, they are more likely to sell into strength and buy into weakness, leading to an increase in expected move and volatility. If VOO is pinned just under a call wall, and dealers are short gamma, it may be a sign that they are preparing for a potential breakout to the upside, which could be a boon for VTI.
Understanding the Role of Dealer Positioning
Dealer positioning is a critical component of market structure, and it can have a significant impact on the price action of VOO and VTI. When dealers are long or short a particular strike, it can influence the expected move and volatility of the underlying asset. For example, if dealers are long a call strike just above the current market price, they may be more likely to sell into strength, which can lead to a reduction in expected move and volatility. On the other hand, if dealers are short a put strike just below the current market price, they may be more likely to buy into weakness, which can lead to an increase in expected move and volatility.
For a more in-depth look at dealer positioning and its impact on market structure, visit our market structure explainer page, which provides a detailed analysis of the key concepts and mechanics that drive the markets.
The Impact of Volatility Regime on Market Structure
The volatility regime is another critical factor to consider when evaluating the market structure of VOO and VTI. When volatility is high, dealers are more likely to be short gamma, which can lead to an increase in expected move and volatility. On the other hand, when volatility is low, dealers are more likely to be long gamma, which can lead to a reduction in expected move and volatility. If VOO is trading in a low-volatility regime, and dealers are long gamma, it may be a sign that the market is due for a breakout to the upside, which could be a boon for VTI.
- In a high-volatility regime, dealers are more likely to be short gamma, which can lead to an increase in expected move and volatility.
- In a low-volatility regime, dealers are more likely to be long gamma, which can lead to a reduction in expected move and volatility.
- The volatility regime can have a significant impact on the market structure of VOO and VTI, and it is essential to consider this factor when evaluating the potential for a reversal in the trend.
Evaluating the Potential for a Reversal
To evaluate the potential for a reversal in the trend, it is essential to consider the market structure and dealer positioning. If VOO is trading just below a key resistance level, and dealers are short gamma, it may be a sign that the market is due for a breakout to the upside, which could be a boon for VTI. The following table summarizes the key factors to consider when evaluating the potential for a reversal:
| Factor | Impact on Market Structure |
|---|---|
| Dealer Gamma | Long gamma: reduction in expected move and volatility. Short gamma: increase in expected move and volatility. |
| Volatility Regime | High volatility: increase in expected move and volatility. Low volatility: reduction in expected move and volatility. |
| Dealer Positioning | Long call strike: reduction in expected move and volatility. Short put strike: increase in expected move and volatility. |
Practical Takeaways
In conclusion, the trend of VOO outperforming VTI may be coming to an end, and it is essential to consider the market structure and dealer positioning when evaluating the potential for a reversal. If VOO is pinned just under a key resistance level, and dealers are short gamma, it may be a sign that the market is due for a breakout to the upside, which could be a boon for VTI. As you continue to monitor the market and adjust your strategy, consider visiting the 0DTE Confluence Decision Desk for more in-depth analysis and insights to help you navigate the complex world of 0DTE options trading.
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Educational content only. Options involve substantial risk.