Macro Theme:
Key dates ahead:
- 8/5: ISM
- 8/7: NFP
- 8/12: CPI
SG Summary:
Update 8/5: We’ve raised the risk pivot to 7,680 as mild negative gamma shows below that strike. Additionally, the “stock up, vol up” regime has produced +98th %’ile call skews in SPY/QQQ/DIA. Given this, we want to flatten out some longs and/or enter into some cheap, short dated downside plays in order to benefit from some index mean reversion (ref: 7,775 SPX)
8/3: COR1M (correlation) is back to our <8 “we want to hedge” levels. If the AI-trade indeed has renewed legs, and the 8/3 Iran deal is material, then this is likely a bull train that persists into OPEX (8/21), and so we want to maintain equity longs while above the Risk Pivot (7,480). Simultaneously, there are several things that could trigger a vol spasm here, and so we want to start dipping our toe into >=1-month SPX/QQQ put spread hedges. If SPX breaks <Risk Pivot then we will look to press shorts.
Key SG levels for the SPX are:
- Resistance: 7,800
- Pivot: 7,680 (bearish <, bullish >) updated 8/5/26
- Support: 7,700, 7,675, 7,600
Founder’s Note:
ES futures are +50bps, NQ +20bps.
ISM PMI at 8:30AM EST.
Resistance (lol) is at 7,800. Support 7,700, 7,675.
TLDR: ATM vol remains a bit cheap in our view, and this market is very overstretched after the ultra-leveraged rally. Index calls are now scanning as very rich (25 delta vs ATM).
SPX gamma is positive across all nearby strikes, but there are no major +99th %’ile strikes on the board. Its likely the call sellers have taken enough pain after mispricing volatility the last two sessions. As the market rallied, their cheap calls blew out, and forced them to cover and/or roll higher. This rolling, in our view, helped add to upside market volatility. Remember yesterday’s AM SPX straddle was pricing in 33bps of movement – and the SPX served up 180bps!
Today’s straddle is at $44/56bps (ref 7,775). That straddle is only pricing in the overnight move – suggesting the options remain underpriced. Additionally, we have many extreme readings, suggesting this overshoot is due for a pull back. We certainly don’t want to turn outright bearish at this juncture, but everything suggests that this was a hyper-levered move that is overextended.
Record SPX call volume yesterday (h/t zerohedge). Options are leverage.
The SPX risk reversal tagged historic lows (call IV high relative to put IV) GS via ZH:
Call skew percentile in the SPY, QQQ and DIA is now +98th %’ile, while puts are <=12th %’ile. We, for one, refuse to but calls that are +98th %’ile rich.
And the quintessential “stock up, vol up” chart showing how extreme the SPX up move + VIX up signal was:
|
| /ESU26 | SPX | SPY | NDX | QQQ | RUT | IWM |
|---|---|---|---|---|---|---|---|
| Reference Price: | $7762.7 | $7736 | $771 | $29733 | $723 | $3036 | $301 |
| SG Gamma Index™: |
| 5.56 | 0.358 |
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| SG Implied 1-Day Move: |
| 0.79% | 0.79% |
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| SG Implied 5-Day Move: |
| 1.56% |
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| SG Implied 1-Day Move High: |
| $7843.33 | $781.88 |
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| SG Implied 1-Day Move Low: |
| $7720.37 | $769.62 |
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| SG Volatility Trigger™: | $7546.7 | $7520 | $762 | $28540 | $705 | $2960 | $295 |
| Absolute Gamma Strike: | $8026.7 | $8000 | $775 | $30000 | $700 | $3000 | $290 |
| Call Wall: | $7826.7 | $7800 | $775 | $30000 | $735 | $3100 | $305 |
| Put Wall: | $7426.7 | $7400 | $750 | $28000 | $660 | $2850 | $290 |
| Zero Gamma Level: | $7489.7 | $7463 | $764 | $28562 | $706 | $3006 | $303 |
| Key Support & Resistance Strikes |
|---|
| SPX Levels: [8000, 7000, 7600, 7500] |
| SPY Levels: [775, 750, 770, 760] |
| NDX Levels: [30000, 29000, 28550, 29500] |
| QQQ Levels: [700, 720, 710, 730] |
| SPX Combos: [(8100,98.16), (8092,65.94), (8077,86.58), (8069,77.69), (8054,95.22), (8038,86.60), (8023,91.90), (8007,68.72), (8000,98.30), (7992,70.13), (7976,89.53), (7953,96.41), (7922,92.17), (7899,99.73), (7891,78.16), (7884,69.45), (7876,96.31), (7860,80.14), (7853,99.08), (7837,83.72), (7829,84.15), (7822,99.32), (7814,77.99), (7806,91.11), (7798,99.87), (7791,89.92), (7783,94.57), (7775,99.41), (7767,94.46), (7760,92.68), (7752,99.33), (7737,86.57), (7729,97.43), (7721,78.93), (7713,85.65), (7698,97.89), (7675,71.58), (7651,93.77), (7628,75.55), (7613,76.84), (7597,73.88), (7551,77.00), (7450,71.27), (7404,91.87), (7373,71.09)] |
| SPY Combos: [762.97, 759.94, 760.7, 767.52] |
| NDX Combos: [30001, 30209, 29793, 30417] |
| QQQ Combos: [694.48, 679.78, 709.88, 681.18] |
|
| SPX | SPY | NDX | QQQ | RUT | IWM |
|---|---|---|---|---|---|---|
| Gamma Tilt: | 1.566 | 1.325 | 1.935 | 1.364 | 1.17 | 0.848 |
| Gamma Notional (MM): | $1.347B | $871.951M | $15.681M | $493.663M | $12.129M | ‑$179.687M |
| 25 Delta Risk Reversal: | -0.026 | 0.00 | -0.027 | 0.00 | -0.029 | 0.00 |
| Call Volume: | 1.567M | 3.407M | 18.444K | 1.919M | 29.312K | 464.826K |
| Put Volume: | 1.635M | 3.671M | 19.539K | 1.533M | 51.148K | 965.836K |
| Call Open Interest: | 10.025M | 6.629M | 85.57K | 5.317M | 240.593K | 2.901M |
| Put Open Interest: | 13.359M | 14.338M | 97.323K | 6.441M | 455.642K | 7.443M |
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