Macro Theme:

 

 

Founder’s Note:

Futures are flat, with some home sales and sentiment data out at 10AM.

SPX AM options expire at 9:30AM ET, and all other options expire at 4PM ET.

Resistance: 6,150, 6,166, 6,173, 6,200

Support: 6,120, 6,100, 6,095, 6,050

Much like yesterday we start off in a positive gamma position, which net positive gamma strikes from 6,100 up to 6,200. We estimate 1/3 of total SPX gamma expiring on the open, with 1/3 of SPY gamma expiring on the close, which is meaningful and serves to reduce this positive gamma in the 6,100 to 6,200 range. We note that the large JPM Call at 6.160, which supplies a lot of ATM gamma in this range, remains in place until 3/31.

There was a sharp 1% drawdown on yesterday’s open, which pushed the SPX to 6,085 before mean reversion kicked in, and returned the SPX to ~6,120 (SPY 610). SPY 610 is a major level for today, as it is the largest S&P500 strike on the board ($6bn in absolute/total gamma).

What was the cause of yesterday’s opening spasm? Apparently it was in retail-heavy names like PLTR, HIMS and RDDT. As you an see, these names plunged at the open, losing ~20% by 10AM ET. We flat this as one would think the S&P would be insulated from these smaller market cap names – but apparently that’s not the case. And so, we add another checkmark in our “liquidity hole/jump risk concern” list.

The idea here is that there is a fragility to this market that IV is not appreciating. As a result, we see exacerbated moves which can allow for large jumps. Thus far those jumps mean revert, but given some “real” bad news, those jumps could turn to plunges.