Macro Theme:
Key dates ahead:
- 8/20: VIX EXP
- 8/23: J-HOLE
- 8/27: NVDA ER
Update 8/18: Per recent updates, due to 11-12% SPX IV’s we want to now own a small amount of Sep put, and/or Sep VIX call spreads into JHOLE & NVDA (8/27), while maintaining a core long position as long as the SPX is >6,400. The core long position can be stock, or expressed via call options as call IV’s are also quite cheap particularly in tech like SMH, XLK. For that upside we will likely elect to go with short dated (early Sep) call spreads or flies that we will likely look to buy Friday to play positive outcomes of JHOLE and NVDA ER.
8/13: Our new risk pivot is 6,400. We are looking for a tag of 6,500 into Friday, which implies the bulk of SPX short term gains are now made (ref SPX 6,459). Per yesterdays update (8/12) we want to add a new small tranche of Sep VIX call spreads and SPX put spreads.
8/12: We want to remain long of stocks with the SPX is >6,350. We will also being looking to own end-of-August SPX puts and/or VIX calls into CPI on the basis that IV is simply cheap enough to warrant adding a fresh sliver of downside plays.
7/30: We recommend ~8/11-8/15 exp 6,500 calls as an upside play out of FOMC, GDP, NFP and Mag 7 earnings. This is because they are trading at a 9-10% IV, and we think a vol contraction + giant positioning at 6,500 could be a target with benign to good outcomes from these events/data.
7/28: SMH 1-month options scan as both very low IV, and neutral call vs put prices. As such we will be adding 1-month ~300 strike SMH calls into the upcoming earnings deluge (ref $287).
Key SG levels for the SPX are:
- Resistance: 6,500
- Pivot: 6,400 (bearish <, bullish >)
- Support: 6,450, 6,300
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Founder’s Note:
Futures are off 15bps with no major data on tap for today – we note there is little of significance at all this week until JHOLE Saturday.
First support, which is major support, is at 6,400. Resistance is at 6,450 & 6,500.
While we mark “risk off” below 6,400, the reality is we see light positive gamma down through 6,300. This suggests that if any downside sparks, the dealer reaction should be limited. Its not until <6,300 that dealer gamma is negative. You combine this positive gamma below, which is from short puts, with the very low IV’s for this week and it all aligns with a narrative that this pre-Jackson Hole week is “risk free”. Given that we think any test of 6,400 this week will be bought.
IV’s & VIX are up a bit today, but that is likely just a “case of the Monday’s” for vol, which tends to get sold hard into the weekend, and mean reverts a bit on a Monday.
Reading the above content you’d likely read us as feeling this is a fairly low risk environment – and that is true. That view does not square with our view that owning a bit of 1-month SPX put spreads and/or VIX calls due to low IV’s is warranted given the ~11-12% ATM SPX vols. However those 12% IV’s extend through JHOLE (pink arrow, below) and out into September, and we want to own downside plays because the market is squarely on one side of a specific trade: risk-free.
We are not here to say that consensus is right or wrong – just that its cheap to bet against the very crowded long trade. We particularly like these trades given the big catalysts of JHOLE and NVDA ER (8/27).
On that note, we are watching BTC struggle a bit, -3% over the weekend, and Ethereum -7%. You may recall that ETH was firing as a major “stock up, vol up” flag on our scanners last week, suggesting extreme overbought conditions. Those overbought conditions (i.e. rich calls) are sure to wear off with this move lower. We also tend to look at crypto as a measure of risk-taking, and so the consolidation squares with equities that are likely to, at best, grind about this week (vs see a major breakout).
|
|
/ESU25 |
SPX |
SPY |
NDX |
QQQ |
RUT |
IWM |
|---|---|---|---|---|---|---|---|
|
Reference Price: |
$6469.35 |
$6449 |
$643 |
$23712 |
$577 |
$2286 |
$227 |
|
SG Gamma Index™: |
|
1.862 |
-0.132 |
|
|
|
|
|
SG Implied 1-Day Move: |
|
0.60% |
0.60% |
|
|
|
|
|
SG Implied 5-Day Move: |
|
1.68% |
|
|
|
|
|
|
SG Implied 1-Day Move High: |
|
After open |
After open |
|
|
|
|
|
SG Implied 1-Day Move Low: |
|
After open |
After open |
|
|
|
|
|
SG Volatility Trigger™: |
$6465.35 |
$6445 |
$644 |
$23710 |
$576 |
$2275 |
$227 |
|
Absolute Gamma Strike: |
$6020.35 |
$6000 |
$645 |
$23800 |
$580 |
$2300 |
$220 |
|
Call Wall: |
$6520.35 |
$6500 |
$645 |
$23725 |
$580 |
$2290 |
$230 |
|
Put Wall: |
$6020.35 |
$6000 |
$635 |
$21500 |
$565 |
$2150 |
$220 |
|
Zero Gamma Level: |
$6384.35 |
$6364 |
$642 |
$23298 |
$576 |
$2281 |
$228 |
|
|
SPX |
SPY |
NDX |
QQQ |
RUT |
IWM |
|---|---|---|---|---|---|---|
|
Gamma Tilt: |
1.259 |
0.870 |
1.418 |
1.029 |
1.014 |
0.779 |
|
Gamma Notional (MM): |
$560.583M |
‑$259.754M |
$11.154M |
$100.772M |
$1.94M |
‑$253.614M |
|
25 Delta Risk Reversal: |
-0.04 |
0.00 |
-0.039 |
0.00 |
-0.027 |
-0.009 |
|
Call Volume: |
510.854K |
1.018M |
15.042K |
697.895K |
23.896K |
282.995K |
|
Put Volume: |
892.42K |
1.518M |
10.883K |
909.897K |
32.899K |
580.715K |
|
Call Open Interest: |
7.167M |
4.932M |
65.801K |
3.315M |
267.755K |
3.578M |
|
Put Open Interest: |
12.403M |
11.872M |
74.946K |
5.059M |
425.362K |
7.596M |
|
Key Support & Resistance Strikes |
|---|
|
SPX Levels: [6000, 6500, 6450, 6400] |
|
SPY Levels: [645, 640, 630, 650] |
|
NDX Levels: [23800, 23725, 23700, 23600] |
|
QQQ Levels: [580, 575, 560, 570] |
|
SPX Combos: [(6746,94.11), (6701,97.11), (6676,78.02), (6650,96.66), (6624,77.51), (6617,75.28), (6598,99.27), (6572,96.16), (6566,76.31), (6559,75.31), (6547,98.46), (6540,85.58), (6527,98.36), (6521,75.18), (6514,91.97), (6508,91.80), (6501,99.96), (6495,84.86), (6488,90.19), (6482,93.11), (6476,96.51), (6469,87.06), (6463,96.97), (6450,96.02), (6430,71.67), (6424,71.03), (6418,88.47), (6392,81.08), (6385,72.99), (6379,70.00), (6372,79.68), (6366,84.37), (6347,84.91), (6327,74.43), (6314,80.70), (6301,87.01), (6276,71.53), (6263,75.89), (6250,82.80), (6218,84.86), (6198,84.48), (6147,78.28)] |
|
SPY Combos: [648.17, 648.82, 657.85, 653.33] |
|
NDX Combos: [23831, 23712, 23949, 23214] |
|
QQQ Combos: [579.87, 583.93, 585.09, 582.19] |