| Futures advance to the 3275 area overnight. Like yesterday we see little to no change in most levels, but the concentration of gamma at 3300 increases. The SPY notional gamma appears to be larger than SPX, which happens on occasion and possibly reflects higher retail activity. The SPY High Gamma area is 330 which matches the SPX 3300 level and its important to recall that this SPY gamma is incorporated into the Combo strikes which are again concentrated at 3300. We saw calls closed in SPX and SPY <=3270/327 and a pickup in interest towards the 3350/3400 strikes, which is part of the mechanical rolling process we like to see on moves higher. Our opinion is that this shift towards higher options strikes helps to draw the market up. Unfortunately we dont see any material increase in SPX positive gamma levels as shown by the SG Gamma Index (more positive gamma brings more stability to the markets).
If you look at the largest 10 call positions by open interest you see 7/10 are in December, with only 1 in August (3300 calls, 10th largest). The 3400 strike for Dec is the only strike on the list above 3300 that appears. I really want to see a pickup in activity over 3300 to help signal there is some type of institutional expectation of higher prices as if the SPX pushes through 3300 there wont be much to “hedge to” and help stabilize prices. For today we see 3250 as support with a large Combo area at 3279. 3330 remains the overhead target and resistance level. The bull case remains intact unless we breach 3200. |
| Market Outlook: |
|---|
| August positions are very light with largest positions appearing around 3000 and 3300. This range will consolidate next week as new positions build. |