Futures had a fairly active night touching 3245 and pulling back to 3215 overnight. Currently they are around 3225, and despite that movement we anticipate a quiet day ahead. Notional gamma levels did build some which is a good sign, but on the Combo charts we are still seeing this band of gamma from 3225-3250. Much like the past several days this infers that we’ll need some decent buying volume to push up through 3250.
One of the things we have been talking about is the flow dichotomy between SPX and single stocks. We’ve been rather disapointed with SPX volumes, while single stocks have produced “record” open interest levels. A chart came out recently from Goldman which highlights this impact (here, h/t @SamanthaLaDuc). You can see just how much impact this call volume has had – huge!
As you all well know when traders buy calls dealers (short calls) must buy stock to hedge. Currently we see call positions across equities slowly rebuilding back to these record levels. Most of you can probably opine on the ramifications of this dynamic – but one interesting struck me after TSLA earnings. The call gamma in TSLA was quite high (see post here) and it looked to me like the stock had a lot of firepower to jump. I failed to account for the implied volatility crush that takes place after earnings, so what happens is that all those calls lose a ton of value even if the stock jumps. Lower call values imply dealers are long too many shares and will need to sell. I really need to parse through some data to confirm this idea that earnings may put sell pressure on “call heavy” stocks, but I wanted to bring it up in front of these busy earnings dates.
For today we look for small movement and mar