| Futures are up a bit overnight after a tame overnight session. Gamma levels in SPX are flat to last nights close with 3400 registering as the largest strike. The Combo Strike charts reflect a large area of support at ~3385-3392 which backswday the “gravity” of the 3400 area. Yesterday there was again large trading at 3350 with volume of 55k puts and 32k calls which led to net OI additions of ~20k each. Additionally, there were 40k call volume at 3400 but only 5k net added. So, lots going on in this 3350-3400 range. Particularly on weekly OPEX days the intraday day trading type volume remains high. One last position note in SPY – there is a lot of call OI at 350 which appears to be fairly distributed between now and EOY. Something to keep in mind should markets make a quick break higher. For today the data does seem to have shifted up a bit from 3350 to 3400 as the main area of attention. Support shows at 3385, resistance at 3419, and we anticipate a pretty tight trading range. Based on OI size it appears 3400 should stay in play until Fridays OPEX. On a separate note we wanted to make mention of the attention that “gamma” has garnered, particularly in the last week. I think there was a fairly tight community aware of the mechanism helping to drive markets up into August, but the very quick unwind and SoftBank coverage has brought a real spotlight to this study. With this likely comes a change in perception of how options can be used, and this may lead to market makers having to add some defense mechanisms. Its long been etiquette (for lack of a better term) that an buy side trader would not use their order to “run over” their dealer counterparty – its easy to imagine there are order initiators (with a new leverage mechanism) who don’t care about being polite. We’ll be expanding on this idea over the coming weeks. |
| Market Outlook: |
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| September OPEX top range = 3500, can push down to 3200 with break of Vol Trigger. |