| Futures are flat to last nights cash close. Open interest changes yesterday seem to confirm our view that SPX flows were rather benign – we saw puts >=3250 net closed which pushes the Put Wall to 3200. Our levels shifting appear to be more a function of SPX price changes rather than large shifts in open interest. For today we are working off of the 3250 area, if we get a break in implied volatility (VIX) we could see a quick recovery into 3300. To the downside negative gamma increases sharply if we break 3200. As there are a lot of puts at 3200 its under there that markets could move from “weak” to “washout”. On the back of the recent “weaponized gamma” action, we may be seeing another player knocked out. Some of you are probably aware of recent news that Citi closed its retail market making operation. While I do not know when they specifically ceased operations one could imagine that the August gamma ramp/crash was a very unfriendly trading environment if you werent positioned correctly. Obviously, any time market makers are removed from the system its bad for liquidity, and it could be a challenge for any new entrants to this space. |
| Market Outlook: |
| 3200 – 3400 October OPEX range. |
| Event | Time EST | Actual | Forecast | Previous |
| Unemployment Claims | 8:30am | 845K | 860K | |
| Fed Chair Powell Testifies | ||||
| Treasury Sec Mnuchin Speaks |
| Signal Name | Latest Data | Previous | SPY | NDX | QQQ | ||
| Ref Price: | 3219 | 3231 | 322 | 10752 | 264 | ||
| VIX Ref: | 28.58 | 28.58 | |||||
| SG Gamma Index™: | -0.48 | -0.16 | -0.11 | -0.00 | -0.07 | ||
| Gamma Notional(MM): | $-420.00 | $-521.00 | $-916.00 | $-1.00 | $-540.00 | ||
| SGI Imp. 1 Day Move: | 1.08%, | 35.0 pts | Range: 3184.0 | 3254.0 | ||||
| SGI Imp. 5 Day Move: | 3299.5 | 2.64% | Range: 3212.0 | 3387.0 | ||||
| Zero Gamma Level(ES Px): | 3309 | 3305 | — | ||||
| Vol Trigger™(ES Px): | 3225 | 3320 | 325 | 10900 | 270 | ||
| High Gamma Strike Resistance: | 3500 | 3400 | 350 | 11000 | 272 | ||
| SG Abs. Gamma Strike: | 3250 | 3350 | 320 | 10900 | 270 | ||
| Put Wall Support: | 3200 | 3250 | 320 | 10000 | 260 | ||
| Call Wall Strike: | 3500 | 3500 | 350 | 11000 | 272 | ||
| CP Gam Tilt: | 0.79 | 0.65 | 0.68 | 0.89 | 0.59 | ||
| Delta Neutral Px: | 3227.0 | ||||||
| Net Delta(MM): | $10,425.00 | $10,135.00 | $1,688.00 | $301.00 | $691.00 | ||
| 25D Risk Reversal | -0.08 | -0.08 | -0.08 | -0.08 | -0.08 | ||
| Model Forecast: |
| Top Absolute Gamma Strikes: SPX: [3350, 3300, 3250, 3200] SPY: [330, 325, 320, 310] QQQ: [272, 270, 260, 255] NDX:[11200, 11000, 10900, 10000] SPX Combo: [3168.0, 3194.0, 3178.0, 3197.0, 3204.0] NDX Combo: [10549.0, 10743.0, 10624.0, 10947.0, 10872.0] The Volatility Trigger has moved DOWN: 3225 from: 3320 The PutWall has moved to: 3200 from: 3250 The High Gamma Strike has moved to: 3500 from: 3400 SPX is below the Volatility Trigger™. The 3309.0 level is first level of resistance and is critical as its the negative gamma threshold. The trigger level of: 3225 will act as overhead resistance. Watching VIX is key, if volatility comes in dealers will start to buy back shares as their short puts lose value. This could start a rally. The total gamma has moved has moved UP: $-421.00MM from: $-521.00MM Gamma is tilted towards Puts, may indicate puts are expensive Negative gamma is moderate favoring further swings in the market |