| Futures were down sharply testing the 3300 level which pushes us through the Zero Gamma level. While technically this places us in a negative gamma position we still consider 3300 critical support. As you can see here a break of 3300 could “turn on” large put gamma positions from 3250 down through 3200. The concern is that many of those larger put positions reside out post election and so if the market declines now those puts may fuel volatility for an extended period. As many of you know we see puts being closed/rolled as fuel for short covering, so if the market drops before the election those hedges could well be held. To the upside we still mark 3400 as the largest call interest area. Yesterday we mentioned the strong rally in many tech names and there are notes out (h/t Chris) detailing large options positions building in tech. Looking at FB as an example you can see how call activity has picked up over the last two weeks. This chasm between call & put gamma is starting to look similar to that of early August. The key to remember with these large options positions is that they bring negative gamma and therefore volatility aka “instability” to markets. |
| Market Outlook: |
| 3200 – 3400 October OPEX range. |
| Event | Time EST | Actual | Forecast | Previous |
| Average Hourly Earnings m/m | 8:30am | 0.5% | 0.4% | |
| Non-Farm Employment Change | 900K | 1371K | ||
| Unemployment Rate | 8.2% | 8.4% | ||
| Revised UoM Consumer Sentiment | 10:00am | 78.9 | 78.9 |
| Signal Name | Latest Data | Previous | SPY | NDX | QQQ | ||
| Ref Price: | 3314 | 3368 | 331 | 11354 | 282 | ||
| VIX Ref: | 26.7 | 26.7 | |||||
| SG Gamma Index™: | 0.20 | -0.24 | 0.05 | 0.01 | 0.00 | ||
| Gamma Notional(MM): | $-190.00 | $178.00 | $-476.00 | $1.00 | $64.00 | ||
| SGI Imp. 1 Day Move: | 1.32%, | 44.0 pts | Range: 3270.0 | 3358.0 | ||||
| SGI Imp. 5 Day Move: | 3310.0 | 4.84% | Range: 3150.0 | 3470.0 | ||||
| Zero Gamma Level(ES Px): | 3331 | 3309 | — | ||||
| Vol Trigger™(ES Px): | 3370 | 3360 | 334 | 10900 | 279 | ||
| High Gamma Strike Resistance: | 3400 | 3400 | 340 | 11000 | 285 | ||
| SG Abs. Gamma Strike: | 3400 | 3350 | 340 | 10900 | 280 | ||
| Put Wall Support: | 3100 | 3350 | 330 | 10000 | 255 | ||
| Call Wall Strike: | 3400 | 3400 | 340 | 11000 | 285 | ||
| CP Gam Tilt: | 1.1 | 1.16 | 0.84 | 1.09 | 1.07 | ||
| Delta Neutral Px: | 3248.0 | ||||||
| Net Delta(MM): | $10,694.00 | $10,681.00 | $1,781.00 | $331.00 | $669.00 | ||
| 25D Risk Reversal | -0.08 | -0.07 | -0.07 | -0.05 | -0.08 | ||
| Model Forecast: |
| Top Absolute Gamma Strikes: SPX: [3400, 3375, 3350, 3300] SPY: [350, 340, 335, 330] QQQ: [290, 282, 280, 277] NDX:[12000, 11000, 10900, 10000] SPX Combo: [3347.0, 3370.0] NDX Combo: [11511.0] The Volatility Trigger has moved UP: 3370 from: 3360 The PutWall has moved to: 3100 from: 3350 SPX is below the Volatility Trigger™. The 3331.0 level is first level of resistance and is critical as its the negative gamma threshold. The trigger level of: 3370 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 DOWN: $-190.45MM from: $177.00MM Gamma is tilted towards Puts, may indicate puts are expensive Negative gamma is moderate favoring further swings in the market |