|Futures are under pressure this morning at 3460, with an overnight low of 3433. Several EU markets are off more than 2% with stimulus and corona virus are being cited for the weakness. We’ve essentially unwound Mondays large gap higher and are back to last Fridays closing area.
Gamma levels remain positive despite the drop, with 3400 syncing as the flip point. This chart of gamma levels gives us the clearest picture of the current setup. Most of the positive gamma is being provided by the 3500 strike, and the question is if there is enough selling to snap the pull of that strike. This start lower doesn’t help the situation as 10/16 expiration call values drop which may result in dealers unwinding long hedges.
While our models still suggest a fairly tight (~80bps) trading range and some price recovery here it is important to reiterate the downside risk. As we’ve highlighted in past notes, there are large put positions out in December. You can see that if markets push down through 3400 those large put areas build which incents further dealer hedging, and this could spark heavy downside volatility. As those hedges don’t expire until December this could bring prolonged weakness.
Todays levels show a large Combo Strike line at 3470 with initial support at 3450. We still mark 3500 as the largest level into tomorrows OPEX. Should larger selling materialize, 3400 is again key as its the Zero Gamma point.
|3400-3500 into 10/16 OPEX.|
|Philly Fed Manufacturing Index||14.4||15.0|
|Signal Name||Latest Data||Previous||SPY||NDX||QQQ|
|SG Gamma Index™:||0.90||0.88||0.16||0.01||0.01|
|SGI Imp. 1 Day Move:||.81%,||27.0 pts||Range: 3423.0 | 3477.0|
|SGI Imp. 5 Day Move:||3497||2.53%||Range: 3409.0 | 3586.0|
|Zero Gamma Level(ES Px):||3405||3426||—||0|
|Vol Trigger™(ES Px):||3395||3370||347||11470||284|
|SG Abs. Gamma Strike:||3500||3500||350||10900||290|
|Put Wall Support:||3200||3200||340||9500||255|
|Call Wall Strike:||3500||3550||350||12000||300|
|CP Gam Tilt:||1.43||1.24||1.17||1.23||1.06|
|Delta Neutral Px:||3296|
|25D Risk Reversal||-0.09||-0.09||-0.09||-0.08||-0.07|
|Top Absolute Gamma Strikes:
SPX: [3525, 3500, 3450, 3400]
SPY: [350, 347, 345, 340]
QQQ: [295, 292, 290, 285]
NDX:[12200, 12000, 11900, 10900]
SPX Combo: [3470.0, 3519.0, 3481.0, 3477.0, 3418.0]
NDX Combo: 
The Volatility Trigger has moved UP: 3395 from: 3370
The Call Wall has moved to: 3500 from: 3550
SPX resistance is: 3500 .Reference ‘Intraday Support’ levels for support areas.
The total gamma has moved DOWN: $238.39MM from: $299.00MM
Gamma is tilted towards Puts, may indicate puts are expensive
Positive gamma is moderate which should lead to smaller market moves. Average Range on day is 1.5%