| Futures have broken down to 3340 which now places the market in control of puts. As we have discussed at length the big concern at this price level is for volatility to rapidly expand. This is because there are large Dec put positions and as the market pushes lower it may activate heavier put hedging. This also likely makes the market more sensitive to changes in implied volatility[IV]. As volatility(ie VIX) rises the value of puts increases and additional dealer short hedges may be required (this hedge adjustment around IV changes is that “Vanna” buzzword). Of course puts being closed and/or IV coming down could push dealers to buy back short hedges. The issue here is that most of the puts are related to election and/or end of year hedges, and as such the bulk of them will likely be held through any “pre election” selling. For today we think monitoring IV (VIX) is key – higher VIX likely means lower markets and vice versa. 3300 is the obvious downside level, with 3400 the the only resistance area we see above. |
Macro Note:
| 3400 resistance. Since the 3400 Zero Gamma line was broken we anticipate an expansion in vol into 11/3 expiration |
| SIGNAL NAME | LATEST DATA | PREVIOUS | SPY | NDX | QQQ | ||
|---|---|---|---|---|---|---|---|
| Ref Price: | 3367 | 3383 | 336 | 11562 | 282 | ||
| VIX Ref: | 33.35 | 33.35 | |||||
| SG Gamma Index™: | -0.02 | -0.28 | -0.04 | 0.00 | -0.04 | ||
| Gamma Notional(MM): | $-200.00 | $-74.00 | $-581.00 | $0.00 | $-267.00 | ||
| SGI Imp. 1 Day Move: | 1.23%, | 41.0 pts | Range: 3326.0 | 3408.0 | ||||
| SGI Imp. 5 Day Move: | 3429 | 2.24% | Range: 3352.0 | 3506.0 | ||||
| Zero Gamma Level(ES Px): | 3384 | 3384 | — | 0 | |||
| Vol Trigger™(ES Px): | 3390 | 3400 | 340 | 11475 | 285 | ||
| SG Abs. Gamma Strike: | 3500 | 3400 | 340 | 10900 | 280 | ||
| Put Wall Support: | 3300 | 3300 | 335 | 10000 | 255 | ||
| Call Wall Strike: | 3500 | 3500 | 350 | 12000 | 300 | ||
| CP Gam Tilt: | 0.99 | 0.94 | 0.8 | 1.02 | 0.73 | ||
| Delta Neutral Px: | 3276 | ||||||
| Net Delta(MM): | $11,189.00 | $11,154.00 | $1,814.00 | $348.00 | $648.00 | ||
| 25D Risk Reversal | -0.11 | -0.11 | -0.11 | -0.1 | -0.09 | ||
| Top Absolute Gamma Strikes: SPX: [3500, 3450, 3400, 3350] SPY: [350, 345, 340, 335] QQQ: [290, 285, 280, 275] NDX:[12000, 11000, 10900, 10000] SPX Combo: [3316.0, 3326.0, 3417.0] NDX Combo: [] The Volatility Trigger has moved DOWN: 3390 from: 3400 SPX is below the Volatility Trigger™. The 3384.0 level is first level of resistance and is critical as its the negative gamma threshold. The trigger level of: 3390 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: $-200.19MM from: $-75.00MM Gamma is tilted towards Puts, may indicate puts are expensive Negative gamma is moderate favoring further swings in the market |