Futures are consolidating to 3625 after an overnight high of 3655. The Call Wall shifts higher to 3700, which confirms this higher market and sets a short term range of 3600-3700. There was clearly a jump in call values yesterday as Gamma/Delta Tilt and the Risk Reversal metric shifted rather violently to the call side.
One curious divergence is the gamma differential between SPY and SPX. SPY is registering as ~$1.7bn in gamma compared to ~$300mm for SPX. The Zero Gamma area of ~350 for SPY is about 100 handles higher than SPX (~3450). Incorporating SPY indicates a much healthier S&P position as it shows a fairly compact zone of open interest around current S&P prices. Contrast this to just the SPX which has a much lower notional gamma, and the OI appears spread out over a much larger range (air pockets). This suggests that total S&P linked dealer gamma is rather robust and should support this 3600-3700 range with a reduction in volatility. That being said, we’d note that SPY gamma also stands out as an aberration against NDX/QQQ and RUT/IWM, too.
We’re not sure if this SPY size is the result of larger retail participation in markets, or something more structural. We’ll produce some data to examine this difference today.
To this point in “larger size” see the chart of CBOE call vs put volumes below. The surge into single stock calls continues, and what is arguably most interesting about this chart is the spread between call and put volume. This is of course supportive evidence we are in an options induced, August style “crash” higher.
We wonder if there is a link between these volumes as the holiday week/increased quarantines keeping people home…
For today we note 3600 as support, 3650 as resistance. On a slightly larger time frame our overhead target remains 3700. A break of 3600 likely leads to a large surge in volatility, particularly if singe stock options positions unwind.
3500-3700 range into DEC OPEX.
|SIGNAL NAME||LATEST DATA||PREVIOUS||SPY||NDX||QQQ|
|SG Gamma Index™:||0.59||0.50||0.31||0.01||0.01|
|SGI Imp. 1 Day Move:||0.91%,||33.0 pts||Range: 3602.0 | 3668.0|
|SGI Imp. 5 Day Move:||3564||1.96%||Range: 3494.0 | 3634.0|
|Zero Gamma Level(ES Px):||3466||3457||—||0|
|Vol Trigger™(ES Px):||3445||3395||356||11750||293|
|SG Abs. Gamma Strike:||3600||3500||360||10900||290|
|Put Wall Support:||3200||3200||355||11000||265|
|Call Wall Strike:||3700||3600||370||12000||300|
|CP Gam Tilt:||1.56||1.35||1.71||1.16||1.07|
|Delta Neutral Px:||0|
|25D Risk Reversal||-0.05||-0.06||-0.07||-0.05||-0.06|
|Top Absolute Gamma Strikes:
SPX: [3600, 3550, 3500, 3450]
SPY: [370, 363, 360, 350]
QQQ: [300, 295, 290, 280]
NDX:[12000, 11300, 11000, 10900]
SPX Combo: [3700.0, 3598.0, 3649.0, 3703.0, 3674.0]
NDX Combo: [11896.0, 11591.0, 11661.0]
The Volatility Trigger has moved UP: 3445 from: 3395
The Call Wall has moved to: 3700 from: 3600
SPX resistance is: 3700. Support is: 3600 .Reference ‘Intraday Support’ levels for support areas.
The total gamma has moved DOWN: $241.76MM from: $244.00MM
Positive gamma is moderate which should lead to smaller market moves. Average Range on day is 1.5%