Futures are flat to last nights close, holding 3830. Notional gamma levels remain flat, and the only activity of note is building up at the 4000 strike in SPX. 4000 has the second largest number of call contracts, second only to 3800. Call activity around at the money strikes is quite light. Todays data doesn’t provide reason for thinking markets move out of the 3800-3850 range, but options positions have stalled. For today 3800 is key support, with 3846 as resistance.
Lastly, we have been getting a lot of questions about the VIX and VIX ETP positioning. For some time we’ve been trying to find a reasonable explanation for VIX being unable to break down lower despite much higher markets. Granted realized volatility has not matched a “Pre-Covid” level, but in Jan ’20 VIX held ~14. Last week this chart from SocGen appeared showing demand in the VIX ETP’s, and heavy call:put levels.
VIX being so “primed” was on display last week as Nomura points out (h/t Paul):
“[The] VIX +64% lo-to-hi last week, vs the “just” -1.5SD move in SPX.”
For our purposes, this means options IV is likely to be more sensitive. Recall the risk reversal chart we posted yesterday which featured put prices that cranked up to Nov Election levels:
Higher IV -> more delta hedging ->more volatility. Not only that, the “speed” of volatility may be greater. With that we wanted to give a look into a new volatility metric we are working on. This “Compression” indicator is based off of the intraday movement of the SPX. We think that this compression can signal trend changes. Note with the blue arrows that when the SPX last visited this price range, price stalled and “compressed”, leaving the path of least resistance to the downside.
Macro Note:
3700-3900 into Feb OPEX
| Signal Name | Latest Data | Previous | SPY | NDX | QQQ | ||
|---|---|---|---|---|---|---|---|
| Ref Price: | 3822 | 3826 | 382 | 13432 | 326 | ||
| VIX Ref: | 23.25 | 23.18 | |||||
| SG Gamma Index™: | 0.65 | 0.68 | 0.01 | 0.02 | -0.04 | ||
| Gamma Notional(MM): | $105 | $153 | $311 | $4 | $-216 | ||
| SGI Imp. 1 Day Move: | 0.98%, | 37.0 pts | Range: 3785.0 | 3859.0 | ||||
| SGI Imp. 5 Day Move: | 3743 | 1.59% | Range: 3683.0 | 3803.0 | ||||
| Zero Gamma Level(ES Px): | 3784 | 3788 | — | 0 | |||
| Vol Trigger™(ES Px): | 3785 | 3785 | 381 | 12775 | 327 | ||
| SG Abs. Gamma Strike: | 3800 | 3800 | 380 | 12800 | 325 | ||
| Put Wall Support: | 3600 | 3600 | 370 | 11500 | 310 | ||
| Call Wall Strike: | 3900 | 3900 | 395 | 12825 | 330 | ||
| CP Gam Tilt: | 1.28 | 1.12 | 1.11 | 1.56 | 0.82 | ||
| Delta Neutral Px: | 3663 | ||||||
| Net Delta(MM): | $1,147,658 | $1,149,802 | $186,038 | $37,412 | $71,921 | ||
| 25D Risk Reversal | -0.08 | -0.09 | -0.07 | -0.08 | -0.08 | ||
| Top Absolute Gamma Strikes: SPX: [3850, 3800, 3750, 3700] SPY: [385, 383, 380, 375] QQQ: [330, 325, 320, 315] NDX:[13500, 13000, 12825, 12800] SPX Combo: [3895.0, 3846.0, 3872.0, 3892.0, 3922.0] NDX Combo: [13796.0, 13594.0, 13177.0] SPX resistance is: 3900. Support is: 3800 .Reference ‘Intraday Support’ levels for support areas. The total gamma has moved DOWN: $105MM from: $152.00MM 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% |
