Futures are holding 3825 after a putting in a 3800 low and 3850 high. Notional gamma levels in major indicies all hold negative, signaling a volatile day ahead. The SG implied range is 2% today, a figure we have not seen in some time. Key levels for today are 3800 (large gamma strike), 3830, 3880 (large combo strikes) and 3900. The VIX will be key today, if it declines then we think a move back up into the 3900 area is quite possible. If VIX continues higher then we think the market stays under pressure.
The Put Wall did shift up to 3850, which is due to the addition of ~6k puts at that strike. There were net put positions added at strikes below, but nothing of major size. Yesterday we mentioned 3800 being critical, as it is under there that put positions increase materially. That sentiment holds today. You can see that reflected here in net put open interest:
One interesting note here, we did not see any SPX strikes which a net close of puts. However, the SPY showed net closing of puts for all strikes >=385. This indicates to us that “retail” took their gains, but “institutions” held their protection.
A few days ago we talked about the VIX and the contango, and how quickly the VIX could snap-back due to how steep that curve was. The image below shows the implied volatility level of at the money SPX options and how that snapped from contango to backwardation. The lower red circle highlights data from Wednesday, the day of the big market rally. You can see how drastically that differs from yesterdays market. We highlight this chart, as if the options prices decline significantly from yesterday (top red circle shifts to lower red circle) that can be a “buy” signal as it indicates implied volatility is declining ( vanna, as discussed last night). Unless you are a volatility quant, we generally just recommend watching the VIX to detect SPX options price changes.
Macro Note:
March range 3900-4000
| Signal Name | Latest Data | Previous | SPY | NDX | QQQ | ||
|---|---|---|---|---|---|---|---|
| Ref Price: | 3820 | 3831 | 380 | 12767 | 312 | ||
| VIX Ref: | 28.89 | 28.89 | |||||
| SG Gamma Index™: | -0.46 | 0.89 | -0.12 | -0.01 | -0.16 | ||
| Gamma Notional(MM): | $-409 | $-310 | $-568 | $-2 | $-978 | ||
| SGI Imp. 1 Day Move: | 1.95%, | 74.0 pts | Range: 3746.0 | 3894.0 | ||||
| SGI Imp. 5 Day Move: | 3890 | 2.08% | Range: 3810.0 | 3971.0 | ||||
| Zero Gamma Level(ES Px): | 3898 | 3880 | — | 0 | |||
| Vol Trigger™(ES Px): | 3865 | 3865 | 386 | 13225 | 321 | ||
| SG Abs. Gamma Strike: | 3800 | 3900 | 385 | 12800 | 315 | ||
| Put Wall Support: | 3850 | 3825 | 380 | 12500 | 310 | ||
| Call Wall Strike: | 4000 | 4000 | 395 | 13700 | 340 | ||
| CP Gam Tilt: | 0.86 | 0.82 | 0.82 | 0.83 | 0.42 | ||
| Delta Neutral Px: | 3744 | ||||||
| Net Delta(MM): | $1,275,046 | $1,222,714 | $200,722 | $37,629 | $86,478 | ||
| 25D Risk Reversal | -0.1 | -0.08 | -0.11 | -0.09 | -0.11 | ||
| Top Absolute Gamma Strikes: SPX: [3900, 3850, 3800, 3700] SPY: [395, 390, 385, 380] QQQ: [320, 318, 315, 310] NDX:[13700, 13000, 12800, 12500] SPX Combo: [3833.0, 3883.0, 3879.0, 3810.0, 3860.0] NDX Combo: [12603.0, 12807.0, 12400.0, 12883.0, 13010.0] The PutWall has moved to: 3850 from: 3825 SPX is below the Volatility Trigger™. The 3898.0 level is first level of resistance and is critical as its the negative gamma threshold. The trigger level of: 3865 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: $-409MM from: $-311.00MM Gamma is tilted towards Puts, may indicate puts are expensive Negative gamma is moderate favoring further swings in the market |
