Futures tested 3910 overnight but have consolidated back under 3900. Major SG levels are all in line with yesterdays readings. Overhead resistance shows as 3900 and 3913, with key support at 3860. Its under 3850 that we see negative gamma pick up, and a break of that level likely leads to a test of 3800.
3900 has formed into a very large magnet area, heavily outsizing other strikes. You can see in the chart below that as markets push up over 3900 there are no strikes with any significant put gamma (indicated by “negative” gamma bars). However under 3900 there are several strikes with decent put positions (3850, 3800).
This syncs with last nights sentiment that as long as markets hold under 3900 we remain exposed to volatility spasms due to these net negative gamma strikes (i.e. more puts than calls). However above 3900 positive gamma kicks in and mean reverting dealer flows can help hold markets up.
It should be pointed out that SPY holds much more positive gamma than SPX (514mm vs 86mm). This tilts the total S&P500 complex a bit more positive and adds to the “magnet” of 3900. Looking at this setup from a dealer perspective, positive delta (i.e. long market) exposure increases as we move down through 3850 OR up into 3925. This infers dealers need to short futures to push their books back to delta neutral (i.e. no directional exposure).
Macro Note:
3800 support 4000 resistance into March OPEX
| Signal Name | Latest Data | Previous | SPY | NDX | QQQ | ||
|---|---|---|---|---|---|---|---|
| Ref Price: | 3891 | 3892 | 388 | 13150 | 318 | ||
| VIX Ref: | 22.96 | 24.1 | |||||
| SG Gamma Index™: | 0.15 | 0.15 | 0.00 | -0.00 | -0.12 | ||
| Gamma Notional(MM): | $86 | $93 | $514 | $0 | $-735 | ||
| SGI Imp. 1 Day Move: | 1.25%, | 49.0 pts | Range: 3842.0 | 3940.0 | ||||
| SGI Imp. 5 Day Move: | 3835 | 5.28% | Range: 3633.0 | 4038.0 | ||||
| Zero Gamma Level(ES Px): | 3852 | 3863 | — | 0 | |||
| Vol Trigger™(ES Px): | 3860 | 3860 | 387 | 13300 | 321 | ||
| SG Abs. Gamma Strike: | 3900 | 3900 | 390 | 12800 | 320 | ||
| Put Wall Support: | 3700 | 3700 | 380 | 12500 | 310 | ||
| Call Wall Strike: | 4000 | 4000 | 395 | 13700 | 330 | ||
| CP Gam Tilt: | 1.05 | 1.06 | 1.21 | 1.03 | 0.54 | ||
| Delta Neutral Px: | 3728 | ||||||
| Net Delta(MM): | $1,277,241 | $1,277,569 | $203,495 | $38,334 | $81,599 | ||
| 25D Risk Reversal | -0.1 | -0.1 | -0.1 | -0.1 | -0.1 | ||
| Top Absolute Gamma Strikes: SPX: [4000, 3900, 3850, 3800] SPY: [395, 390, 385, 380] QQQ: [325, 320, 315, 310] NDX:[13700, 13000, 12800, 12500] SPX Combo: [3971.0, 3995.0, 3921.0, 3944.0, 3913.0] NDX Combo: [12789.0, 12986.0, 13196.0] SPX resistance is: 3900 .Reference ‘Intraday Support’ levels for support areas. The total gamma has moved DOWN: $86MM from: $93.00MM 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% |
