Futures are at 3775 off of overnight lows near 3740. 3800 remains the largest strike on the board, and continue to hold that as the critical risk line. Gamma remains negative across all indices, with QQQ holding the most volatile position. We are anticipating a fairly large directional move today, with implied volatility (i.e. VIX) being the key signal (VIX down = market up). If markets elect to start selling at the open there is plenty of SPX fuel to push things lower, but to our eyes the updated data reads like traders took the opportunity to buy the dip.
Yesterday puts in the S&P were net closed at strikes >=380/3800 with standout call volume at 3950 (13k) in SPX and 400 (170k) in SPY.
Additionally we show about 25% off QQQ gamma expires at the close today, which could provide a boost today into tomorrow for tech. The large 3/5 expiration puts strikes are 310, 315 and 320. There are also fairly chunky SPX puts expiring today up into 3850.
Assuming those are in the money puts, when they expire dealers may need to unwind short hedges today if markets rally. Should markets fail to rally today then those put hedges would be unwound after the close and into Monday.
Notice in the chart below that the downside in QQQ the gamma acceleration appears to reduce (ie dealers fully hedged) around 295, and you can see a fairly steep reduction (ie hedge buyback) in gamma up into 325. Therefore we see current downside fuel reduced in tech. However, SPX/SPY selling doesn’t appear to reduce until 360/3600.
If there is a strong rally today we won’t be drawing any longer term conclusions from this move as much of it could be tied to short covering.
Macro Note:
3800 support 4000 resistance into March OPEX
| Signal Name | Latest Data | Previous | SPY | NDX | QQQ | ||
|---|---|---|---|---|---|---|---|
| Ref Price: | 3773 | 3772 | 377 | 12436 | 304 | ||
| VIX Ref: | 27.51 | 28.57 | |||||
| SG Gamma Index™: | -0.64 | -0.23 | -0.15 | -0.02 | -0.17 | ||
| Gamma Notional(MM): | $-405 | $-435 | $-509 | $-4 | $-985 | ||
| SGI Imp. 1 Day Move: | 2.01%, | 76.0 pts | Range: 3697.0 | 3849.0 | ||||
| SGI Imp. 5 Day Move: | 3835 | 5.28% | Range: 3633.0 | 4038.0 | ||||
| Zero Gamma Level(ES Px): | 3849 | 3849 | — | 0 | |||
| Vol Trigger™(ES Px): | 3840 | 3855 | 382 | 13125 | 317 | ||
| SG Abs. Gamma Strike: | 3800 | 3800 | 380 | 12800 | 300 | ||
| Put Wall Support: | 3700 | 3700 | 370 | 12500 | 300 | ||
| Call Wall Strike: | 4000 | 4000 | 395 | 13750 | 340 | ||
| CP Gam Tilt: | 0.81 | 0.75 | 0.85 | 0.68 | 0.43 | ||
| Delta Neutral Px: | 3726 | ||||||
| Net Delta(MM): | $1,280,850 | $1,257,081 | $204,539 | $36,317 | $93,522 | ||
| 25D Risk Reversal | -0.11 | -0.1 | -0.12 | -0.1 | -0.11 | ||
| Top Absolute Gamma Strikes: SPX: [3900, 3800, 3750, 3700] SPY: [390, 385, 380, 375] QQQ: [315, 310, 300, 290] NDX:[13000, 12800, 12500, 12000] SPX Combo: [3708.0, 3757.0, 3806.0, 3697.0, 3784.0] NDX Combo: [12320.0, 12520.0, 12719.0, 12395.0, 12233.0] The Volatility Trigger has moved DOWN: 3840 from: 3855 SPX is below the Volatility Trigger™. The 3849.0 level is first level of resistance and is critical as its the negative gamma threshold. The trigger level of: 3840 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 has moved UP: $-405MM from: $-435.00MM Gamma is tilted towards Puts, may indicate puts are expensive Negative gamma is moderate favoring further swings in the market |
