Futures have consolidated to the 3900 area overnight. 3900 is the largest gamma strike on the board and should provide support/pinning in todays trading. The SG implied move is just 79bps and therefore we expect a fairly tight trading range today. The gamma flip lines are slowly shifting higher to ~3870, and we would warrant caution if the market breaks that level. On a rally 3926 is first resistance.
Data shows that about 15% of SPX gamma and only about 7% of QQQ rolls off at todays expiration. Earlier this week when QQQ was 5% lower we noted ~25% of QQQ gamma concentrated for todays expiration. The point here is that a lot of QQQ puts burned up this week, and with that dealer buyback fuel burned up. Through this lens both the “speed” of the recent rally, and the overnight consolidation makes sense.
We do not see any material selling starting as long as markets hold the 3870 level. You can see in the vanna model comparison below that todays OPEX may bring a small tailwind/support to the S&P into Monday(right chart). This is indicated by the Mondays estimated hedge requirement (blue) being beneath that of the todays (red). As the Monday shows lower positive delta exposure dealers can reduce their offsetting short hedge position. You can see from yesterdays chart that the forecast was was more “consolidated”. Keep in mind that Thursdays data could not predict/account for any change in open interest that occurred before Fridays session.
Next week is the large quarterly March expiration and with that we anticipate a reduction in volatility. The QQQ “short cover fuel” being gone seems to align with this lower volatility picture, too.
Macro Note:
3800 support 4000 resistance into March OPEX
| Signal Name | Latest Data | Previous | SPY | NDX | QQQ | ||
|---|---|---|---|---|---|---|---|
| Ref Price: | 3911 | 3926 | 390 | 12861 | 318 | ||
| VIX Ref: | 22.66 | 21.91 | |||||
| SG Gamma Index™: | 1.15 | 0.01 | 0.20 | -0.00 | -0.08 | ||
| Gamma Notional(MM): | $184 | $11 | $425 | $-2 | $-575 | ||
| SGI Imp. 1 Day Move: | 0.79%, | 31.0 pts | Range: 3880.0 | 3942.0 | ||||
| SGI Imp. 5 Day Move: | 3831 | 3.11% | Range: 3712.0 | 3950.0 | ||||
| Zero Gamma Level(ES Px): | 3872 | 3829 | — | 0 | |||
| Vol Trigger™(ES Px): | 3860 | 3650 | 389 | 13050 | 318 | ||
| SG Abs. Gamma Strike: | 3900 | 3800 | 395 | 12800 | 315 | ||
| Put Wall Support: | 3700 | 3500 | 389 | 12500 | 290 | ||
| Call Wall Strike: | 4000 | 4000 | 395 | 13700 | 322 | ||
| CP Gam Tilt: | 1.41 | 1.07 | 1.11 | 0.84 | 0.67 | ||
| Delta Neutral Px: | 3748 | ||||||
| Net Delta(MM): | $1,351,386 | $362,626 | $211,315 | $40,668 | $87,963 | ||
| 25D Risk Reversal | -0.08 | -0.08 | -0.08 | -0.08 | -0.09 | ||
| Top Absolute Gamma Strikes: SPX: [4000, 3950, 3925, 3900] SPY: [400, 395, 390, 385] QQQ: [320, 315, 310, 300] NDX:[13700, 13000, 12800, 12500] SPX Combo: [3973.0, 3949.0, 3926.0, 3930.0, 3898.0] NDX Combo: [12550.0] The Volatility Trigger has moved UP: 3860 from: 3650 The PutWall has moved to: 3700 from: 3500 SPX resistance is: 4000. Support is: 3900 .Reference ‘Intraday Support’ levels for support areas. The total gamma has moved has moved UP: $183MM from: $11.00MM 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% |
