| Futures are limit up this morning and implied volatility (VIX) continues to get crushed. This vol crush is a big story in options land, and while many complex theories abound I continue to stick with the “inventory” theory. As a refresher on volatility as a catalyst we believe that lower implied volatility (IV) translates into higher stock prices because as implied vols drop that lowers put prices. This in turn leads options dealers to buy back short futures because they are overhedged. This can cause a snowball effect, particularly if we can actually sustain both lower volatility and hold higher SPX prices. You may be hearing the term “vanna” kicked around, and essentially this is what we’ve been waiting for: a “Vanna rally”. Vanna is the rate of change of delta for a given change in IV. As IV drops, dealers may be overhedged short and have to buy back futures. As it currently stands we would consider upside targets on a rally to be 2400, and possibly 2500 due to the amount of open interest at those strikes. |
| Event | Time EST | Actual | Forecast | Previous |
| Flash Manufacturing PMI | 9:45am | 45.1 | 50.7 | |
| Flash Services PMI | 44.1 | 49.4 | ||
| Richmond Manufacturing Index | 10:00am | -10 | -2 |
| Signal Name | Latest Data | Previous |
| SPX Ref: | 2331.25 | 2212.0 |
| VIX Ref: | 57.08 | 60.46 |
| Gamma Per Point: | $-1,053,167,443.40 | $-1,044,069,935.15 |
| Zero Gamma Level: | 3105.0 | 3101.0 |
| Vol Trig: | 3140.0 | 3140.0 |
| High Gamma Strike Resistance: | 2355.0 Size: 46/10 | 2085.0 |
| Top Abs. Gamma Strike: | 2300.0 | 2200.0 |
| Put Wall Support: | 2300.0 Size: 4/10 | 2200.0 |
| Call Wall Strike: | 2355.0 Size: 0/10 | 2212.0 |
| CP Gam Tilt: | 0.29 | 0.08 |
| Net Delta: | $-13,388,108,643.00 | $-14,893,184,539.00 |
| Model Forecast: |
| Intraday support/resistance levels (during high gamma periods): 2355.0, 2455.0, 2435.0, 2085.0, 2090.0
The Volatility Trigger has moved UP: 3100.0 from: 3000.0 |