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Informe GT Gamma Levels

May 4, 2020 | 0 Comentarios

Futures slid overnight and are currently holding 2800. Call positioning is very weak as can be seen as in the Tilt Index which showed a major drop. Our SG Gamma Index also shifted lower which implies a higher rate of SPX volatility. The 2800 strike is very important as it is the last strike with moderate call positions. The large amount of total open interest at 2800 may prove to hold the market, but should that level break we see mainly large put positions below. As we mentioned last week, its under 2800 where we see the possibility of a “gamma trap”. The idea is that as we move under 2800 put positions gain value, which require dealers to sell futures as a hedge. As the market drops implied vols (VIX) spikes which increases put values and requires more dealer hedging. Fear then kicks in which leads to more put buying. This increases dealer selling which further pressures the market and raises put values even higher. You an see how this can become a self reinforcing cycle, or “trap”. This type of action would most likely take many days to resolve, quite possibly into May Monthly OPEX (5/15). Conversely should the market hold and consolidate above 2800 we resistance at 2900.


Market Outlook:
Into May we note 3000 as top of range, with 2900 being key to positive gamma. 2800 is the bottom of the range, with negative gamma and the possibility of a sharp “gamma trap” type move lower should that level break.


Event Time EST Actual Forecast Previous
No events


Signal Name Latest Data Previous
SPX Ref: 2785 2821
VIX Ref: 40.3 37.19
SG Gamma Index: -0.48 -0.25
Gamma Per Point: $-378.14MM $-322.85MM
SGI Imp. 1SD Move: 1.69%
Zero Gamma Level: 2878.0 2885.0
Vol Trig: 2830 2910
High Gamma Strike Resistance: 2835 2925
Top Abs. Gamma Strike: 2800 2900
Put Wall Support: 2825 2900
Call Wall Strike: 2835 2925
CP Gam Tilt: 0.75 0.77
Delta Neutral Px: 2842.0
Net Delta: $14,171.25MM $14,153.57MM
25D Risk Reversal -0.15 -0.13


Model Forecast:
Top Absolute Gamma Strikes: [2800, 2900, 3000, 2850, 2700]
The Volatility Trigger has moved DOWN: 2830 from: 2910
The PutWall has moved to: 2825 from: 2900
The Call Wall has moved to: 2835 from: 2925
The High Gamma Strike has moved to: 2835 from: 2925
SPX is below the volatility trigger. The 2878.0 level is first level of resistance and is critical as its the negative gamma threshold.
The trigger level of: 2830 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: $-378.14MM from: $-323.00MM
Gamma is tilted towards Puts, may indicate puts are expensive
Negative gamma is moderate favoring further swings in the market