|Futures are poised to open under the key 3420 Volatility Trigger line this morning. There is a lot of interest at 3400 which may offer some support as various flows enter the market after a long weekend. We think that under 3420 the market is quite vulnerable to another large move down. 3450 is the Call Wall area and possible resistance. As always, we look to the VIX as a guide in these situations: lower VIX prices -> higher SPX, higher VIX -> lower SPX.
A quick note on Softbank. I am working on a more detailed post around this, but from what I can tell the way that Softbank entered positions was as a spread and/or tied to stock. This infers much less impact that some of the more sensational articles are suggesting. I’m finding it interesting that the same folks that claimed “gamma forces” had no impact are now certain that Softbank used options gamma to force markets higher. As we all know there was definitely increased and aggressive call activity throughout all of August, which likely came from a myriad of entities. Its possible that those Softbank positions were either a long volatility play, or a stock replacement type strategy (replace long stock exposure with options to reduce risk). I am hoping we get a bit more color from various bank flow desks on this today.