Informe SG Levels

Futures have pushed higher to 4485. Our gamma flip point remains at 4410, which implies that we’re in for high volatility again today. We see resistance in the SPX4400/SPX440 area, with first support 4374, then 4345. We see that 4400-4410 line as pretty solid resistance, however support is “transient” due to negative gamma.

We wrote extensively about our views of yesterdays flow in the PM note, and we don’t see much to add to that view (essentially options weren’t involved in the move until >2pm, but negative gamma pushed macro flows). As you can see below puts were net closed at all strikes above 4365 SPX (and 435 SPY) but there were fairly substantial positions added to lower strikes. This indicates puts were rolled rather than outright closed. Again, with the Fed tomorrow trades want to leave some protection on. This closure is also why we refer to support as “transient” because these closed puts may have removed some support >4350.

Another indicator that traders hold protection (and despite that strong rally) our risk-reversal ratio remains very skewed towards puts (this metric is based on last nights closing prices). This indicates that puts are more highly priced vs calls than at any point since the covid-crash.

For today its likely about choppy price action as traders away the 9/22 FOMC. Its up to Powell tomorrow to set the next price move, which should be rather substantial due to the options positioning. Negative gamma could strongly influence any selling to the downside. To the upside there is also a ton of fuel for an vanna-induced move if traders sell off their puts and crush the high implied volatility levels. There fore while today is likely about chop, the move out of Wednesday should be substantial.

Model Overview:

4410 is the gamma flip line, and key resistance. We look for a large directional move after the 9/22 FOMC.