Futures have nudged higher to 4409, off of overnight highs of 4425. 4400 is the gamma flip point and our “bull/bear” line. We look for another large move today, with an SG implied move of 1.7%. Support lies at 4385 and 4300, resistance 4433 and 4500.
Our view has been that we look for a substantial rally out of a “benign” FOMC, and our best indication of the markets assessment is implied volatility. And, now that the market has had time to digest the FOMC we can see that implied volatility[IV] has declined sharply (the VIX broke 20). This is largely a reduction in the “event volatility premium” from the Fed (interesting note here on large SPY call trades).
Despite this decline in IV there is still plenty of fuel to get markets moving – this is where vanna has huge impact. As that IV ratchets higher/lower then dealers have to sell/buy accordingly. You can see this in the SPX/QQQ vanna models below that there is a strong right skew which infers dealers need to sell as markets drop, and buy as market rise.
We think that as long as the S&P is >4400 then bulls have the advantage, particularly with IV declining. The current Call Wall target area is 450 for SPY, however that wall is 4430 due to the large JPM collar trade at 4430 (note: this trade expires on 9/30). You can see how the strike creates an inflection point in the EquityHub snapshot below. This inflection point infers that the rate of change of gamma (or speed) adjusts significantly around this strike, and we see that as a catalyst for hedging adjustment. In other words the real directional move will manifest when we pop through either 4430 (upside move) or 4385 (downside move).
Model Overview:
4400 is the key gamma flip point, with 4500 upside target into 10/15 OPEX.
| SpotGamma Proprietary Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Ref Price: | 4395 | 4386 | 437 | 15183 | 369 |
| SpotGamma Imp. 1 Day Move: | 1.7%, | 75.0 pts | Range: 4320.0 | 4470.0 | ||
| SpotGamma Imp. 5 Day Move: | 2.6% | 4383 (Monday Ref Px) | Range: 4269.0 | 4497.0 | ||
| SpotGamma Gamma Index™: | -0.36 | -1.11 | -0.23 | 0.03 | -0.11 |
| Volatility Trigger™: | 4400 | 4380 | 440 | 15075 | 372 |
| SpotGamma Absolute Gamma Strike: | 4450 | 4450 | 440 | 15500 | 370 |
| Gamma Notional(MM): | $-280 | $-346 | $-929 | $3 | $-546 |
| Additional Key Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Zero Gamma Level: | 4428 | 4418 | 0 | 0 | 0 |
| Put Wall Support: | 4200 | 4200 | 435 | 14725 | 350 |
| Call Wall Strike: | 4430 | 4430 | 450 | 15375 | 378 |
| CP Gam Tilt: | 0.91 | 0.81 | 0.78 | 1.34 | 0.7 |
| Delta Neutral Px: | 4308 | ||||
| Net Delta(MM): | $1,371,572 | $1,369,300 | $183,760 | $42,154 | $90,551 |
| 25D Risk Reversal | -0.09 | -0.11 | -0.08 | -0.08 | -0.08 |
| Top Absolute Gamma Strikes: |
|---|
| SPX: [4500, 4450, 4400, 4350] |
| SPY: [450, 445, 440, 435] |
| QQQ: [380, 378, 375, 370] |
| NDX:[16000, 15500, 15375, 15000] |
| SPX Combo: [4433.0, 4503.0, 4301.0, 4521.0, 4411.0] |
| SPY Combo: [441.36, 448.37, 428.23, 450.12, 439.17] |
| NDX Combo: [15389.0, 15541.0, 15009.0, 14797.0, 15207.0] |
