Futures are at 4355, up from overnight lows of 4321. Major gamma levels remain unchanged, and we look for high volatility again today. First resistance is at 4385, followed by 4400. Major support is at 4342, then 4302. A move back to 4400 is just as easy as a move to 4300, the key for today is waiting for implied volatility (ie VIX) to tilt and signal market direction (vol down, market up/vol up, market down).
As we mentioned last night, we did not read too much into yesterdays selloff. The market seems to be finding “fair value” between the large gamma strikes of 4300 & 4400. We think that due to the negative gamma position markets are not sticking to one of those strikes (aka no +gamma pin), and so markets just bounce back and forth between large options strikes. When the market is dominated by puts things are much more volatile due to more frequent hedging adjustments (puts sensitivity to vol).
We continue to see the 4300 area as a lower bound due to the large put positions below that strike (including Put Wall). As noted yesterday this weeks Friday expiration marks fairly substantial put interest rolling off, and we anticipate some type of a tailwind into or from that event. The “into” or “from” depends on the price action into Friday. If markets hold near 4400 then the hedge unwind will be less impactful then if markets hit the 4300 mark.
Either way, the more critical point here is that the markets hedge position will reduced into 10/15 Monthly OPEX which could remove support into end of month. The concern is that if there is still no real bid (ie no reflexive vol shorting), then removal of ~4300 support “matters more”.
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Model Overview:
Large negative gamma position forecasts large, volatility swings. This should continue until/unless the S&P recovers 4400.
| SpotGamma Proprietary Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Ref Price: | 4356 | 4329 | 437 | 14621 | 358 |
| SpotGamma Imp. 1 Day Move: | 2.02%, | 88.0 pts | Range: 4268.0 | 4444.0 | ||
| SpotGamma Imp. 5 Day Move: | 2.58% | 4368 (Monday Ref Px) | Range: 4256.0 | 4481.0 | ||
| SpotGamma Gamma Index™: | -0.68 | -0.3 | -0.27 | -0.04 | -0.20 |
| Volatility Trigger™: | 4385 | 4385 | 437 | 14830 | 369 |
| SpotGamma Absolute Gamma Strike: | 4450 | 4450 | 440 | 15500 | 350 |
| Gamma Notional(MM): | $-463 | $-26 | $-454 | $-7 | $-1,088 |
| Additional Key Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Zero Gamma Level: | 4388 | 4427 | 0 | 0 | 0 |
| Put Wall Support: | 4300 | 4300 | 430 | 14725 | 350 |
| Call Wall Strike: | 4500 | 4500 | 450 | 15375 | 375 |
| CP Gam Tilt: | 0.84 | 0.9 | 0.88 | 0.62 | 0.47 |
| Delta Neutral Px: | 4335 | ||||
| Net Delta(MM): | $1,377,840 | $427,908 | $183,564 | $41,997 | $96,427 |
| 25D Risk Reversal | -0.09 | -0.09 | -0.08 | -0.09 | -0.09 |
| Key Support & Resistance Strikes: |
|---|
| SPX: [4500, 4450, 4400, 4300] |
| SPY: [440, 438, 435, 430] |
| QQQ: [365, 360, 355, 350] |
| NDX:[15500, 15000, 14700, 14500] |
| SPX Combo: [4295.0, 4443.0, 4247.0, 4308.0, 4342.0] |
| SPY Combo: [428.6, 443.38, 423.82, 429.91, 433.39] |
| NDX Combo: [14403.0, 14728.0, 14610.0, 14801.0, 14521.0] |
