Futures little changed overnight, currently 4670. The total market gamma position remains robustly positive, which leads us to look for a tight 0.66% max S&P500 move today. Key resistance is at 4691 with support at 4644.
In yesterdays note we commented on how prominent the 4700 strike was – and that expanded today. This was the result of 17k calls added yesterday, combined with the slight bump in SPX price. This level (which is our “Call Wall” & largest total gamma strike) remains our overhead target.
We see little gamma expiring today: S&P <=10%, 20% in QQQ. This implies we should see little change for total gamma or key levels into Monday. With that, we stick to our view of looking for the market to grind higher due to high positive gamma restricting realized volatility. This in turn drags implied volatility, which reduces put prices, which in turn creates a tailwind for equity prices (via options dealer hedge buyback). This is essentially known as the “vanna” trade.
Below is the current view of S&P500 realized volatility (via S&P) which you can see is declining substantially. As we see gamma remaining high into next week, we forecast that this realized volatility should continue declining to ’21 lows. This should also serve to drag implied (or “forward”) volatility lower.
Model Overview:
As long as the S&P500 holds 4500 we expect positive gamma flows and lower implied volatility to boost markets.
| SpotGamma Proprietary Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Ref Price: | 4673 | 4673 | 466 | 16344 | 398 |
| SpotGamma Imp. 1 Day Move: | 0.66%, | 31.0 pts | Range: 4642.0 | 4704.0 | ||
| SpotGamma Imp. 5 Day Move: | 1.89% | 4602 (Monday Ref Px) | Range: 4515.0 | 4689.0 | ||
| SpotGamma Gamma Index™: | 1.79 | 2.64 | 0.10 | 0.05 | 0.04 |
| Volatility Trigger™: | 4495 | 4495 | 467 | 15020 | 396 |
| SpotGamma Absolute Gamma Strike: | 4700 | 4700 | 470 | 15500 | 400 |
| Gamma Notional(MM): | $728 | $937 | $1,030 | $7 | $41 |
| Additional Key Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Zero Gamma Level: | 4598 | 4564 | 0 | 0 | 0 |
| Put Wall Support: | 4000 | 4000 | 463 | 13500 | 396 |
| Call Wall Strike: | 4700 | 4700 | 470 | 15125 | 400 |
| CP Gam Tilt: | 1.56 | 1.71 | 1.31 | 1.74 | 1.03 |
| Delta Neutral Px: | 4411 | ||||
| Net Delta(MM): | $1,835,156 | $1,790,261 | $212,180 | $61,669 | $105,584 |
| 25D Risk Reversal | -0.06 | -0.06 | -0.05 | -0.05 | -0.04 |
| Key Support & Resistance Strikes: |
|---|
| SPX: [4700, 4650, 4600, 4500] |
| SPY: [470, 468, 465, 460] |
| QQQ: [400, 398, 395, 380] |
| NDX:[16300, 16000, 15500, 15125] |
| SPX Combo: [4691.0, 4742.0, 4794.0, 4719.0, 4644.0] |
| SPY Combo: [468.78, 473.91, 479.05, 471.58, 464.11] |
| NDX Combo: [16402.0, 16320.0, 16369.0, 16484.0, 16614.0] |
