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Informe SG Levels

Nov 9, 2021

Futures are flat to last nights clost at 4690. We saw a small build in gamma, but overall levels and ranges remain the same. We look for a max move today of 31 handles, with major resistance at the SPY470 (SPX 4715) area. Support lies at 4690. Our models look for a trading session much like that of the last several sessions: rather dull.

The main thing catching our eye this AM is implied volatility, which has a fairly persistent bid. This can not only be seen in the VIX which bounced sharply off of YTD lows, but also in our Risk Reversal metric which reads a -0.07. That’s not a bearish move, but is a signal that the call euphoria has backed off. What makes this VIX/IV drift more interesting, too, is that realized volatility continues to come down.

This places us in an interesting box. We have low realized volatility[RV] due to the 4700 gamma pin, but implied volatility[IV] (aka trades expectation about future volatility) is creeping higher. This divergence of sorts is forming ahead of next weeks monthly options expiration (11/19). We view options expirations as a trigger for movement/volatility and so we may have a situation in which realized has to catch up to VIX, and we will be watching the data closely for this IV/RV “reconciliation”.

Short dated IV on SPX options remains muted – in and around 10. This indicates traders are expecting low SPX movement. However we can see that the VVIX and SKEW (shown below) indicies are a bid, which suggests traders are starting to add a bit of tail risk protection. Traders seem a bit slow to add to call positions >470SPY/4700SPX which is another indication of fatigue.

If you are the bearish type, here’s some fodder. Below is a chart of our Walls and current SPX prices (link here). We need to run some stats on this divergence, but note the impressive gap between current SPX prices (blue line) and the Put Wall (green) & Vol Trigger (orange). Qualitatively we read this as concerning – it shows a lack of hedges. We’ve remarked recently that this market resembles that of August of ’20 in which weaponized call gamma inflicted a 10% 1 month market return – and there are certainly shades of that now. The big money question is this: do traders suddenly come in and add put support to current prices, or does the SPX have to drawdown to close this gap?

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: 4689 4691 469 16341 398
SpotGamma Imp. 1 Day Move: 0.66%, 31.0 pts Range: 4658.0 | 4720.0
SpotGamma Imp. 5 Day Move: 2.05% 4694 (Monday Ref Px) Range: 4598.0 | 4791.0
SpotGamma Gamma Index™: 1.85 1.79 0.27 0.05 0.02
Volatility Trigger™: 4495 4495 467 15020 398
SpotGamma Absolute Gamma Strike: 4700 4700 470 15500 400
Gamma Notional(MM): $564 $633 $1,168 $6 $97
Additional Key Levels Latest Data Previous SPY NDX QQQ
Zero Gamma Level: 4614 4582 0 0 0
Put Wall Support: 4000 4000 450 13500 315
Call Wall Strike: 4700 4700 470 15125 400
CP Gam Tilt: 1.58 1.39 1.39 1.6 1.08
Delta Neutral Px: 4426
Net Delta(MM): $1,842,148 $1,914,552 $225,277 $62,679 $109,800
25D Risk Reversal -0.07 -0.07 -0.06 -0.05 -0.05
Key Support & Resistance Strikes:
SPX: [4700, 4650, 4600, 4500]
SPY: [470, 468, 465, 460]
QQQ: [400, 395, 390, 380]
NDX:[16300, 16000, 15500, 15125]
SPX Combo: [4690.0, 4737.0, 4789.0, 4714.0, 4700.0]
SPY Combo: [468.93, 473.62, 478.78, 471.27, 469.87]
NDX Combo: [16429.0, 16625.0, 16511.0]
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