Futures are off slightly to 4665. With these lower S&P prices we see a slight reduction in gamma, leading to a tick higher in our estimated max move: 0.74%. Upside resistance sits at 4685, then 4700. Support lies at 4645, which is our gamma flip level (Volatility Trigger).
This new Vol Trigger of 4645 is up substantially from yesterdays figure of 4495. This shift is likely the result of a large straddle type position being closed at 4450: 18k calls & 10k puts. In addition, we saw decent put positions added to 4600 & 4675, 4700 (10k contracts ea.). This obviously helps close that “gap” we referenced yesterday, but we note the Put Wall remains unchanged at 4000. In other words, some hedging appears to be coming in to the S&P.
The volatility yesterday (TSLA et all) seems to have sparked a fair amount of short term positions shifts, too. We now estimate ~30% of total SPX gamma expiring between todays expiration and Fridays. This implies that volatility may not wait for next weeks Monthly expiration (11/19). Gamma expiring implies dealer support at current S&P levels will erode.
One of the things brought to our attention yesterday was that of the NDX volatility. The massive run higher is NDX/QQQ has linked with higher NDX implied volatility. This can be seen below wherein we plotted the VXN (aka “Nasdaq VIX”) and NDX Index. You can see that this volatility index has been shifting higher along with NDX prices. This “vol up, market up” is often a sign of excessive exuberance as traders bid up the price of calls. This is not yet as extreme of a correlation as August of ’20, but it is a red flag for bulls.
Overall we give edge to bulls as long as the market holds this 4650 level. Above that level gamma remains fairly high, which implies the forces of mean reversion supportive. Our primary concern here is that of single stock volatility bleeding into index volatility as it appeared to do yesterday.
Model Overview:
As long as the S&P500 holds 4650 we expect positive gamma flows and lower implied volatility to boost markets.
| SpotGamma Proprietary Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Ref Price: | 4668 | 4675 | 467 | 16175 | 395 |
| SpotGamma Imp. 1 Day Move: | 0.72%, | 34.0 pts | Range: 4634.0 | 4702.0 | ||
| SpotGamma Imp. 5 Day Move: | 2.05% | 4694 (Monday Ref Px) | Range: 4598.0 | 4791.0 | ||
| SpotGamma Gamma Index™: | 1.52 | 1.84 | 0.21 | 0.05 | -0.01 |
| Volatility Trigger™: | 4645 | 4495 | 466 | 15120 | 396 |
| SpotGamma Absolute Gamma Strike: | 4700 | 4700 | 470 | 16000 | 400 |
| Gamma Notional(MM): | $371 | $447 | $824 | $5 | $-17 |
| Additional Key Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Zero Gamma Level: | 4628 | 4600 | 0 | 0 | 0 |
| Put Wall Support: | 4000 | 4000 | 462 | 13500 | 390 |
| Call Wall Strike: | 4700 | 4700 | 470 | 15125 | 400 |
| CP Gam Tilt: | 1.41 | 1.26 | 1.23 | 1.47 | 0.99 |
| Delta Neutral Px: | 4439 | ||||
| Net Delta(MM): | $1,888,803 | $1,836,550 | $226,431 | $55,190 | $110,655 |
| 25D Risk Reversal | -0.08 | -0.07 | -0.07 | -0.06 | -0.06 |
| 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: [4685.0, 4737.0, 4783.0, 4709.0, 4634.0] |
| SPY Combo: [468.82, 473.96, 478.64, 471.16, 463.68] |
| NDX Combo: [16404.0, 15999.0, 16599.0, 16485.0, 16161.0] |
