Futures put in a high of 4723 before correcting sharply to 4688. This morning marks the first phase of November OPEX, in which the bulk of 11/19 SPX Index options expire at 9:30AM ET. SPX PM index options, along with all other Index/ETF/stock options expire at 4:15PM ET. We generally look for markets to hold to our levels even though there is an AM expiration, as we think many dealers have risk paired off between AM and PM expirations.
Therefore we anticipate a fairly tight trading range today, with resistance a 4725, and support at 4675. However, todays levels do ignore the “elephant in the room”, and that is 41% of SPX gamma expiring today. That is a very large number, and may invoke some unexpected volatility today. As we chronicled extensively the past week, we certainly think it will spur volatility next week.
Below we’ve posted the current distribution of gamma across strikes in SPX, and its rather remarkable. We cannot recall seeing such a concentration at a single strike before – and this is the result of 18k calls and 23k puts to the 4700 strike. You can also see (via the light grey area) that a very large percentage of 4700 strike gamma expires today – along with many other 4700 area strikes. This is why we look for an “unpinning” of the 4700 area next week.
There is a similar gamma strike distribution in QQQ at the 400 strike, however we only estimate 25% of QQQ total gamma expiring today:
For Monday, we anticipate the Call Wall resistance line to remain in the 4725-4750 area, but the strength of that wall will be reduced. This implies that the market could have an easier time pushing higher.
The downside is where we see much more volatility potential. A break of the Vol Trigger (4645) could elicit dealer shorting, into what we see as an under-hedged market. We feel it would be quite easy for the VIX to punch higher to the low 20’s, with a SPX max drawdown into 4550.
Note: We have made an adjustment to our “Implied 1 Day Move” measurement. Please go here for details.
Model Overview:
Markets hold supportive positive gamma as long as the S&P Index is above $4,650.
| SpotGamma Proprietary Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Ref Price: | 4720 | 4701 | 469 | 16568 | 401 |
| SpotGamma Imp. 1 Day Move: | 0.42%, | Est 1 StdDev Open to Close Range (±pts): 20.0 | |||
| SpotGamma Imp. 5 Day Move: | 2.05% | 4694 (Monday Ref Px) | Range: 4598.0 | 4791.0 | ||
| SpotGamma Gamma Index™: | 2.57 | 1.80 | 0.34 | 0.08 | 0.05 |
| Volatility Trigger™: | 4645 | 4645 | 467 | 15800 | 398 |
| SpotGamma Absolute Gamma Strike: | 4700 | 4700 | 470 | 16500 | 400 |
| Gamma Notional(MM): | $980 | $749 | $974 | $15 | $183 |
| Additional Key Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Zero Gamma Level: | 4642 | 4623 | 0 | 0 | 0 |
| Put Wall Support: | 4695 | 4400 | 465 | 16400 | 398 |
| Call Wall Strike: | 4725 | 4725 | 472 | 16550 | 400 |
| CP Gam Tilt: | 1.49 | 1.36 | 1.22 | 1.96 | 1.13 |
| Delta Neutral Px: | 4455 | ||||
| Net Delta(MM): | $2,035,325 | $1,987,051 | $241,317 | $60,155 | $116,414 |
| 25D Risk Reversal | -0.05 | -0.05 | -0.06 | -0.06 | -0.06 |
| Key Support & Resistance Strikes: |
|---|
| SPX: [4725, 4720, 4705, 4700] |
| SPY: [470, 469, 468, 465] |
| QQQ: [405, 402, 400, 398] |
| NDX:[16500, 16450, 16400, 16350] |
| SPX Combo: [4739.0, 4734.0, 4767.0, 4724.0, 4743.0] |
| SPY Combo: [471.61, 471.14, 474.43, 470.2, 472.08] |
| NDX Combo: [16500.0, 16699.0, 16665.0, 16616.0, 16914.0] |
