Futures are back to 4175, having recovered nearly all of yesterdays losses. With the updated options levels we now pick up 4160 as the Volatility Trigger, and 4150 as the largest gamma strike. We’re therefore holding 4150 as critical support for today. The Call Wall has shifted to 4200, which continues to be a major resistance line.
The setup today therefore looks like this: an estimated max move of 85bps, 4200 resistance, 4150 support.
QQQ shed a bit of its negative position, which once again gives us this sharp vanna skew. The fact that the lines in the chart below drop to the lower right of the chart indicate dealers needing to buy back short hedges. Of course the opposite is true if markets decline, as dealers must short futures to hedge.
We are therefore looking for another day of above-average volatility in Nasdaq. If you’re looking to play a rally you may want to focus on QQQ/IWM due to this negative gamma position, whereas SPX holds a slightly positive gamma position, and is also near major 4200 resistance.
Looking at the volume and open interest changes from yesterday, it was most interesting to see no SPX strikes with puts being net closed. Often in these sharp drawdowns well see higher strike puts reflect a decrease in open interest. This makes sense as traders use market drops to monetize their puts. There were a few strikes in SPY that saw net put closing, with 417 losing 30k puts.
Additionally we only saw 10k calls added to 4150 and 4200 respectively. The takeaway here is that put holders held fast, and call buyers did not step up in size.
4100-4250 is the range into May OPEX. Gamma is currently high which should lead to low volatility. As long as markets are >4170 we anticipate a low volatility market which grinds higher.
|SpotGamma Proprietary Levels||Latest Data||Previous||SPY||NDX||QQQ|
|SpotGamma Imp. 1 Day Move:||0.86%,||36.0 pts||Range: 4129.0 | 4201.0|
|SpotGamma Imp. 5 Day Move:||4185||6.64%||Range: 3907.0 | 4463.0|
|SpotGamma Gamma Index™:||0.41||0.83||-0.22||-0.00||-0.14|
|Volatility Trigger™(ES Px):||4160||4180||417||13700||338|
|SpotGamma Absolute Gamma Strike:||4150||4200||420||12850||330|
|Additional Key Levels||Latest Data||Previous||SPY||NDX||QQQ|
|Zero Gamma Level(ES Px):||4154||4145||0||0||0|
|Put Wall Support:||3900||4000||414||12500||325|
|Call Wall Strike:||4200||4200||421||14025||340|
|CP Gam Tilt:||1.12||0.95||0.91||0.99||0.57|
|Delta Neutral Px:||3991|
|25D Risk Reversal||-0.08||-0.07||-0.08||-0.08||-0.08|
|Top Absolute Gamma Strikes:|
|SPX: [4200, 4175, 4150, 4000]|
|SPY: [420, 415, 414, 410]|
|QQQ: [335, 330, 325, 320]|
|NDX:[14025, 14000, 13750, 12850]|
|SPX Combo: [4200.0, 4250.0, 4225.0, 4208.0, 4220.0]|
|NDX Combo: [13328.0, 13544.0, 13463.0, 13368.0, 13247.0]|
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