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Informe SG Levels

Nov 24, 2021 | 0 Comentarios

Futures were active overnight with a high of 4691 and low of 4667. There was a small decline in the SG Gamma Index, but our estimated 1 day range remains similar to yesterday at 0.62%. Key resistance is at 4700, with support at 4670. Below 4670 gamma flips to negative, which could lead to a quick increase in volatility.

Despite the volatility yesterday we see little change in put positions. The Vol Trigger and Put Wall did not shift, which again implies “no fear” in yesterdays trading. There were some decently sized call additions to the 4700 area, and we now see the vanna model skew towards resistance as shown below (y’day left, todays model, right). The implication here is that dealers have some more futures to sell as the market pushes up into 4700.

This leaves us in something of a “no mans land” from a gamma perspective. At 4700 we have the largest amount of notional gamma (per strike) and at 4670 we have “zero gamma”. All this implies that dealers have little to hedge in this general 4650-4700 range. Adding to this mix is tomorrows US holiday which can lead to shifts in implied volatility forecasting, and lower liquidity.

Further, while the S&P realized volatility is fairly muted (we’re only down ~1% from Mondays all time highs) there is clearly a lot more volatility & churning under the surface. The inability for that churn to materially effect the S&P is notable, particularly when combined with the lack of material put buying. Our suspicion is that put buying won’t occur today due to the option “decay” cost of the extra day off (recall that put buying leads to dealers shorting futures).

We do expect markets to be quite choppy due to the aforementioned holiday liquidity and note that implied volatility decay (aka vanna trade) likely adds a light bid. The net of this, we think, equates to markets settling just under the 4700 strike. If markets do break the 4670 strike, then we do advise caution particularly if implied volatility (ie VIX) rises sharply (which infers active put buying).

Model Overview:

4670 critical support, 4750 upside target into Dec OPEX.

SpotGamma Proprietary Levels Latest Data Previous SPY NDX QQQ
Ref Price: 4679 4679 466 16278 397
SpotGamma Imp. 1 Day Move: 0.62%, Est 1 StdDev Open to Close Range (±pts): 29.0
SpotGamma Imp. 5 Day Move: 2.02% 4707 (Monday Ref Px) Range: 4604.0 | 4794.0
SpotGamma Gamma Index™: 0.69 0.75 0.05 0.05 -0.03
Volatility Trigger™: 4670 4670 466 15800 398
SpotGamma Absolute Gamma Strike: 4700 4700 470 16575 400
Gamma Notional(MM): $278 $146 $-185 $6 $-146
Additional Key Levels Latest Data Previous SPY NDX QQQ
Zero Gamma Level: 4637 4637 0 0 0
Put Wall Support: 4400 4400 465 13500 390
Call Wall Strike: 4750 4750 472 16575 400
CP Gam Tilt: 1.16 1.08 0.95 1.71 0.9
Delta Neutral Px: 4450
Net Delta(MM): $1,833,878 $1,836,806 $211,295 $41,640 $103,089
25D Risk Reversal -0.08 -0.08 -0.08 -0.08 -0.08
Key Support & Resistance Strikes:
SPX: [4700, 4650, 4600, 4500]
SPY: [470, 469, 468, 465]
QQQ: [400, 398, 395, 390]
NDX:[16575, 16500, 16350, 16000]
SPX Combo: [4735.0, 4782.0, 4684.0, 4707.0, 4759.0]
SPY Combo: [474.28, 478.96, 469.13, 471.47, 476.62]
NDX Combo: [16351.0, 16513.0, 16155.0, 15944.0, 16562.0]
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