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Informe SG Levels

Dic 3, 2021 | 0 Comentarios

Futures are off from last nights close, down to 4565. We saw a shift in gamma towards zero, which means our implied max move for today in 0.96% or 44pts.  Said another way: we look for volatility to reduce some. Key resistance is at 4600 then 4630, which is where gamma flips from positive (above 4600) to negative (below 4600).  Support is at 4550 then 4508.

It appears that traders used the rally to add some put positions in the 4400-4500 area which adds a bit of support. Further we saw a few chunky SPX call positions placed in the 4650 area. This starts to fill in some positive gamma over 4600, which implies better market support if the S&P can breach 4600 (recall last week we referred to the 4600-4675 area as a “void”).

With little material change in S&P options positions, we think that short term movement is still being controlled by implied volatility. Below is a chart of the VIX vs realized S&P volatility, and you can see that there is a fairly large spread. The VIX at 30 represents some amount of fear that is in excess to what has been happening in the SPX (ie just 3% from all time highs). A 30 VIX suggests one day estimated moves of ~1.8% in the S&P500 which to us seems a bit rich.

That’s not to say the market cannot have a large drop today, or in the next few days; a 5% decline would certainly reward put holders handsomely. We’re simply saying that one is paying a fair premium to place that bet.

Consider the SG implied move as a 1 day volatility estimate, and for today that is 0.96%. Comparing that to the VIX implied move of 1.8%, and you can see why we feel implied volatility is too high. The gamma implied volatility does not match with the options implied volatility.

If the market simply “stalls” that implied volatility premium likely shifts lower, which provides dealers the incentive to buy back futures. Put options are all charged up, and need a market drawdown to maintain that energy. Time passing (assuming no downside volatility) leads to that energy being “released”.

This leads us with little change to our view from previous days: giving edge to a vanna-induced rally. We will continue to hold that view until/unless 4500 is broken.

Model Overview:

4600 gamma flip level, 4550 critical support. 4700 overhead target.

SpotGamma Proprietary Levels Latest Data Previous SPY NDX QQQ
Ref Price: 4583 4578 457 16007 389
SpotGamma Imp. 1 Day Move: 0.96%, Est 1 StdDev Open to Close Range (±pts): 44.0
SpotGamma Imp. 5 Day Move: 0.57% 4629 (Monday Ref Px) Range: 4603.0 | 4656.0
SpotGamma Gamma Index™: -0.32 -1.07 -0.17 0.03 -0.10
Volatility Trigger™: 4595 4615 457 15800 395
SpotGamma Absolute Gamma Strike: 4500 4500 470 16575 400
Gamma Notional(MM): $-262 $-315 $-523 $4 $-465
Additional Key Levels Latest Data Previous SPY NDX QQQ
Zero Gamma Level: 4610 4640 0 0 0
Put Wall Support: 4400 4100 450 15000 385
Call Wall Strike: 4800 4800 465 16575 400
CP Gam Tilt: 0.93 0.84 0.86 1.37 0.71
Delta Neutral Px: 4458
Net Delta(MM): $1,909,218 $1,943,744 $227,514 $46,393 $107,886
25D Risk Reversal -0.11 -0.13 -0.11 -0.1 -0.1
Key Support & Resistance Strikes:
SPX: [4700, 4650, 4600, 4500]
SPY: [470, 460, 455, 450]
QQQ: [400, 390, 388, 385]
NDX:[16575, 16500, 16000, 15500]
SPX Combo: [4701.0, 4650.0, 4632.0, 4550.0, 4508.0]
SPY Combo: [469.75, 464.72, 462.89, 454.66, 450.54]
NDX Combo: [15785.0, 16409.0, 15993.0, 15593.0]
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