Futures are up slightly from Fridays close: 4728. Our updated models show a solid amount of positive gamma, and with that we see a tight 0.56% open/close range for today. We see resistance at 4749, with support at 4720 (SPY470 equivalent) & 4700. Its key to note that the Call Wall shifted to 4800, which shows a buildup of call positions at higher strikes. This is the new upside target into 12/31.

We think this week will be mostly “drift” as the year closes out.  As the S&P shifts towards 4800 the positive gamma builds, which should result in lower volatility. As this realized volatility declines, it should drag implied volatility lower, which is what gives the “drift” a tailwind – in other words it is a grind higher.

Both QQQ & IWM hold slightly negative gamma positions, which indicates they should have more relative movement to the S&P 500.

We suspect that as 12/31 approaches discussion will turn to the year end “JPM collar trades” which could add some movement to markets. Our data shows that >30% of total S&P gamma expires on Friday, so it is a large expiration. Since the JPM collar is currently deep in the money, its roll is more about “delta” than “gamma” and so it has the potential to shift markets around Thursday into Friday. Large deltas trading indicate large hedge adjustments, which is why we will be watching closely.

SpotGamma will be noting more on this mid week.

Model Overview:

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