Once again we saw little movement in overnight futures, and little change to our forecast. 4800 is still the predominant gamma strike (and “pin” area), with support at 4787 & 4775. Resistance holds at 4815 and 4825. Our estimated open/close range on the day is a very slim 0.41% (open to close).

With 12/31 OPEX tomorrow, we are going to lose a lot of the gamma that is pinning the S&P to the 4800SPX/480SPY area. You can see this in the light grey shaded area below. This suggests increased volatility into next – but doesn’t necessarily forecast a direction for that volatility.

When trying to give edge to a direction there are a few pieces to consider. First we’d be looking for our Call Wall metric to roll higher, and we expect a fair amount of rolling tomorrow. This may confirm a higher Call Wall strike, and new top-end to our range.

Next, we take note of implied volatility[IV]. Shorter dated SPX IV is near 12, which is quite low. The VIX is holding a 17, which is at the lows seen just before Nov OPEX. Anecdotally we’ve seen the first week of January bring IV selling as the end of year hedges roll off. To test that theory, using excel we bucketed VIX returns by week using the last 10 years of data.

You can see the outcome below, with a curious result. Excel finds there are “53” weeks, which is odd given most of us use 52 weeks in a year. Thats helpful for our purposes, as when you look at the data, the “53rd” week is nearly always just the 30th & 31st of Dec. The return of the VIX during that “53rd” week is easily the highest out of all other weeks (last bar at right).

Equally as notable is the first week of the year, which holds nearly the worst VIX returns. In other words, there is some (thin) evidence that VIX holds a bid today/tomorrow, and comes for sale next week. There are many caveats to this, including the fact that generally there is a New Years holiday in this mix (not this year) and its a small sample size.

Playing into this idea that volatility is picking up today/tomorrow, we note ugly moves >-2% moves in the meme-leaders: ARKK, TSLA, AMC, NVDA etc. These stocks were extremely strong to start the week, and faded hard yesterday. To add to the volatility mix, there is the JPM collar trade which we’ll be on watch for starting today.

Our bottom line is this: our SG data suggests a low volatility day today, and we give an edge to this. Further, tomorrows at-the-money straddle is ~$26 in SPX which suggests traders are pricing a 0.54% move into Fridays close.

That being said, there is a lot that should start to happen under the hood, with large positions shifting and thin holiday liquidity.

By Monday the positions will have shifted, and the picture will be clearer.

Model Overview:

4620 gamma flip level. 4800 overhead target.