Informe SG Levels

Futures are at 4585, from overnight lows of 4535.  We’re still faced with a large negative gamma position in all indices, which implies that high volatility continues today. We see resistance at 4600, followed by 4650. Support is at 4569 then 4519.

With the updated data we now measure the heaviest gamma strike at 4600 (from 4700).  This is the result of some very large “straddle” interest added at the 4600 strike, an increase of ~30k calls & puts. This interest adds to the pinning effect of 4600.

Yesterday we mentioned the void between 4600 & 4700, and there is some evidence that the void is starting to fill in. This lends to the idea that even though we have large negative gamma and high implied volatility, 4600 is becoming “fair value”. This is not just with the straddle flow noted above, but also in SPY. As you can see below, we have primarily call interest above, and put interest below. The puts that were positioned >=460 have largely been closed and/or rolled lower. The call interest above, remains light.

However, these put strikes in SPY/SPX & QQQ are all quite large, and they are generating our models negative gamma signals. With that, we don’t think a substantial rally can manifest until either large puts are expired/closed, and/or there is a material decline in implied volatility (ie VIX). The obvious event ahead for that would be the FOMC next Wednesday (26th).

For now we do not see the positioning for a major drawdown in the S&P at this point, but feel that single stocks and QQQ could underperform in through Monday.

Finally, for those of you looking for the OPEX update, you can download it here.