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Informe SG Levels

May 13, 2021 | 0 Comentarios

Futures checked lower to 4010 overnight, but have rebounded to 4060. Markets are set to open under a large negative gamma regime, and as such we are looking for substantial volatility. Our major support level is 4000, with resistance at 4110.  We must lend attention to “vanna” today as options are quite sensitive to this elevated implied volatility. If the VIX breaks down today, we would look for that to fuel a rally. Conversely any shift higher in the VIX likely means a test of 4000.

We’ve got our eye on the chance for a strong bounce here, as that violent shift higher in implied volatility reverts and traders seek to close/monetize their put hedges.  We also see 4k as both a very large options level, and a psychologically important level (people love big round numbers).   Based on this we think the downside for today is limited.

Below we’ve posted the vanna models in the QQQ/SPY.  The comparison shows that the black delta exposure line tails up in SPY as we break over 410, whereas in QQQ the black line remains flat. The higher this black line goes, the more futures need to be sold for hedging. Therefore, this SPY chart is indicating that dealer hedging shifts to light selling as SPY goes >410 but are still neutral/small buyers in QQQ >320. This makes sense as QQQ has held a large put regime for some time (if you’re new to this vanna model, go here).

QQQ SPY Vanna Model

Additionally, we recommend checking out the vanna model, and clicking through the dates under the title. You can see how the skew of this model has changed over the last several days, as volatility has spiked.

Looking forward, if we do get a rally on implied vol crush & puts being closed, that is important. This serves to clear out hedges, which can add to instability going forward. In other words, markets are currently hedged, but a bounce higher removes those hedges.  This means that if markets once again weaken, they’ll have less support.  We think this is a key part of the mechanics to the “dead cat bounce”, and something we will be keeping a close eye on for today.

Model Overview:

Markets are under a negative gamma regime. Look for high volatlity, with large swings in markets. 4000 is key support, with major resistance at 4200 into 5/21 OPEX.

SpotGamma Proprietary Levels Latest Data Previous SPY NDX QQQ
Ref Price: 4043 4052 405 12962 316
SpotGamma Imp. 1 Day Move: 1.63%, 66.0 pts Range: 3977.0 | 4109.0
SpotGamma Imp. 5 Day Move: 4231 7.21% Range: 3926.0 | 4536.0
SpotGamma Gamma Index™: -0.89 -0.13 -0.30 -0.07 -0.17
Volatility Trigger™(ES Px): 4110 4175 413 13475 330
SpotGamma Absolute Gamma Strike: 4000 4000 400 12850 330
Gamma Notional(MM): $-636 $-754 $-1,373 $-10 $-1,003
Additional Key Levels Latest Data Previous SPY NDX QQQ
Zero Gamma Level(ES Px): 4156 4165 0 0 0
Put Wall Support: 4000 4100 405 12500 310
Call Wall Strike: 4200 4250 420 13750 340
CP Gam Tilt: 0.76 0.62 0.65 0.49 0.47
Delta Neutral Px: 3992
Net Delta(MM): $1,470,004 $1,410,039 $222,962 $44,423 $97,399
25D Risk Reversal -0.11 -0.09 -0.11 -0.09 -0.09
Top Absolute Gamma Strikes:
SPX: [4150, 4100, 4000, 3900]
SPY: [410, 405, 400, 395]
QQQ: [330, 325, 320, 310]
NDX:[12850, 12500, 11850, 11800]
SPX Combo: [3982.0, 4011.0, 4035.0, 4039.0, 3934.0]
NDX Combo: [12683.0, 13098.0, 12890.0, 13305.0, 12968.0]
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