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Informe SG Levels

Mar 17, 2022 | 0 Comentarios

Futures are at 4335 down from overnight highs of 4367. With yesterdays rally there was a sharp reduction in negative gamma, however we still forecast high volatility for today (1.4% open/close). Resistance lies at 4348 and 4400. Support shows at 4330 and 4300.

For the past several weeks we’ve been looking for a rally, catalyzed by a post-FOMC implied “event” volatility [IV] reduction and OPEX. Accordingly, we felt that a bullish Fed response could pull forward some of the OPEX rally. Market movement so far coincides with this outline.

The volatility crush is quite clear. Shown below is the VIX term structure from Monday (blue) vs today. This curve, which is a barometer of IV, suggests a decrease in value of S&P500 put options. As put options lose value those that are short puts have to buy back short stock hedges (this is the vanna trade).

Along with a decline in IV we saw a big stock rally and time passing. Those add to the put destruction. Take, for example, the value of the March 18th, 4000 put (chart below). There were >100k of these open for Fridays expiration and the value of those was decimated from Monday into today.

Our takeaway here is simple: this was a short cover rally through put destruction. Short cover rallies are inherently unstable.

3/18 expiration, 4000 strike put premium.

The other major signal we picked up on yesterday was a total lack of positive call deltas in the SPY & QQQ. You can see below that SPY traders were fairly heavy call sellers (appears to be in the money call sellers) into the AM short-stock cover, and then after 1PM ET and through the FOMC flow was neutral. The QQQ chart was similar. If the Fed tripped some macro buy signal you’d think the response from call buyers & put sellers would be significant positive deltas.

Our HIRO signal shows the hedge impact (delta) of all options trades in real time.

Looking forward, we still have 30% of total deltas in the SPX/SPY/QQQ set to expire tomorrow. From the gamma perspective below you can see how much is set to expire (light grey shaded area), and note that 4300 is the major support strike.

Accordingly, we think OPEX flows will continue to be supportive of markets into Friday. However, we are currently having a hard time finding data that implies options-based support into next week. This would change if we see a pickup in call flows and/or a push above 4400 in the S&P.

Please join us today at 4pm ET as we talk with Darius Dale of 42 Macro. He’ll be providing a critical macro update following yesterdays FOMC, and we’ll see how that dovetails with options positioning.

SpotGamma Proprietary Levels Latest Data Previous SPY NDX QQQ
Ref Price: 4353 4371 435 13970 340
SpotGamma Imp. 1 Day Move: 1.4%, Est 1 StdDev Open to Close Range (±pts): 61.0
SpotGamma Imp. 5 Day Move: 3.52% 4224 (Monday Ref Px) Range: 4076.0 | 4373.0
SpotGamma Gamma Index™: -0.39 -1.19 -0.08 0.06 -0.09
Volatility Trigger™: 4330 4300 432 13975 335
SpotGamma Absolute Gamma Strike: 4300 4300 440 14075 350
Gamma Notional(MM): $-350 $-191 $-389 $7 $-595
Additional Key Levels Latest Data Previous SPY NDX QQQ
Zero Gamma Level: 4487 4472 0 0 0
Put Wall Support: 4100 4100 420 13500 320
Call Wall Strike: 4400 4600 440 14075 360
CP Gam Tilt: 0.92 0.91 0.86 1.61 0.65
Delta Neutral Px: 4397
Net Delta(MM): $1,876,034 $1,931,613 $169,678 $45,654 $109,387
25D Risk Reversal -0.08 -0.09 -0.09 -0.09 -0.09
Key Support & Resistance Strikes:
SPX: [4450, 4400, 4350, 4300]
SPY: [450, 440, 435, 430]
QQQ: [350, 345, 340, 330]
NDX:[14100, 14075, 14000, 13500]
SPX Combo (strike, %ile): [(4448.0, 83.77), (4422.0, 81.43), (4400.0, 94.03), (4348.0, 78.08)]
SPY Combo: [439.98, 429.96, 424.73, 444.77, 442.15]
NDX Combo: [14075.0, 13740.0]
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