Futures were quiet overnight, and are holding near 4380. Our volatility expectations decreased dramatically today, with an SG Implied move of 0.86% (open/close) vs ~1.4% yesterday. We see resistance at 4400 and 4425. Support shows at 4380 the 4350.
OPEX day has finally arrived, and our models show roughly 1/3 of the total S&P/QQQ options position expiring today. For both the SPX & SPY the 440/4400 strike is dominant, and we look for a pinning around this area for today. The chart here shows just how large this 440 call position is.
It was the SPY flow which was most interesting yesterday, large volumes at the 440 call & 435 put. Interestingly, despite over 350,000 contracts 440c trading, the net open interest change was -1,277. Further, our open interest change table shows SPY calls were net closed at strikes <=438. We suspect this trading is tied to the SPY dividend (dividend ex-Date today).
Because of the substantial rally in markets over the past few days, the Monday OPEX “hedge clearing” day is a bit more cloudy. This is because the large put positions have been crushed before OPEX, which may reduce the related hedge unwind for Monday. Recall back to January when the market was careening lower into Friday OPEX, and mid-day on Monday markets bounced. This time the OPEX energy, so to speak, has arguably been discharged.
Therefore we will enter Monday with a reduced notional gamma, which implies less dealer hedging impact. If markets retain the 4400 level, then a grind higher up into 4500 seems likely. This is due to the fact that above 4400 we see positive gamma starting to build, and deflating implied volatility[IV] (i.e. vanna support). Note, as we discussed last night, we see IV as currently “fairly valued” and so for vol to reduce its likely a “drain” and not a “flush”.
For the downside, under 4400 there is a slipstream down lower. This OPEX is reducing a lot of high delta, in-the-money puts but it also removed a lot of puts <=4300. Therefore we think if selling arrives, the “lower bound” that was near 4100 has moved down to 4000. As a reminder the ’22 equity market low was the 2/24 “official” conflict date – despite the fact that both credit & commodity markets deteriorated into March.
In summary, if we were to map out the landscape, it seems to compare well to January. There is a bit of call interest >=4400 which could contain markets (black circles). However a stock break down does not have support from the options market, and in fact could easily be fueled lower. This is our big concern here – should selling pick up and hedge demand (i.e. put buying) renew – that brings short stock demand from dealers and a resulting spike in IV with less starting support.
| SpotGamma Proprietary Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Ref Price: | 4397 | 4392 | 441 | 14025 | 344 |
| SpotGamma Imp. 1 Day Move: | 0.86%, | Est 1 StdDev Open to Close Range (±pts): 38.0 | |||
| SpotGamma Imp. 5 Day Move: | 3.52% | 4224 (Monday Ref Px) | Range: 4076.0 | 4373.0 | ||
| SpotGamma Gamma Index™: | 0.17 | -0.40 | 0.01 | 0.07 | -0.09 |
| Volatility Trigger™: | 4380 | 4330 | 437 | 13975 | 342 |
| SpotGamma Absolute Gamma Strike: | 4400 | 4300 | 440 | 14075 | 350 |
| Gamma Notional(MM): | $-555 | $-205 | $-246 | $4 | $-610 |
| Additional Key Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Zero Gamma Level: | 4465 | 4493 | 0 | 0 | 0 |
| Put Wall Support: | 4350 | 4100 | 420 | 13000 | 320 |
| Call Wall Strike: | 4400 | 4400 | 440 | 14075 | 345 |
| CP Gam Tilt: | 1.04 | 0.91 | 0.91 | 1.33 | 0.67 |
| Delta Neutral Px: | 4442 | ||||
| Net Delta(MM): | $1,708,274 | $1,892,732 | $158,283 | $46,348 | $110,412 |
| 25D Risk Reversal | -0.08 | -0.08 | -0.09 | -0.09 | -0.09 |
| Key Support & Resistance Strikes: |
|---|
| SPX: [4450, 4425, 4400, 4350] |
| SPY: [450, 445, 442, 440] |
| QQQ: [350, 345, 340, 330] |
| NDX:[14200, 14100, 14075, 14000] |
| SPX Combo (strike, %ile): [(4508.0, 8.59), (4438.0, 92.74), (4425.0, 77.92), (4420.0, 85.57), (4416.0, 83.25), (4411.0, 97.44), (4407.0, 91.67), (4403.0, 87.79), (4398.0, 90.86), (4389.0, 94.9), (4385.0, 99.1), (4381.0, 79.51), (4376.0, 78.35)] |
| SPY Combo: [439.75, 442.39, 440.19, 430.04, 434.9] |
| NDX Combo: [13994.0, 14022.0, 13658.0, 13854.0, 13924.0] |
