Futures have popped higher, near yesterdays highs of 4465. There was very little shift in our levels for today, backing the idea that yesterdays trade was rather anemic. Resistance holds at 4480 then 4500. Support lies at 4456 then 4431. Our daily volatility estimate is at 0.82% (open/close).
Many queries have come in as to the meaning of the large spread between the Volatility Trigger & ZeroGamma (respectively VT = SpotGamma’s proprietary gamma flip line vs ZG = where the market measures gamma flipping). This is signaling a gamma “void” of sorts at strikes >4400 up into 4475. Last weeks rally into OPEX pushed the market up into a “neutral zone” of sorts, and we’re now left floating in that void. There is fairly large call interest at 4500 which we see as material resistance.
The Vanna Model has a bit less nuetrality. Shown below is Friday’s model (left) vs today’s (right). A sharp, “condensed” skew is shown on the left, and this suggests that vanna was supplying large, positive directional flow to markets. This is the type of skew that comes with put-heavy markets. As implied volatility[IV] declines/increases, dealers have a lot of delta hedges to buy/sell back.
Todays model (right) shows a similar, but less steep skew to 3/18. Essentially hedging flows are less impacted by a change in IV. Put positions are still larger than that of calls (much less so than last week), therefore any decline in IV offers some directional dealer hedging.
The models shifts neutral when the skew is removed (ex: blue dotted line, right image), and then can shift into “resistance” with call heavy markets (for example, on 12/16).
The point here is that we see the gamma flow as offering little influence to markets at current SPX prices. As long as the market holds >=4400 then vanna, or the delta hedging impact due to a change in implied volatility, is still supplying a bit of support.
If the market does drift higher into 4500 Call Wall, then positive gamma & resistance should increase. Therefore vanna would shift neutral but gamma would start to act as resistance.
Should markets sell off, we still see little material support below. As described for the past few reports, we see little support because of the put-hedge destruction over the last week. If traders elect to purchase puts (which adds to dealer negative delta) this could coincide with a spike in IV. Both of these factors would add speed to any drawdown.
| SpotGamma Proprietary Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Ref Price: | 4444 | 4455 | 444 | 14336 | 350 |
| SpotGamma Imp. 1 Day Move: | 0.82%, | Est 1 StdDev Open to Close Range (±pts): 36.0 | |||
| SpotGamma Imp. 5 Day Move: | 2.26% | 4438 (Monday Ref Px) | Range: 4338.0 | 4539.0 | ||
| SpotGamma Gamma Index™: | 0.02 | 0.05 | -0.08 | 0.03 | -0.08 |
| Volatility Trigger™: | 4400 | 4395 | 442 | 14050 | 349 |
| SpotGamma Absolute Gamma Strike: | 4400 | 4400 | 440 | 14225 | 350 |
| Gamma Notional(MM): | $-149 | $-86 | $-381 | $3 | $-444 |
| Additional Key Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Zero Gamma Level: | 4476 | 4487 | 0 | 0 | 0 |
| Put Wall Support: | 4100 | 4100 | 430 | 13000 | 320 |
| Call Wall Strike: | 4500 | 4500 | 450 | 14225 | 360 |
| CP Gam Tilt: | 1.01 | 0.93 | 0.83 | 1.5 | 0.67 |
| Delta Neutral Px: | 4389 | ||||
| Net Delta(MM): | $1,292,314 | $1,299,768 | $140,750 | $35,036 | $87,578 |
| 25D Risk Reversal | -0.06 | -0.06 | -0.06 | -0.07 | -0.07 |
| Key Support & Resistance Strikes: |
|---|
| SPX: [4500, 4450, 4400, 4300] |
| SPY: [450, 445, 440, 435] |
| QQQ: [350, 345, 340, 330] |
| NDX:[15000, 14500, 14225, 14000] |
| SPX Combo (strike, %ile): [(4534.0, 88.16), (4485.0, 91.32), (4458.0, 81.28), (4431.0, 86.83)] |
| SPY Combo: [448.39, 449.28, 453.28, 443.06, 445.72] |
| NDX Combo: [14183.0, 13925.0, 14743.0] |
