Futures are flat to last nights close, at 4485. Negative gamma shifts higher, which leads to an expanded volatility forecast of 1.08% (open/close). 4500-4520 (SPY450 equivalent) is major resistance, with support at 4475 and 4450.
Overall, into Friday we think its just as easy for markets to shift lower and tag 4400 as it is for them to rip back up into the 4550 area. Markets have built up just enough implied volatility to add some vanna fuel, and if the market can retake 4500 that fuel likely leads to a pretty sharp snapback as volatility selling slips markets higher. However, risk remains high while the S&P is <=4500, and that same vanna fuel can work to the downside, too.
Whats notable here, is that despite yesterdays decline and overall volatility, there wasn’t a large demand shift for puts. Further, the end of day rally deflated some of the increased implied volatility.
Below is our Risk Reversal model which shows the price of puts relative to calls. Two days ago when the S&P was 100 handles higher, we remarked about the lack of demand for puts, while the indicator was at -0.06. The ~2% subsequent decline in the SPX has only served to shift this metric down slightly to -0.08. This says the market is “alert” but not “worried”.
This relative complacency in equity implied volatility holds in the face of increasing credit market volatility. The MOVE Index (aka “Bond VIX”) remains stubbornly pressed against highs going back to March of ’20. We’d also note this interesting tidbit(h/t @iv_technicals): the 30 day straddle for TLT (the long US Bond ETF) is 5%, while the 30 day straddle for SPY is 4%!
While demand for S&P put protection remains dull, single stock put demand indicates more concern(s). Shown here is put volume (blue) vs call volume (orange) in equities, and what struck us was not necessarily yesterdays figures, but the overall trend. Despite what happens next in markets, this chart reads like “peak call buying” may be largely behind us. This is particularly true as focus now is predominantly on macro themes as opposed to single stock stories.
| SpotGamma Proprietary Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Ref Price: | 4481 | 4480 | 446 | 14498 | 353 |
| SpotGamma Imp. 1 Day Move: Est 1 StdDev Open to Close Range |
1.08%, | (±pts): 48.0 | VIX 1 Day Impl. Move:1.39% | ||
| SpotGamma Imp. 5 Day Move: | 1.98% | 4545 (Monday Ref Px) | Range: 4456.0 | 4636.0 | ||
| SpotGamma Gamma Index™: | -0.26 | 0.11 | -0.37 | 0.03 | -0.18 |
| Volatility Trigger™: | 4475 | 4500 | 452 | 14050 | 361 |
| SpotGamma Absolute Gamma Strike: | 4500 | 4500 | 450 | 14225 | 350 |
| Gamma Notional(MM): | -252.0 | -288.69 | -1580.0 | 4.0 | -951.0 |
| Additional Key Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Zero Gamma Level: | 4509 | 4543 | 0 | 0 | 0 |
| Put Wall Support: | 4300 | 4300 | 440 | 14000 | 350 |
| Call Wall Strike: | 4600 | 4600 | 460 | 14225 | 380 |
| CP Gam Tilt: | 0.92 | 0.81 | 0.56 | 1.39 | 0.51 |
| Delta Neutral Px: | 4458 | ||||
| Net Delta(MM): | $1,337,127 | $1,314,924 | $167,646 | $45,951 | $106,848 |
| 25D Risk Reversal | -0.08 | -0.07 | -0.08 | -0.09 | -0.08 |
| Call Volume | 251,960 | 1,576,947 | 4,841 | 726,328 | |
| Put Volume | 543,267 | 3,064,920 | 7,957 | 1,516,922 | |
| Call Open Interest | 4,165,005 | 5,263,264 | 45,870 | 3,152,411 | |
| Put Open Interest | 8,618,989 | 12,028,164 | 50,523 | 7,017,780 |
| Key Support & Resistance Strikes: |
|---|
| SPX: [4600, 4500, 4450, 4400] |
| SPY: [450, 445, 440, 430] |
| QQQ: [360, 355, 350, 345] |
| NDX:[15000, 14500, 14225, 14000] |
| SPX Combo (strike, %ile): [4602.0, 4450.0, 4414.0, 4548.0, 4351.0] |
| SPY Combo: [458.58, 443.39, 439.82, 453.22, 433.57] |
| NDX Combo: [14223.0, 14368.0, 14165.0, 14571.0] |
