Futures are holding yesterdays close, currently near 4405. This is off of overnight lows of 4382, and highs of 4412. This move obviously foists a larger negative gamma position on markets, which expands our SPX volatility estimate to 1.27% (open/close). Note that negative gamma is SPY & QQQ is quite large, which signals a more elevated volatility. Initial support is at 4400, then 4310. Resistance shows at 4420 (SPY 440 equivalent) and 4450.
Traders will be watching the 8:30AM ET CPI print.
Yesterdays price action finally seemed to trigger put buyers. This was mainly into the close, as our HIRO delta readings were positive to neutral into 2pm ET. Shown below is the change in SPX put open interest, and you can see there were several out of the money puts picking up >10k contracts. We’d also note 30k calls added to the 4450 line – likely placing that strike in play on any rebound.
In regards to puts, you can see that the overall put position is now driving larger in size. Below is our Delta Tilt reading, which we’ve found effective for reading lower bounds in markets. You can see there was a bounce coinciding with the March ’22 lows, and now we are re-approaching that lower bound level. Whats equally interesting here is that the rise in this indicator was due to the closing of put positions with March OPEX, and not the addition of calls.
Material call buying has failed to manifest throughout this year. This is a market being driven by the flow of put options – entirely different from the call heavy trading of the past 2 years.
Put controlled markets are characterized by high volatility, as dealers must hedge in the markets prevailing direction. Put flow is likely to remain higher than that of calls until the macro landscape is clear. Technically speaking the “flip point” is the Vol Trigger level of 4475.
Our purpose here is to monitor the options market and volatility. Last week we discussed why we were concerned about the move in credit markets, and as you can see here the MOVE Index (aka Bond VIX) continues to press near March ’20 highs. The VIX remains well below ’22 highs.
There has now been a 15% drawdown in Treasury futures (per @sentimentrader), something that has happened only twice before (since 1990). We think this likely pressures the est. >$500 billion in risk parity/vol targeting strategies.
These are complicated waters to navigate, and as such we’re thankful to rely on model driven forecasts. It’s ultimately about flows and not narratives, and as such we suggest that until the market recovers the Vol Trigger (4475) then put flows and high volatility will continue to dominate.
| SpotGamma Proprietary Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Ref Price: | 4412 | 4413 | 439 | 13990 | 340 |
| SpotGamma Imp. 1 Day Move: Est 1 StdDev Open to Close Range |
1.27%, | (±pts): 56.0 | VIX 1 Day Impl. Move:1.53% | ||
| SpotGamma Imp. 5 Day Move: | 1.98% | 4545 (Monday Ref Px) | Range: 4456.0 | 4636.0 | ||
| SpotGamma Gamma Index™: | -1.09 | -0.09 | -0.40 | 0.03 | -0.20 |
| Volatility Trigger™: | 4475 | 4465 | 450 | 14025 | 358 |
| SpotGamma Absolute Gamma Strike: | 4400 | 4500 | 440 | 14225 | 350 |
| Gamma Notional(MM): | -615.0 | -472.18 | -1863.0 | 4.0 | -1127.0 |
| Additional Key Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Zero Gamma Level: | 4508 | 4509 | 0 | 0 | 0 |
| Put Wall Support: | 4300 | 4300 | 440 | 14000 | 340 |
| Call Wall Strike: | 4700 | 4600 | 480 | 14225 | 360 |
| CP Gam Tilt: | 0.73 | 0.7 | 0.47 | 1.29 | 0.43 |
| Delta Neutral Px: | 4457 | ||||
| Net Delta(MM): | $1,479,158 | $1,336,311 | $166,446 | $45,191 | $111,693 |
| 25D Risk Reversal | -0.1 | -0.07 | -0.09 | -0.1 | -0.1 |
| Call Volume | 377,050 | 1,135,752 | 8,398 | 608,221 | |
| Put Volume | 851,879 | 1,796,072 | 14,514 | 1,585,532 | |
| Call Open Interest | 4,664,581 | 5,290,867 | 48,860 | 3,228,077 | |
| Put Open Interest | 9,755,592 | 11,829,641 | 54,523 | 6,945,843 |
| Key Support & Resistance Strikes: |
|---|
| SPX: [4500, 4450, 4400, 4300] |
| SPY: [450, 440, 435, 430] |
| QQQ: [350, 345, 340, 330] |
| NDX:[14250, 14225, 14000, 13500] |
| SPX Combo (strike, %ile): [4298.0, 4351.0, 4399.0, 4311.0, 4413.0] |
| SPY Combo: [428.48, 433.76, 438.6, 429.8, 439.92] |
| NDX Combo: [14228.0, 13948.0, 13752.0, 14158.0, 14368.0] |
