Informe SG Levels

Futures are higher to 3940 ahead of today’s expiration. Volatility estimates continue to hold at 1.2% (open/close) and we anticipate this changing for Monday due to the roll off of put positions. Resistance is at 4000-4015(SPY 400). Support shows at 3950 then 3900.

This expiration is not particularly large for SPX or QQQ with our models showing ~15% of delta & gamma expiring, but sizeable for SPY (37% of gamma, 20% of delta). A market push to 400 SPY/4000 SPX and 300 QQQ likely relieves any OPEX pressure – and as we opined yesterday that this move into this level(s) could happen today into Monday. If the market tags these respective targets then that likely withdraws any significant options based support.

In terms of yesterdays flows, its was clear via HIRO (real time delta traded) readings yesterday and the OI change charts that puts were closed as markets opened near 3900. Additionally there was large “straddle” volume (80k calls, 130k puts) & open interest (45k calls, 35k puts) added to the 3900 strike, which places large short term support at that strike. The addition of chunky call positions at 3900 is why our Put Wall metric shifted lower, to 3700 (the Put Wall shift lower is something we generally read as bearish).

You get a sense of the impact of this 3900 position through our strike gamma chart, shown below. Most of this position expires today, as does a large percentage of the at-the-money SPX/SPY/QQQ options position (seen in light grey). The expiration of these positions reads as less support for next week.

To this point we mentioned yesterday that <=3800 it seemed that gamma would produce buying from dealers, but that this expiration shifts that level down towards 3700. This general trend of traders uninterested in calls and systematically rolling puts “down & out” continues to suggest an acceptance of and positioning for lower stock prices.