Futures were flat overnight, trading at 3940. Volatility estimates are again high, with the SG Implied Move at 1.2% (open/close SPX move), and VIX showing 1.85% implied SPX move. Resistance is at 4000 with support at 3800 then 3877.
Note that as we push toward the Memorial Day holiday this weekend we expect liquidity to deteriorate from its already fragile state. This could invoke larger 2-way volatility (i.e. moves higher & lower). Traders will also be watching for the 2pm ET Fed minutes.
Positions continue to build up at the 3900 strike, which we think serves to make that strike a stronger support level. Over the past few weeks it was purely puts at strikes <4000 and the market seemed to have extra speed on moves under that level. This buildup of call positions >3900 (albeit light), plus the appearance of dealers shifting to buyers <3700 (see gamma curve note here) leads us to discount the risk of capitulation.
Yes, we could have strong moves lower, and we’ve assigned an edge for markets probing lower into June OPEX. However, this idea of a “limit down with VIX >40 capitulation” is challenging through an options positioning lens (i.e. well hedged).
To the upside we think that there will not be an extended rally until we get clarity from the Fed and/or a buildup of call positions. Here we’ve plotted call volume for the stocks in the S&P 500 + a few of the other most active options names. As you can see in green there is no sign of life from call buyers.
Today we will be holding a live subscriber Q&A at 10:00AM ET, please join here. It will be recorded, and that recording will be posted on the Fed .
| SpotGamma Proprietary Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Ref Price: | 3943 | 3943 | 393 | 11772 | 287 |
| SpotGamma Imp. 1 Day Move: Est 1 StdDev Open to Close Range |
1.26%, | (±pts): 50.0 | VIX 1 Day Impl. Move:1.85% | ||
| SpotGamma Imp. 5 Day Move: | 2.92% | 3901 (Monday Ref Px) | Range: 3787.0 | 4015.0 | ||
| SpotGamma Gamma Index™: | -1.46 | -1.29 | -0.23 | 0.01 | -0.10 |
| Volatility Trigger™: | 4100 | 4285 | 400 | 11775 | 300 |
| SpotGamma Absolute Gamma Strike: | 4000 | 4000 | 400 | 11800 | 300 |
| Gamma Notional(MM): | -745.0 | -789.32 | -1175.0 | 1.0 | -620.0 |
| Additional Key Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Zero Gamma Level: | 4170 | 4202 | 0 | 0 | 0 |
| Put Wall Support: | 3700 | 3700 | 380 | 12000 | 280 |
| Call Wall Strike: | 5000 | 4500 | 402 | 11800 | 310 |
| CP Gam Tilt: | 0.6 | 0.58 | 0.57 | 1.13 | 0.55 |
| Delta Neutral Px: | 4153 | ||||
| Net Delta(MM): | $1,547,091 | $1,584,681 | $178,395 | $39,442 | $98,110 |
| 25D Risk Reversal | -0.06 | -0.06 | -0.06 | -0.06 | -0.07 |
| Call Volume | 365,067 | 436,464 | 2,397,817 | 5,316 | 1,065,336 |
| Put Volume | 606,340 | 856,888 | 3,697,750 | 11,412 | 1,405,029 |
| Call Open Interest | 5,856,946 | 5,767,102 | 6,899,470 | 60,561 | 4,642,673 |
| Put Open Interest | 9,588,722 | 9,689,521 | 10,459,721 | 44,913 | 6,049,912 |
| Key Support & Resistance Strikes: |
|---|
| SPX: [4100, 4000, 3900, 3700] |
| SPY: [400, 395, 390, 380] |
| QQQ: [300, 290, 285, 280] |
| NDX:[12500, 12025, 12000, 11800] |
| SPX Combo (strike, %ile): [3900.0, 4003.0, 3853.0, 3952.0, 3877.0] |
| SPY Combo: [389.66, 399.9, 384.93, 394.78, 387.29] |
| NDX Combo: [11478.0, 11807.0, 11678.0, 11890.0] |
