Futures are sitting on the key 4100 level. We look for volatility similar to that of yesterday, with support at 4100 then 4063. Resistance is at 4150-4160(SPY415).
For the past several sessions we were highlighting this theme of options traders playing negative deltas as the S&P went >4150. We’re now seeing those gamma bars fill in and this is skewing our view of price distribution. Essentially these 4150-4200 (415-420 SPY) call positions are starting to limit the chance of a 4200 test (aka upside volatility), while 4000 is still pretty viable to the downside.
Below 4100 level we see an increase of negative gamma, which implies an uptick in volatility. 4000 remains critical support into OPEX, and we do not see that level being tested today. However, as we opined on Friday the lift from traders being able to sell volatility will diminish into week end, which implies reduced support. That being said, Fridays 4100 straddle is currently trading near $90 with an IV ~30% which feels a bit rich to us given our view of price distribution.
On this topic, if we do see IV tick higher from equities selling, we currently expect short term vol sellers to step back in which should provide some mean reversion back into 4100. This is why we mentioned that these short term (i.e. pre-Fed) IV dynamics were supportive of markets in the short term (i.e. today/tomorrow) as vol selling feeds into equity buying.
Its this reflexive, ultra short dated selling response that diminishes into Friday, particularly given that many traders are watching for FridaysMay CPI report.
| SpotGamma Proprietary Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Ref Price: | 4120 | 4119 | 411 | 12599 | 307 |
| SpotGamma Imp. 1 Day Move: Est 1 StdDev Open to Close Range |
1.06%, | (±pts): 43.0 | VIX 1 Day Impl. Move:1.57% | ||
| SpotGamma Imp. 5 Day Move: | 2.48% | 4108 (Monday Ref Px) | Range: 4006.0 | 4210.0 | ||
| SpotGamma Gamma Index™: | -0.59 | -0.73 | -0.16 | 0.00 | -0.06 |
| Volatility Trigger™: | 4110 | 4110 | 412 | 11775 | 307 |
| SpotGamma Absolute Gamma Strike: | 4000 | 4000 | 400 | 11800 | 300 |
| Gamma Notional(MM): | -381.0 | -365.11 | -769.0 | 1.0 | -403.0 |
| Additional Key Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Zero Gamma Level: | 4196 | 4195 | 0 | 0 | 0 |
| Put Wall Support: | 4000 | 4000 | 400 | 12000 | 300 |
| Call Wall Strike: | 4200 | 4200 | 425 | 11800 | 315 |
| CP Gam Tilt: | 0.86 | 0.82 | 0.73 | 1.09 | 0.74 |
| Delta Neutral Px: | 4243 | ||||
| Net Delta(MM): | $1,787,363 | $1,797,648 | $174,650 | $61,630 | $115,324 |
| 25D Risk Reversal | -0.07 | -0.07 | -0.07 | -0.08 | -0.08 |
| Call Volume | 310,079 | 370,182 | 1,311,400 | 6,253 | 628,505 |
| Put Volume | 648,578 | 745,822 | 2,096,281 | 8,793 | 941,197 |
| Call Open Interest | 6,026,121 | 5,989,352 | 6,786,169 | 66,636 | 4,639,538 |
| Put Open Interest | 10,779,230 | 10,653,458 | 11,207,693 | 64,423 | 7,117,274 |
| Key Support & Resistance Strikes: |
|---|
| SPX: [4200, 4150, 4100, 4000] |
| SPY: [420, 415, 410, 400] |
| QQQ: [320, 310, 305, 300] |
| NDX:[13000, 12500, 12000, 11800] |
| SPX Combo (strike, %ile): [4014.0, 4063.0, 4212.0] |
| SPY Combo: [401.06, 406.01, 420.83] |
| NDX Combo: [12297.0, 12511.0] |
