Informe SG Levels

Futures are flat to last nights close of ~4225. There was very little change in key SG strikes overnight,  and so we still hold the range as 4200-4250.  Positive gamma increased sharply and so our forecast is for a very tight 58bps (25pt) maximum SPX move today. With that our vanna model maintains that “right skew” resistance we talked about yesterday.

These dull, low volatility markets have a habit of persisting, and our high volatility window doesn’t open until we approach the large 6/18 quad-witching expiration.  If markets grind higher into 4250 then positive gamma increases, which should further reduce volatility . As many of you know, a larger amount of market positive gamma suggests larger hedging flows from dealers. As you can see in the chart below positive gamma doesn’t peak until ~4300.

Model Overview:

While markets hold 4200 we look for a low volatility grind higher, with 4250 the overhead target. 4160 is the gamma flip line, and therefore critical support.