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Informe SG Levels

Jun 16, 2021 | 0 Comentarios

Once again – no movement in futures overnight which hold 4250. Obviously for today all eyes are on the 2pm EST FOMC, but first the VIX expiration goes off. We think both of these events function to loosen markets up, and Friday’s expiration releases the big “gamma grip”.

For today our major levels are 4275 and 4225, with 4250 being the large pivot line. This 4225-4275 band also syncs up with our maximum 1 day close of 32 pts on the day.

Our gamma flip lines have now shifted up under the very large 4225 strike.  That suggests there is a major drop in positive gamma and a reduction in market support under 4225.  We mark 4200 as the critical risk line into Friday. A break of 4200 likely brings a quick move to 4160.

Said another way:

  • We maintain a bullish stance >4225
  • Neutral outlook 4225-4200
  • Bearish/high risk <4200

Recently we’ve suggested that downside hedging may be worth a look as realized volatility is quite low, our risk reversal metric shows put prices remain muted, and there is a large expiration incoming (possible catalyst for high volatility).

Interestingly, the SKEW index is being noted this morning, as it has broken to new highs. This suggests that traders are now seeking tail risk protection ahead of this FOMC meeting.

Finally we wanted to highlight some changes in the vanna model. What causes the difference in the “shape” of the vanna model is todays expiration (FOMC day).  As delta notional goes higher (y axis) it suggests dealers “long market” exposure goes higher. In theory they need to offset this exposure by selling futures. If the delta exposure drops dealers can buy back futures.

Note that yesterday (left image) there is not much indicative selling pressure if markets go lower (red circle). Today (right image) we see comparatively more selling potential as highlighted in red.  The upside resistance (green circles) is still at or near the same levels between days.  We believe this difference between dates reflects additional FOMC downside hedges. Intuitively this makes sense, as if traders are buying put protection then dealers are short those puts, and would need to sell futures if the market pushes lower.

Options Vanna

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.

SpotGamma Proprietary Levels Latest Data Previous SPY NDX QQQ
Ref Price: 4247 4248 424 14040 342
SpotGamma Imp. 1 Day Move: 0.75%, 32.0 pts Range: 4215.0 | 4279.0
SpotGamma Imp. 5 Day Move: 4248 2.05% Range: 4161.0 | 4335.0
SpotGamma Gamma Index™: 1.20 1.51 0.25 0.03 0.03
Volatility Trigger™: 4220 4195 421 13890 339
SpotGamma Absolute Gamma Strike: 4225 4225 425 14000 340
Gamma Notional(MM): $372 $494 $996 $5 $162
Additional Key Levels Latest Data Previous SPY NDX QQQ
Zero Gamma Level: 4216 4217 0 0 0
Put Wall Support: 4000 4000 410 13200 330
Call Wall Strike: 4275 4275 425 14000 345
CP Gam Tilt: 1.3 1.25 1.28 1.4 1.11
Delta Neutral Px: 4070
Net Delta(MM): $1,593,962 $1,570,744 $176,198 $44,705 $82,482
25D Risk Reversal -0.06 -0.06 -0.07 -0.05 -0.06
Top Absolute Gamma Strikes:
SPX: [4275, 4250, 4225, 4200]
SPY: [430, 427, 425, 420]
QQQ: [345, 340, 335, 330]
NDX:[14000, 13900, 13800, 13500]
SPX Combo: [4252.0, 4303.0, 4277.0, 4273.0, 4281.0]
NDX Combo: [14157.0, 14368.0, 14242.0, 14115.0, 14284.0]
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