Futures are at 4280, which is flat to the close but off of 4270 lows. As anticipated there is little change in levels overnight with resistance at the 4300 Call Wall, and support at 4275. We again forecast a tight trading range at 72bps/31pts. No strike seems poised to overtake 4300 as the Call Wall which suggests a lack of volume at strikes overhead.
The most interest data point overnight is the gamma flip line, which is now showing up around the 4270 area (Vol Trigger/ZeroGamma). Positive gamma has become quite concentrated in this 4300 area and so it deteriorates quite quickly if SPX prices slide lower.
Because we see a rather large positive Combo Strike bar at 4260, we are quoting that as the “last line of defense”. A break of that level could bring a quick retest of 4200.
Yesterday we highlighted some divergent pricing in options – specifically the price of tail risk. The VIX did creep higher the last two days with markets higher/flat. Below is a plot of the VIX vs a measure of realized (historical) volatility in the SPX, and you can see there is a divergence forming.
This is obviously a short term window, but we are monitoring this market “stalling” at major resistance (4300 Call Wall) with traders seeking downside protection (ie higher VIX/skew).
While neither of these items are red flags they do warrant attention. Effectively our options levels are “pinching” the market between 4300 Call Wall resistance and the 4270 zero gamma line. We think of this something like a “wedge” in technical analysis wherein a large change in markets form from a break of one of these levels.
Model Overview:
4300 top, 4000 support into July OPEX.
| SpotGamma Proprietary Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Ref Price: | 4281 | 4277 | 427 | 14570 | 354 |
| SpotGamma Imp. 1 Day Move: | 0.72%, | 31.0 pts | Range: 4250.0 | 4312.0 | ||
| SpotGamma Imp. 5 Day Move: | 4269 | 1.97% | Range: 4185.0 | 4353.0 | ||
| SpotGamma Gamma Index™: | 1.36 | 1.36 | 0.11 | 0.07 | 0.02 |
| Volatility Trigger™: | 4270 | 4270 | 427 | 14040 | 354 |
| SpotGamma Absolute Gamma Strike: | 4300 | 4300 | 427 | 14450 | 355 |
| Gamma Notional(MM): | $182 | $115 | $458 | $10 | $115 |
| Additional Key Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Zero Gamma Level: | 4281 | 4126 | 0 | 0 | 0 |
| Put Wall Support: | 4000 | 4000 | 420 | 12000 | 353 |
| Call Wall Strike: | 4300 | 4300 | 430 | 14100 | 355 |
| CP Gam Tilt: | 1.41 | 1.06 | 1.12 | 2.35 | 1.08 |
| Delta Neutral Px: | 4133 | ||||
| Net Delta(MM): | $1,235,187 | $1,234,177 | $159,305 | $36,663 | $79,749 |
| 25D Risk Reversal | -0.06 | -0.06 | -0.05 | -0.04 | -0.04 |
| Top Absolute Gamma Strikes: |
|---|
| SPX: [4300, 4275, 4250, 4200] |
| SPY: [430, 428, 427, 425] |
| QQQ: [355, 353, 352, 350] |
| NDX:[15300, 15250, 14450, 14100] |
| SPX Combo: [4289.0, 4314.0, 4340.0, 4302.0, 4297.0] |
| NDX Combo: [14563.0, 14767.0, 14650.0, 14475.0, 14810.0] |
