Futures are flat to last nights close near 4439. Please note that this morning the VIX expiration takes place before the cash open which could push ES futures around. Today we do not see the fuel for a large move, and anticipate markets maintaining the 4450/445 area. We see support at 4425 and resistance at 4475.
A break of the 4425 Vol Trigger shifts us into a neutral view on markets. We see a break of 4400 leading to a quick drawdown and test of 4325.
Last week we outlined our view that realized volatility had become quite compressed, and we anticipated that volatility would pick up into and around this time frame. With Jackson Hole approaching, Sep FOMC, and a deterioration in macro data we think traders are poised to own some downside protection vs shorting volatility into oblivion.
To this point, our opinion on yesterdays volatility was that it was induced by a big SPY 445 chunk expiring Monday, and traders adjusting VIX/vol positions ahead of VIX expiration (a short vol unwind). This has us wondering if we can mark this as a key low in realized volatility.
This Fridays August expiration is not particularly large, as most of the SPX Index gamma lies in the Sep Quarterly expiration. Therefore there is little to roll and we think this could stall out the “gamma tailwind” as options positions (particularly calls) sit stagnant (recall that we see call options being rolled to higher strikes as fuel for markets to drift higher).
Model Overview:
4500 top, 4400 support into 8/20 OPEX.
| SpotGamma Proprietary Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Ref Price: | 4446 | 4436 | 444 | 15019 | 365 |
| SpotGamma Imp. 1 Day Move: | 0.43%, | 19.0 pts | Range: 4427.0 | 4465.0 | ||
| SpotGamma Imp. 5 Day Move: | 1.38% | 4450 (Monday Ref Px) | Range: 4389.0 | 4512.0 | ||
| SpotGamma Gamma Index™: | 0.08 | 2.19 | 0.26 | 0.02 | -0.07 |
| Volatility Trigger™: | 4225 | 4420 | 443 | 14770 | 366 |
| SpotGamma Absolute Gamma Strike: | 4000 | 4500 | 444 | 14450 | 365 |
| Gamma Notional(MM): | $8 | $145 | $747 | $4 | $-289 |
| Additional Key Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Zero Gamma Level: | 4410 | 4434 | 0 | 0 | 0 |
| Put Wall Support: | 4000 | 4200 | 435 | 14500 | 360 |
| Call Wall Strike: | 4500 | 4500 | 444 | 14775 | 370 |
| CP Gam Tilt: | 1.11 | 1.07 | 1.18 | 1.23 | 0.84 |
| Delta Neutral Px: | 0 | ||||
| Net Delta(MM): | $736,571 | $1,553,537 | $196,935 | $46,367 | $82,817 |
| 25D Risk Reversal | -0.06 | -0.06 | -0.09 | -0.07 | -0.07 |
| Top Absolute Gamma Strikes: |
|---|
| SPX: [4500, 4400, 4200, 4000] |
| SPY: [450, 445, 444, 440] |
| QQQ: [370, 368, 365, 360] |
| NDX:[15050, 15000, 14775, 14450] |
| SPX Combo: [4444.0, 4502.0, 4498.0, 4484.0, 4475.0] |
| SPY Combo: [444.04, 449.81, 449.37, 448.04, 447.15] |
| NDX Combo: [15191.0, 14771.0, 14786.0, 15101.0, 14651.0] |
