Futures have been testing lower, currently at 4390. We have a decent amount of gamma expiring at the open (27% of SPX/36%SPY). This may be enough to dissolve the 4400 pin, and expose markets to lower prices. Should we stage a rally here, we see resistance at 4431 and 4441.
The gamma flip line (Vol Trigger) has moved to 4395, and we mark that as resistance. Should markets trade under that line, then we look for a large directional move lower with 4350 as first support.
Our new gamma strike charts shown here map the current total gamma by strike (black) and how much of that is held in the next expiration (grey). Through this you can quite clearly see how much at-the-money gamma is set to roll off, and we believe that increases releases the 4400 area pin. As noted last night, there is also a lot of SPY gamma expiring – this occurs on the close of trading.
Our key point to relay here is that if markets close under the Vol Trigger we will be very cautious into the weekend. The loss of a sizeable gamma (~20% Index/ETF) is going to reduce the positive gamma flows >4400, and opening under the Vol Trigger suggests markets will start next week in negative gamma territory. If markets start weak today we do not think there is much fuel for mean reversion.
Its likely there are traders hedging the Jackson Hole meetings next week, which could be adding in some volatility premium and/or demand for puts into next weekend and that could be enough of a nudge to cause markets to slide lower into next week.
While our models look for a max move of 0.9% today, we do want to note 4330 remains as a downside inflection point. This would be our “worst case” level for today. The chart below plots how gamma changes as the SPX price shifts, and you can see this 4330 trough. This suggest that dealers would have a shift in hedging requirements at this strike which has proven to mark major support in the past.
Model Overview:
4500 top, 4400 support into 8/20 OPEX.
| SpotGamma Proprietary Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Ref Price: | 4392 | 4403 | 439 | 14913 | 363 |
| SpotGamma Imp. 1 Day Move: | 0.93%, | 41.0 pts | Range: 4351.0 | 4433.0 | ||
| SpotGamma Imp. 5 Day Move: | 1.38% | 4450 (Monday Ref Px) | Range: 4389.0 | 4512.0 | ||
| SpotGamma Gamma Index™: | 0.29 | -0.10 | -0.05 | -0.03 | -0.12 |
| Volatility Trigger™: | 4395 | 4420 | 440 | 14940 | 366 |
| SpotGamma Absolute Gamma Strike: | 4400 | 4400 | 440 | 14450 | 365 |
| Gamma Notional(MM): | $-347 | $-165 | $-289 | $-4 | $-521 |
| Additional Key Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Zero Gamma Level: | 4420 | 4406 | 0 | 0 | 0 |
| Put Wall Support: | 4200 | 4350 | 435 | 14850 | 360 |
| Call Wall Strike: | 4500 | 4500 | 450 | 14775 | 370 |
| CP Gam Tilt: | 1.06 | 0.93 | 0.94 | 0.85 | 0.73 |
| Delta Neutral Px: | 4273 | ||||
| Net Delta(MM): | $1,608,402 | $1,576,108 | $221,687 | $46,883 | $90,915 |
| 25D Risk Reversal | -0.07 | -0.08 | -0.09 | -0.08 | -0.08 |
| Top Absolute Gamma Strikes: |
|---|
| SPX: [4450, 4425, 4400, 4375] |
| SPY: [445, 444, 442, 440] |
| QQQ: [370, 365, 362, 360] |
| NDX:[15000, 14850, 14775, 14450] |
| SPX Combo: [4481.0, 4433.0, 4459.0, 4411.0, 4441.0] |
| SPY Combo: [449.1, 444.26, 446.9, 442.06, 445.14] |
| NDX Combo: [14819.0, 15161.0, 14833.0, 14744.0, 14535.0] |
