InformeSG Levels

Futures are up slightly to 4555 after having held a 10 handle range overnight. The gamma position remains positive which implies a fairly tight max S&P500 move of 0.74% today. We note key support at 4548 with resistance at 4598.

Some market consolidation was/is warranted, and for today and into tomorrow the options complex seems supportive of equity prices. There are a few shifts taking place that make things interesting into next week.

First we note the SPX position which is currently flagging as a negative gamma position. This is due to a very large 450 put position, a great deal of which expires on Friday. In fact while only 15% of SPX expires on 10/29, we currently find that >30% of total SPY gamma rolls off. This is material enough to influence volatility into next week. This idea is supported by the QQQ’s, too, which register >25% of gamma expiring.

What we have our eye on here is implied volatility, which seems to be adjusting higher after tagging YTD lows. Yesterday the S&P saw a rather sharp ~30 handle selloff which led to a 17 print in the VIX. Just last week our Risk Reversal metric which was registering at a frothy -0.04 (aka high call demand) has moderated to a -0.07 suggesting less demand for upside.

Model Overview:

As long as the S&P500 holds 4500 we expect positive gamma flows and lower implied volatility to boost markets.