| Futures have recovered some this morning to 3365. Both the Vol Trigger and Zero Gamma line have shifted down to 3340, which is due to puts at nearly every strike >3370 being net closed. There was a sizeable addition to 3200 puts (~13k contracts) which is now the Put Wall. Note the OI Change Charts here and take a look at the Gamma/Delta Tilt charts, too. Impressive shifts.
Our single stock data seems to reflect that most of the Call Gamma has been wrung out and that implies options positions don’t have the same downside fuel as in recent days. I think a lot of traders were selling calls as a way to play declines, which has a more limited dealer hedge unwind than if dealers were short puts. Of course new puts can be added (in both single stock and equity) and that can start a fresh cycle down but my impression at the moment is that everything is pretty much neutral. That being said we do anticipate a fairly volatile day, we just dont see a directional edge at this moment. For today we note 3350 as the key downside area, with 3400 the overhead resistance line. Below 3340 is where we may see another sharp move down. If the VIX can break below 30 we think that is a good signal for a rally back into 3400. |
| Market Outlook: |
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| Looking for a bounce as long as we are above the Vol Trigger. 3550 remains the top into Sep OPEX. |