Futures were flat overnight, holding 3990 (3950 SPX cash equivalent). With yesterdays market push higher, we now see 4000 as the strike with the largest gamma, and maximum resistance for today. First resistance lies at 3968. 3950 is our pivot line, with 3900 support.
We still anticipate the 4000 level holding into FOMC, and watch the 4065 JPM collar call strike as a high into 3/31 expiration. Further, we think some consolidation is warranted in single stocks, post OPEX.
This morning we see 1/3 of total SPX Index gamma, and 1/3 of delta expiring. Later this afternoon we see approximately 1/3 of total SPY/QQQ gamma and 1/4 of total delta expiring. The headline effect of this is that it reduces volatility due to the reduction in negative gamma. The drop in open interest also weakens many of the downside strikes, like 3850, which have supported markets.
Yesterday brought a sharp release of IV, as shown by the SPX term structure below. This decline in IV was a tailwind for equities, and helped to push the index up to our key 3950 resistance level (see 3/16 AM note). We think there is unlikely to be a more material decline in IV until after next weeks FOMC, and so yesterday’s fast gains are likely not in the cards for today.
Further (per our comment at the top about single stock consolidation), yesterday felt like quite a beta chase. Shown below, for example, is AMD which was +7.7% on the day. Note in blue the surge in call volumes into today’s large expiration, wherein 1/3 of total AMD’s deltas are set to expire (and these are largely ITM calls).
Shown here is the single stock put/call ratio, and you can see in volume(black) that there was indeed a call chase yesterday, but not nearly that of the February “blow off top” call levels.
While AMD was the #1 performer, there was a clear run into tech across the board, which, again, may have hit a short term crescendo yesterday. To this point, we see 47% of stocks having their largest gamma expiration today. We think this, along with focus shifting to FOMC, leads to some consolidation into Monday.
Lastly, one of the charts we found interesting was that of KRE. Note the relative surge in call volumes (blue) yesterday, which coincides with largest net call volume we’ve seen since the 3/10 crisis kicked off. You can see the difference in those volumes via the EquityHub, and we also spoke a bit about this KRE flow in yesterday’s Q&A.
Additionally, one can make the argument that while overall KRE IV is declining, there appears to be a call bid as the IV to upside strikes is relatively more firm.
|SpotGamma Proprietary SPX Levels||Latest Data||SPX Previous||SPY||NDX||QQQ|
|SG Implied 1-Day Move:||0.91%,||(±pts): 36.0||VIX 1 Day Impl. Move:1.46%|
|SG Implied 5-Day Move:||2.54%||3861 (Monday Reference Price)||Range: 3764.0 | 3960.0|
|SpotGamma Gamma Index™:||-0.33||-1.51||-0.30||-0.03||0.03|
|SpotGamma Absolute Gamma Strike:||4000||3900||400||12600||305|
|Gamma Notional (MM):||-548.0||-684.0||-1430.0||10.0||20.0|
|Additional Key Levels||Latest Data||Previous||SPY||NDX||QQQ|
|Zero Gamma Level:||4057||4054||404.0||12298.0||336|
|Delta Neutral Px:||3987|
|25 Day Risk Reversal:||-0.05||-0.07||-0.07||-0.06||-0.07|
|Call Open Interest:||6,815,944||6,750,680||6,854,119||64,619||5,230,319|
|Put Open Interest:||12,367,768||12,026,468||14,799,024||75,824||9,269,737|
|Key Support & Resistance Strikes:|
|SPX: [4000, 3975, 3950, 3900]|
|SPY: [400, 397, 395, 394]|
|QQQ: [310, 305, 300, 290]|
|NDX: [13000, 12600, 12500, 12450]|
|SPX Combo (Strike, Percentile): [(4150.0, 83.22), (4099.0, 88.03), (4075.0, 81.73), (4063.0, 92.66), (4051.0, 89.24), (4032.0, 85.51), (4024.0, 78.41), (4000.0, 86.98), (3968.0, 91.14), (3960.0, 77.17), (3948.0, 88.61), (3929.0, 75.45), (3921.0, 79.01), (3901.0, 97.89), (3889.0, 85.25), (3869.0, 78.93), (3849.0, 96.32), (3826.0, 75.17), (3802.0, 98.19)]|
|SPY Combo: [380.19, 390.09, 384.94, 406.33, 396.82]|
|NDX Combo: [12706.0, 12920.0, 12630.0, 13121.0, 12794.0]|