Futures are flat, near 4110. 4100 starts as overhead resistance for today – a level which has grown in size as traders added +20k calls and +10k puts to this strike. SPY 412 (SPX 4130) is resistance above that level, followed by 4150. There was very heavy
vol
ume at SPY 408 yesterday (SPX 4090), which helps to further establish the 4100 area as a pivot. Support shows at 4050, followed by 4015 (SPY400).
The risk here for bears is all the open interest being added to 4100 is forming as stiff resistance into April OPEX. As we have been discussing in recent notes, the key options drivers of vanna and charm are largely benched, and the open interest being added to 4100 likely serves to add gravity to 4100 as a pinning/resistance area. “Real buyers” (i.e. non options flow) will likely have to come in to push this market above the 4100 equilibrium point. We also see Gamma Tilt turning sharply lower, suggesting that more puts are being added at current prices, relative to calls.
Relatedly, our risk reversal metric slid lower to -5.6 which relates to 30 days to expiration put values (
IV
) increasing relative to calls. More general measures of
IV
are fairly flat (fixed strike
IV
, VIX, etc) implying that the put demand is not heavy longs, but likely more neutral (i.e. some put sellers, particularly short dated).
These put positions have served to slide the
Vol Trigger
higher, to 4095. We think the movement of the
Vol Trigger
is often insightful as, in a way, it shows where the point of equilibrium of puts:calls is. Large long call positions should help to keep the Vol trigger at lower relative levels, and suggests lower realized
vol
atility. In this case, we have this “choke point” formation possibly in play. This occurs when the market pushes up against a stable, longer term
Call Wall
and then the
Vol Trigger
shifts up underneath. You can see these formations highlighted below, in red circles (
Call Wall
= pink,
Vol Trigger
= yellow, SPX = white). While on the surface it appears we area again invoking technical analysis (for the second day in a row!), these data points are conveying that traders are adding puts at faster rates than calls. If traders felt there was significant upside here, one would expect higher relative call positions.
The distribution of prices around the
Vol Trigger
is quite interesting, as we have recently discussed (full video here, histogram below). As you can see, the forward price returns of the S&P with a close <
Vol Trigger
(bottom plot) widen out substantially vs the tight, lower
vol
atility returns when the market closes >
Vol Trigger
(top). If the S&P is below the
Vol Trigger
then we consider it a “negative gamma regime”, and this data further backs the concept that these negative gamma environments are associated with higher
vol
atility. It’s important to note these plots reflect price action across a variety of regimes (i.e. markets coming off of highs as well as major lows), and since we are dealing with this “choke point” off a market high, we may be more likely to see a left tail return here vs right.
That being said, we continue to think that this is not a “crashy” position for the market, and substantial/high
vol
atility moves only come after first testing the 4000 level. Conversely we still see “grind up” as the best case scenario for SPX bulls, and continue to favor single stocks or “non-SPX” plays if you’d like to bet on upside.
SpotGamma Proprietary Levels |
SPX |
SPY |
NDX |
QQQ |
RUT |
IWM |
---|---|---|---|---|---|---|
Reference Price: |
$4090 |
$407 |
$12966 |
$315 |
$1752 |
$173 |
SpotGamma Implied 1-Day Move: |
0.99% |
0.99% |
|
|
|
|
SpotGamma Implied 5-Day Move: |
2.69% |
|
|
|
|
|
SpotGamma Volatility Trigger™: |
$4095 |
$406 |
$11975 |
$317 |
$1900 |
$180 |
Absolute Gamma Strike: |
$4000 |
$408 |
$12525 |
$315 |
$1750 |
$170 |
SpotGamma Call Wall: |
$4200 |
$408 |
$12525 |
$320 |
$1735 |
$176 |
SpotGamma Put Wall: |
$3800 |
$400 |
$11000 |
$300 |
$1600 |
$170 |
Additional Key Levels |
SPX |
SPY |
NDX |
QQQ |
RUT |
IWM |
---|---|---|---|---|---|---|
Zero Gamma Level: |
$4235 |
$443 |
$12560 |
$355 |
$1770 |
$211 |
Gamma Tilt: |
1.1 |
0.91 |
1.7 |
0.99 |
0.59 |
0.4 |
SpotGamma Gamma Index™: |
0.35 |
-0.088 |
0.043 |
-0.0032 |
-0.024 |
-0.12 |
Gamma Notional (MM): |
$3.9B |
$9.2B |
$24M |
$3.3B |
$107M |
$3B |
25 Day Risk Reversal: |
-5.62% |
-5.26% |
-5.14% |
-5.21% |
-5.38% |
-5.68% |
Call Volume: |
427K |
1.8M |
6.1K |
604K |
11K |
229K |
Put Volume: |
767K |
2.9M |
6.1K |
852K |
25K |
658K |
Call Open Interest: |
5.8M |
7.1M |
53K |
4.6M |
166K |
3.2M |
Put Open Interest: |
11M |
14M |
60K |
8M |
313K |
7.4M |
Key Support & Resistance Strikes |
---|
SPX Levels: [4150, 4100, 4050, 4000] |
SPY Levels: [410, 408, 407, 405] |
NDX Levels: [14000, 13000, 12525, 12000] |
QQQ Levels: [320, 315, 310, 300] |
SPX Combos: [(4274,84.49), (4250,92.70), (4225,78.11), (4213,77.89), (4201,97.48), (4176,90.03), (4164,76.10), (4160,77.60), (4152,95.30), (4135,79.02), (4123,90.75), (4115,79.68), (4062,85.21), (4053,76.07), (4013,82.00), (3951,87.94), (3914,79.52), (3898,93.19)] |
SPY Combos: [412.54, 417.43, 427.62, 422.33] |
NDX Combos: [13135, 12526, 13550, 13343] |
QQQ Combos: [301.96, 316.81, 326.6, 321.86] |