Informe Option Levels

Macro Theme:

Major Resistance: $4,150 – $4,160 (SPY $415)
Pivot Level: $4,130 (SPY $412)
Interim Support: $4,100
Major Support: $4,000
Range High: $4,200 Call Wall
Range Low: $4,000 Put Wall

‣ IV lows coincide with the $4,200 Call Wall to create $4,150-$4,200 area resistance into May OPEX
‣ A break of 4100 is “risk off”, likely invoking a test of $4,000
‣ Equities may enter a “window of weakness” starting with 5/17 VIX & 5/19 OPEX

Founder’s Note:

Futures are flat, holding near 4145. SG levels remain unchanged, with major resistance at 4150-4160 (SPY 415). Support shows at 4130 (SPY 412), then 4110 (SPY 410) – 4100. Price action is, once again, anticipated to mean revert inside of the 4100-4150 range.

We continue to note the SPY 412 strike as it is the biggest S&P (both SPX & SPY) strike on the board, and it seems to draw market flow. ~30% of total SPY gamma position expires on Friday, which should reduce these pinning flows.

You can hear a pin drop as realized volatility grinds even lower. We mark 1 month RV at 12.7%, which masks the 5 day RV of <5%. It seems that ~4130 SPX and IV of ~12% is “fair value”, and long term buyers are uninterested in stepping up over that level. This does not mean that sellers are appearing, and so what we have is small intraday dips being bought (and short dated IV sold) by the 0DTE crowd. Shown below is the HIRO signal for 0DTE flow (green) vs the SPX (white), and one gets the sense that 0DTE is currently the only game in town.

Each morning we scroll through various financial news sites, and today was the first time we recall seeing “Debt Ceiling” as the narrative for market movement – or lack thereof. One has to assume these headlines increase into the “earliest X-Date” of June 1, and with that, market anxiety. It’s hard not to appreciate the synchronicity of these headlines around OPEX, as the discussions pick up after May OPEX (and loss of gamma pins), and the “X Date” plays into the large June OPEX (driver of large directional flows). With this our base case is that volatility increases as time-to-(initial) X-date decreases. The X date is of course a moving target, determined by a murky mix of financial engineering and politics – but we’ll leave the parsing of these dynamics to the macro folks. Our stance on the topic is that volatility thrives with uncertainty.