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Informe Option Levels

May 22, 2023 | 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 at 4,200. Following OPEX we see the most prominent S&P500 strike at the 420 SPY level (SPX 4205), which we mark as the key pivot for today. Resistance above there is at the SPY 422 Call Wall (SPX 4120). The SPX Call Wall has rolled to 4300 as traders added calls to 4200, and added puts to 4200. Support below shows at 4,170 & 4,150.

In QQQ the Call Wall resistance level remains at 340, with initial support at 335, then 330.

As we just passed expiration, most of our key gamma strikes have shrunk in size, and so the support & resistance related to them should have reduced. As such, we anticipate higher relative volatility over the next several sessions. 1 month realized volatility is at 13% (avg 80bps SPX daily move), and so the bar for “higher volatility” is fairly low.

Heading into OPEX, the range of operations was predominantly 4100-4150, before the late week SPX rally to the 4200 Call Wall. The SPY420/SPX4200 strike will now setup as the “base of operations” as the market settles on an initial direction and options positions begin to fill back in. We have been looking for some expiration-triggered consolidation to markets, which could push the S&P back into the 4100’s and setup 4200 as initial overhead resistance. Conversely, as our Call Walls have shifted higher, we now do not see the equities as overbought unless there is another ~100bps rally (breaching SPY/QQQ Call Walls). In this scenario 4200 would setup as initial support.

Of course much of market the movement could be set by reactions to the Debt Ceiling drama, with talks continuing today. Our view is that the intensity of market reactions to Debt Ceiling headlines increases as time to x-Date (June 1) decreases. With that, we are viewing any market movement into the 4100’s as consolidation, and a likely area of churn until a debt outcome becomes more clear. We favor playing mean reversion off of large gamma strikes while in this 4100-4200 zone.

A more material downside directional signal shows on a break of 4100, which likely invokes a test of the large 4000 level.

To the upside, we are bullish on a close over 4200.

The other major question lies with how traders will react to the brief consolidation in “AI” stocks – many of which are down 50-100 bps pre-market. We believe Friday’s call-heavy OPEX helped to stall out the upside convexity in many of these names, and so we will be watching closely to see if traders attempt to pile back in. As the weapon of choice for many of these traders are 0DTE (aka Friday’s expiration for single stocks), much of their positioning was wiped out on Friday.

To this point you can see the key data for NVDA, below. Much of the call gamma was lost, and the levels widened out. This is where HIRO comes in handy – if the call buying resumes then another short term squeeze may be in play, but the data as it sits pre-market reflects this loss of short term positioning.

 

SpotGamma Proprietary Levels

SPX

SPY

NDX

QQQ

RUT

IWM

Reference Price:

$4191

$418

$13803

$336

$1773

$176

SpotGamma Implied 1-Day Move:

0.83%

0.83%

SpotGamma Implied 5-Day Move:

2.20%

SpotGamma Volatility Trigger™:

$4170

$418

$12875

$334

$1750

$175

Absolute Gamma Strike:

$4150

$420

$13850

$335

$1800

$175

SpotGamma Call Wall:

$4300

$422

$13850

$340

$1790

$180

SpotGamma Put Wall:

$4000

$400

$11000

$327

$1700

$170

Additional Key Levels

SPX

SPY

NDX

QQQ

RUT

IWM

Zero Gamma Level:

$4136

$418

$12485

$336

$1922

$184

Gamma Tilt:

1.313

0.873

2.359

0.946

0.732

0.631

SpotGamma Gamma Index™:

1.289

-0.119

0.075

-0.017

-0.02

-0.058

Gamma Notional (MM):

$596.244M

‑$474.667M

$10.66M

‑$88.54M

‑$20.783M

‑$614.009M

25 Day Risk Reversal:

-0.062

-0.065

-0.058

-0.057

-0.057

-0.067

Call Volume:

598.322K

2.034M

23.015K

696.794K

25.277K

278.18K

Put Volume:

1.079M

3.182M

14.882K

1.478M

32.743K

501.292K

Call Open Interest:

6.107M

6.576M

62.713K

4.32M

192.007K

3.202M

Put Open Interest:

11.782M

13.318M

57.155K

8.765M

343.042K

6.996M

Key Support & Resistance Strikes

SPX Levels: [4200, 4150, 4100, 4000]

SPY Levels: [420, 418, 415, 410]

NDX Levels: [14000, 13850, 13500, 13000]

QQQ Levels: [340, 335, 330, 325]

SPX Combos: [(4351,94.93), (4326,90.63), (4322,93.33), (4305,78.17), (4301,99.32), (4280,83.09), (4276,95.83), (4272,75.04), (4259,85.08), (4255,86.86), (4251,99.01), (4246,81.64), (4238,91.24), (4230,81.01), (4226,98.09), (4221,91.84), (4217,75.15), (4209,92.06), (4205,90.16), (4200,98.70), (4192,86.81), (4179,75.65), (4125,87.35), (4104,75.84), (4049,89.63), (4024,76.77), (4008,83.12), (3999,95.09)]

SPY Combos: [418.61, 421.12, 423.63, 428.66]

NDX Combos: [13845, 13942, 13417, 14356]

QQQ Combos: [339.27, 344.32, 334.22, 349.37]