Informe Option Levels

Macro Theme:

Major Resistance: $4,400
Pivot Level: $4,400
Interim Support: $4,350
Range High: $4,500 Call Wall
Range Low: $4,000 Put Wall

‣ We are neutral on the S&P, and looking for a window of weakness post 6/14 FOMC & 6/16 OPEX with a target of 4,320
‣ Much of our data into 6/16 suggests that call buying is at major extremes, backing our views for a market correction

Founder’s Note:

Futures are lower to 4,400. The SPX Call Wall declined to 4,400 today, marking the 4,400 – 4,410 (SPY 400 Call Wall) level(s) as the top of our trading range, and major resistance for today. Support below shows at 435 SPY (4360 SPX), then 4,350.

In QQQ we see support at 365 and resistance at the 370 Call Wall.

4,400 continues to accrue call positions, having added ~15k calls yesterday. We also see the SPY 435-440 area as thick with large gamma strikes, and those positions appears to be whats pinning the S&P down. This lack of price action is pummeling volatility, as the VIX broke into the 12’s yesterday for the first time since Jan ’20. Heading into this weekend its hard to imagine traders looking to do anything other than short vol into the weekend, and so we look for dips to be bought and short term traders to sell SPX calls against 4,400.

While the SPX is pinned, we are seeing a renewed bid in tech which had been “resting” while small caps caught up (QQQ +1.18% y’day, SPX +0.36%, IWM -0.75%). Driving tech gains was AAPL, which made fresh all time highs to $187. AMZN also surged +4% off of AI investment, showing that the AI narrative continues to draw buyers. The bear case is going struggle in the face of this type of megacap price action.

On this topic call volumes were relatively light the last several days, and should that volume ignite it may bring another shift higher in top tech. Below you can see how many of the recent surges in QQQ (blue) were tied to jumps higher in call volumes (white).

As another example we have NVDA skew below, wherein you can see call IVs & skews have certainly come down. This still looks a bit rich to us, but its clearly off recent extremes. We surmise that many investors that missed the first AI rush were left looking for better entry points, and so they may start to find those now.

When you combine this relative calm in the equity call space, megacap breaking higher, low put demand, and 2 year VIX lows it makes a strong case for higher equity prices in the short term. We still think the S&P has to wrestle with some short term expiration dynamics, and so we’d favor QQQ and top tech as a way to express longs.