Futures are near 3700, up from overnight lows of 3665. Resistance is at 3700, then 3760 (SPY 375 equivalent). Support shows at 3651 and 3600. Our SG Implied move remains very high at 1.3%, as does the VIX implied move at 2%. In other words: volatility is likely to remain high today.
There was a rather surprising lack of change in SG levels. Nearly all levels remained the same which suggests that despite the volatility yesterday and huge options volume (total US options volume was 54mm vs 49mm avg), open interest didn’t change significantly.
It does seem like the core theme to yesterdays S&P flow was calls building up into the 3650 to 3750 area, and put interest added to strikes <=350/3500 (see yesterdays recap). However, this was not enough put flow to shift our Put Wall. As volumes were large, we suspect many traders sold puts at the lows, and elected to cover intraday as both IV dropping and stock prices ripping led to destruction of put values.
3700 is now the key level as it’s the biggest gamma strike on the board. Above this line we think volatility will reduce, as 3700 supports markets. This would play into the scenario we outlined for some time of markets extending its directional move into next weeks monthly OPEX (10/21). We do not see a reason to shift from this stance.
Should we move over 3700 today, we highlight the 3750 area as larger resistance due to contracts expiring there today.
While open interest did not change all that much, it appears the implied volatility was pounded. Our Risk Reversal metric is reading a bullish -0.05, and the skew index slid sharply (SDEX shown below). This further suggests that traders elected to sell OTM puts into yesterdays AM crash.
We see some commentators suggesting that yesterdays rally forms an air pocket below, but we don’t really agree with that. One has to respect downside moves here, particularly off of some headline like the BOE drop from a few sessions ago.
However, on net yesterdays rally really just pushed the S&P back up into its short term equilibrium, of sorts. Note below how the S&P is trading where it spent so much time basing into the end of September. Barring some headline “sucker punch” which re-engergizes October puts, we continue to think that IV coming down (vanna) and time passing (charm) add a tailwind for equities into next week.
| SpotGamma Proprietary SPX Levels | Latest Data | SPX Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Ref Price: | 3669 | 3672 | 365 | 11033 | 268 |
| SG Implied 1-Day Move:: | 1.3%, | (±pts): 48.0 | VIX 1 Day Impl. Move:2.02% | ||
| SG Implied 5-Day Move: | 3.08% | 3640 (Monday Ref Price) | Range: 3528.0 | 3753.0 | ||
| SpotGamma Gamma Index™: | -1.11 | -1.86 | -0.33 | -0.01 | -0.09 |
| Volatility Trigger™: | 3700 | 3800 | 375 | 11525 | 270 |
| SpotGamma Absolute Gamma Strike: | 3700 | 3700 | 360 | 11750 | 270 |
| Gamma Notional(MM): | -701.0 | -644.0 | -1961.0 | -1.0 | -673.0 |
| Put Wall: | 3500 | 3500 | 360 | 11000 | 265 |
| Call Wall : | 4100 | 4100 | 377 | 11750 | 274 |
| Additional Key Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Zero Gamma Level: | 3856 | 3889 | 388.0 | 11183.0 | 300 |
| CP Gam Tilt: | 0.69 | 0.66 | 0.53 | 0.87 | 0.62 |
| Delta Neutral Px: | 3894 | ||||
| Net Delta(MM): | $1,820,293 | $1,879,899 | $221,838 | $49,396 | $110,441 |
| 25D Risk Reversal | -0.05 | -0.06 | -0.04 | -0.06 | -0.05 |
| Call Volume | 830,619 | 480,820 | 4,207,040 | 11,696 | 1,823,432 |
| Put Volume | 1,214,028 | 746,184 | 7,208,808 | 12,482 | 2,320,003 |
| Call Open Interest | 7,013,584 | 6,911,672 | 8,763,768 | 63,485 | 5,345,952 |
| Put Open Interest | 11,607,281 | 11,423,977 | 14,886,253 | 80,240 | 7,308,303 |
| Key Support & Resistance Strikes: |
|---|
| SPX: [4000, 3700, 3650, 3600] |
| SPY: [370, 365, 360, 350] |
| QQQ: [280, 270, 265, 260] |
| NDX:[12000, 11750, 11500, 11000] |
| SPX Combo (strike, %ile): [(3699.0, 73.98), (3651.0, 91.93), (3625.0, 79.15), (3611.0, 86.36), (3600.0, 96.87), (3574.0, 74.61), (3559.0, 81.62), (3548.0, 92.01), (3526.0, 77.48), (3512.0, 81.77), (3501.0, 96.81)] |
| SPY Combo: [359.02, 349.14, 353.89, 364.14, 360.11] |
| NDX Combo: [10879.0, 10669.0, 11497.0, 11000.0] |
