Futures are higher to start the morning, testing the 3700 level. Support shows at 3659, then 3600. Resistance lies at 3700 then 3750.
With this mornings OPEX we see roughly 20% of total SPX options positioning expire, then into the PM we mark roughly 30% of total SPY/QQQ expiring.
This market is all about feedback loops. Momentum shifts in one direction, and options flows form to reinforce that direction. This feedback loop, we believe, helped to propel markets higher over the last week, and now OPEX is a catalyst to spark a new feedback loop.
Below is a plot of put & call open interest for SPY, along with SKEW for today’s expiration. You can see the 3 large OI points at 360,370 & 374. Further we note skew(blue) appears quite depressed into the 370-375 area which read as traders being short strikes in those areas. For this reason we give edge today to the market sliding higher to this 370 area, however due to how active 0DTE flow is this picture can change rapidly.
Our core takeaway from this expiration is an unpinning of the 370 SPY/3700 SPX and 270 QQQ area. We assign an edge to a downside test of 3600 Put Wall to start next week based on the idea that the put decay, which has been an equity tailwind, is gone.
We recognize the price of being “wrong” in this market is high, and should the SPX trade above its Vol Trigger level (3750) our models flip to a bullish stance. This is because above the Vol. Trigger we estimate the dealer gamma shifts positive, which suggests that volatility should come down. If volatility comes down, that reinstates tailwind for equities (vanna flow).
The issue, as we discussed, for implied volatility to come down sharply is that we have another ~2 weeks until two strong volatility catalysts: FOMC (11/3) and elections (11/8). Additionally there are some foreign central bank events which could be a trigger for market movement (ECB, for example 10/28).
For this reason we would not anticipate strong volatility selling. However, should markets come out of the gate strong on Monday and get above that Vol Trigger, the feedback loop works higher, and could lead to traders rushing to sell short dated implied volatility (i.e. anything expiring before Nov) which could generate a push up into the 3900 area Call Wall into end of Oct.
| SpotGamma Proprietary SPX Levels | Latest Data | SPX Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Ref Price: | 3665 | 3685 | 365 | 11046 | 269 |
| SG Implied 1-Day Move:: | 1.21%, | (±pts): 45.0 | VIX 1 Day Impl. Move:1.95% | ||
| SG Implied 5-Day Move: | 2.96% | 4130 (Monday Ref Price) | Range: 4008.0 | 4253.0 | ||
| SpotGamma Gamma Index™: | -0.92 | -0.77 | -0.33 | -0.02 | -0.09 |
| Volatility Trigger™: | 3750 | 3750 | 375 | 11310 | 270 |
| SpotGamma Absolute Gamma Strike: | 3700 | 3700 | 370 | 12000 | 270 |
| Gamma Notional(MM): | -608.0 | -512 | -1782.0 | -3.0 | -643.0 |
| Put Wall: | 3600 | 3600 | 360 | 11000 | 265 |
| Call Wall : | 3900 | 3900 | 390 | 11325 | 275 |
| Additional Key Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Zero Gamma Level: | 3855 | 3816 | 385.0 | 11339.0 | 298 |
| CP Gam Tilt: | 0.76 | 0.79 | 0.56 | 0.75 | 0.63 |
| Delta Neutral Px: | 3892 | ||||
| Net Delta(MM): | $1,784,623 | $1,567,035 | $207,191 | $51,416 | $105,420 |
| 25D Risk Reversal | -0.05 | -0.03 | -0.05 | -0.06 | -0.06 |
| Call Volume | 531,855 | 710,211 | 1,655,452 | 7,223 | 768,716 |
| Put Volume | 845,073 | 1,069,948 | 2,768,738 | 11,791 | 1,041,446 |
| Call Open Interest | 7,181,705 | 7,300,010 | 8,623,342 | 68,499 | 5,307,264 |
| Put Open Interest | 11,845,914 | 10,972,726 | 14,605,383 | 84,252 | 7,189,352 |
| Key Support & Resistance Strikes: |
|---|
| SPX: [4000, 3750, 3700, 3650] |
| SPY: [375, 370, 365, 360] |
| QQQ: [280, 275, 270, 265] |
| NDX:[12000, 11500, 11150, 11000] |
| SPX Combo (strike, %ile): [(3836.0, 85.31), (3700.0, 88.18), (3652.0, 94.3), (3626.0, 80.63), (3611.0, 86.99), (3600.0, 97.26), (3574.0, 72.67), (3559.0, 79.76), (3552.0, 91.15), (3526.0, 73.83)] |
| SPY Combo: [358.92, 364.08, 354.13, 368.87, 360.02] |
| NDX Combo: [10881.0, 10670.0, 11081.0, 11003.0] |
