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Informe Option Levels

Oct 27, 2022 | Informe Option Levels, Option Levels | 0 Comentarios

Futures are flat to 3850 ahead of the 8:30AM ET CPI. Key levels are unchanged with the exception of the higher Vol Trigger (3805). This metric sliding higher suggests an increase in put gamma positions. Support today shows at the 3834 and 3800 strikes. Below there we see another level at 375SPY (3755SPX). To the upside, major resistance does not show until at 3900 (Call Wall).

The positioning dynamics outlined in yesterdays AM note still stand for today. We historically wouldn’t even mention a GDP reading, but now those readings (like CPI’s) are potential volatility triggers in this illiquid environment. We have no opinion on what the print will be (nor how the market will react), but must respect that tail risk of sharp downside.

Further, our critical support line (Vol Trigger) has been working its way higher along with the market. This is expected behavior, and highlights that a break of 3800 leads to an air pocket underneath.

We note too, that once again (as with Tuesday), the S&P charged into 3900 but the Call Wall did not move higher. Traders do not appear to be looking for more upside over that level.

The predominate themes we‚Äôve been covering are the rise of¬†0DTE¬†options trading, and the extremely flat skew. To this latter point, our RiskReversal metric closed at -0.03 which is the highest in 2 years. This is a signal that put values are low relative to calls ‚Äď and this comes from call buying and/or put selling. (We‚Äôve been of the¬†opinion¬†that it has more to do with put selling in a high¬†vol¬†environment vs ferocious call demand).

Regardless, there is a risk embedded in this ‚Äď and that is the ‚Äústeepening‚ÄĚ or buying of skew. If the dynamic changes such that puts go bid and/or calls sold that foists negative delta hedging requirements onto dealers which could be impactful. Further, that‚Äôs likely to happen into an environment with rising¬†IV¬†(adding to downside pressure). As we discussed¬†yesterday, the issue is that there seems to be very little flattening left for skew (i.e. our RiskReversal shifting more toward 0), particularly before the FOMC on 11/3. For now, this shuts down the equity tailwind, particularly with the¬†Call Wall¬†at 3900.

Certainly an accommodative Fed would keep the upside momentum in tact, but the shorter term dynamics seem to present a bit more risk than reward.

SpotGamma Proprietary SPX Levels Latest Data SPX Previous SPY NDX QQQ
Ref Price: 3830 3833 382 11405 277
SG Implied 1-Day Move:: 1.19%, (¬Īpts): 46.0 VIX 1 Day Impl. Move:1.73%
SG Implied 5-Day Move: 3.09% 3797 (Monday Ref Price) Range: 3680.0 | 3915.0
SpotGamma¬†Gamma Index‚ĄĘ: 0.01 0.61 -0.14 0.02 -0.07
Volatility Trigger‚ĄĘ: 3805 3770 382 11000 281
SpotGamma Absolute Gamma Strike: 4000 4000 380 11050 280
Gamma Notional(MM): -168.0 -57.0 -836.0 3.0 -509.0
Put Wall: 3600 3600 360 11000 265
Call Wall : 3900 3900 390 11050 285
Additional Key Levels Latest Data Previous SPY NDX QQQ
Zero Gamma Level: 3848 3851 390.0 10405.0 301
CP Gam Tilt: 1.0 0.97 0.73 1.29 0.68
Delta Neutral Px: 3856
Net Delta(MM): $1,605,725 $1,582,679 $186,630 $50,476 $98,355
25D Risk Reversal -0.03 -0.06 -0.02 -0.04 -0.02
Call Volume 659,636 625,627 1,996,937 7,478 690,735
Put Volume 1,026,670 995,035 3,145,726 6,142 1,073,571
Call Open Interest 6,801,772 6,356,667 7,799,956 60,430 4,622,302
Put Open Interest 10,866,920 11,041,414 13,842,586 55,994 6,851,216
Key Support & Resistance Strikes:
SPX: [4000, 3900, 3800, 3700]
SPY: [390, 385, 380, 375]
QQQ: [300, 280, 275, 270]
NDX:[12500, 12000, 11500, 11050]
SPX Combo (strike, %ile): [(3999.0, 73.79), (3949.0, 94.34), (3900.0, 94.77), (3850.0, 82.26), (3834.0, 90.12), (3750.0, 79.52), (3700.0, 88.81), (3651.0, 88.76)]
SPY Combo: [388.9, 393.86, 382.4, 369.03, 364.07]
NDX Combo: [10870.0, 11052.0, 11075.0]
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