Futures are higher to 3979, which is off of overnight highs of 3998. This extends the rally from yesterdays CPI number to 5.6%, and clearly brings our major 4000 target level into play for today. Above 4000 we mark 4010 (SPY 400) then 4049. Support below shows at 3958 and 3946. The Call Wall rolled materially higher to 4100, which is the top end of our range into 11/18 expiration.
Our overall view is that we see markets shifting into more of a pin/grind into/above 4000, with edge remaining with the bulls until 11/18 Nov OPEX.
Yesterday was a big day for the options volumes, with overall volume of 47mm vs 41mm avg and SPX volume of 3.1mm vs 2mm avg. More interestingly it was one of the largest SPX call volume days this year, with 1.3mm calls trading. Of course there was a large 0DTE component, too, with 43% of total SPX volume tied to yesterday’s contract.
Of particular note there was over 100k calls trading at that 4000 level yesterday, with 24k added to open interest.
In yesterdays AM note we discussed how fluid the range was up to 4000 and down through 3700. The market clearly had no issue traversing that zone, and we are looking for volatility to now contract. Our updated target zone is the green area highlighted below (at right) and features that large 4000 gamma highlighted yesterday, and in the paragraph above.
With the target zone now from 4000 to 4100, we suggest traders reference the market movement from August of ’22. There was an explosive move higher in the S&P after July FOMC, and markets pinned the week into August expiration (green box, left) around the 4300 level. Here we see that pinning type action, but in the 4000-4100 range.
The other key point about August (and a lesser extent, March) was that it was the only month this year which built a material amount of positive gamma, as shown below. This led to both realized volatility and the VIX testing ’22 lows (see here).
Relatedly, for most of ’22 we have categorized rallies as “put-fueled short covering” and subject to quick and violent reversals. We are of the opinion that this time may be different, which is why we are rolling out the August comparison as opposed to other instances wherein we saw massive rallies but cautioned for major reversals.
Puts were certainly crushed yesterday, but it appears that call positions did come in off of yesterdays data point. More calls brings supportive hedging flows as we review in the video here. Further, the proximity to Nov OPEX is a catalyst for short term support.
Finally, there was a massive decline in the MOVE Index, which suggests that bond traders are breathing a sigh of relief (more on this in yesterdays note, or here). This lower MOVE implies traders are more comfortable with the path of rate increases going forward, which allows investors to more fairly value various assets.
| SpotGamma Proprietary SPX Levels | Latest Data | SPX Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Ref Price: | 3954 | 3927 | 394 | 11605 | 282 |
| SG Implied 1-Day Move:: | 1.0%, | (±pts): 40.0 | VIX 1 Day Impl. Move:1.47% | ||
| SG Implied 5-Day Move: | 3.15% | 3900 (Monday Ref Price) | Range: 3778.0 | 4023.0 | ||
| SpotGamma Gamma Index™: | 0.85 | -1.14 | 0.05 | 0.03 | -0.00 |
| Volatility Trigger™: | 3820 | 3820 | 390 | 11000 | 279 |
| SpotGamma Absolute Gamma Strike: | 4000 | 4000 | 400 | 11050 | 280 |
| Gamma Notional(MM): | 238.0 | 243.0 | 43.0 | 5.0 | -117.0 |
| Put Wall: | 3600 | 3600 | 360 | 11000 | 260 |
| Call Wall : | 4100 | 3900 | 400 | 11050 | 282 |
| Additional Key Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Zero Gamma Level: | 3913 | 3857 | 394.0 | 10508.0 | 295 |
| CP Gam Tilt: | 1.26 | 1.15 | 1.01 | 1.45 | 0.93 |
| Delta Neutral Px: | 3863 | ||||
| Net Delta(MM): | $1,736,063 | $1,681,236 | $200,562 | $58,901 | $107,930 |
| 25D Risk Reversal | -0.04 | -0.04 | -0.02 | -0.04 | -0.03 |
| Call Volume | 752,068 | 500,745 | 4,001,162 | 15,052 | 1,778,126 |
| Put Volume | 1,279,664 | 809,450 | 5,283,816 | 10,310 | 1,750,307 |
| Call Open Interest | 6,847,872 | 6,789,939 | 8,602,374 | 70,304 | 5,489,677 |
| Put Open Interest | 11,626,387 | 11,293,708 | 14,702,872 | 66,042 | 7,477,762 |
| Key Support & Resistance Strikes: |
|---|
| SPX: [4000, 3950, 3900, 3850] |
| SPY: [400, 395, 390, 385] |
| QQQ: [290, 285, 280, 270] |
| NDX:[12500, 12000, 11500, 11050] |
| SPX Combo (strike, %ile): [(4148.0, 76.96), (4097.0, 96.3), (4057.0, 75.31), (4049.0, 92.74), (4022.0, 77.57), (4010.0, 92.62), (3998.0, 96.55), (3978.0, 77.71), (3974.0, 84.34), (3958.0, 88.79), (3946.0, 93.07), (3923.0, 75.95), (3899.0, 88.02), (3832.0, 78.86)] |
| SPY Combo: [399.03, 408.9, 393.9, 404.16, 400.22] |
| NDX Combo: [11049.0, 11084.0, 11571.0, 11699.0] |
