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Informe Option Levels

Mar 26, 2024 | Informe Option Levels

Macro Theme:

 

 

Short Term SPX Resistance: 5,265 (SPY 525)

Short Term SPX Support: 5,200

SPX Risk Pivot Level: 5,200

Major SPX Range High/Resistance: (5,265 SPY 525)

Major SPX Range Low/Support: 5,000

‣ 5,265 is the upside target.*

‣ 5,200 is critical support, up from 5,100 on 3/20. Below 5,200 is our risk off indicator.*

‣ 5,300 is our target into March month end.*

‣ NVDA’s event on 3/18 failed to renew the call bid in the chip sector, likely triggering longer term consolidation in the space (ref: 216 in SMH).**

*updated 3/22
**updated 3/19

 

 

Founder’s Note:

ES are +40bps to 5,300. NQ futures are +45bps to 18,600.

Key SG levels for the SPX are:

  • Support: 5,234, 5,224, 5,210, 5,200
  • Resistance: 5,250, 5,265 (SPY

    Call Wall

    )

  • 1 Day Implied Range: 0.53%

For QQQ:

  • Support: 440, 430
  • Resistance: 446, 450

IWM:

  • Support: 200
  • Resistance: 210

    Call Wall

11:30 AM EDT 42-Day Bill Auction, 01:00 PM 5-Year Note Auction

Futures have popped higher this AM, indicating pressing back into the

large gamma strike

near 5,250.

Realized volatility [RV] should continue to sharply contract into the remainder of this week, particularly as traders shift focus to the upcoming holiday period. As you can see below, 1-month SPX RV is now ~9%, which is not far from post-’22 lows. This gives further space for implied vol to contract, which, as outlined yesterday, should boost equities.

IV contraction is indeed at hand with the SPX term structure is remarkably depressed. This weeks IV’s near 9% imply traders pricing 56bps daily SPX movement. This very tight level is directly inline with the SG 1-day implied move, and obviously flags that traders see little to no risk in the days ahead. These vol levels are “priced for perfection”, as its easy for the SPX to move more that these expectations in either direction. In these situations, we can see quick volatility jumps, as traders that are shorting 55bps of SPX movement have to cover with any SPX move over that level.

That does not mean its likely to happen, as yesterday’s incredibly tight 25bps range indicates. It does signal that the short vol crowd has little to squeeze out at this point – but as we march closer to the 3 day weekend this dynamic is unlikely to change. We eye next week for some volatility expansion, ideally after a test into SPX 5300 this week.

The other interesting dynamic here is that of correlation, with the CBOE COR1M back at all-time lows. This signals that individual components of the S&P are not all moving in the same direction – something akin to “poor market breadth”. We believe this may relate to the growth of options overwriting ETF’s, and possibly 0DTE’s – both of which are hot topics in the options space. Both of these flows likely serve to suppress SPX index volatility, as the massive call overwriting funds engorge dealers with lots of positive gamma, and, as our data indicates, 0DTE’s invoke further mean SPX reversion. Since the year 2000 our data verifies that daily trading ranges this year are tighter than all other years except 2017. In 2017 we saw the lowest RV ever, near 3.5%, and this ultimately led to Volmegeddon.

That’s the dynamic of the major index flows, however thematic single stocks are more free, or even more levered, to move.

In theory, consider the semi sector, wherein NVDA is the bulk of SMH/SOXX, etc. The options volume in NVDA is massive, and there are both 2x NVDA ETF’s and 1.5x NVDA ETF’s – all of which invoke leverage into the stock. NVDA whipping around in turn moves the SMH/SOXX, and all other semi’s linked to it. This creates dispersion, as individual components of the SPX move a lot in relation to each other, but in this case it shoves correlation lower as those semi stocks have been ripping higher, heavily outpacing other sectors.

Eventually we will get a risk event which forces correlation higher (all stocks decline), and may normalize the balance of flows going forward. Traders obviously see little chance of that risk event happening, and betting on a drawdown over the last 6 months has been painfully unprofitable. However, because there are so many reflexive flows that have to unwind (flows that contract indexes, and lever up top sectors), traders should have plenty of opportunity to position into shorts after the first signal or “risk flare”. For SG models, that first flare-up is a break of SPX 5200.

 

SpotGamma Proprietary Levels

SPX

SPY

NDX

QQQ

RUT

IWM

Reference Price:

$5218

$519

$18277

$444

$2074

$205

SpotGamma Implied 1-Day Move:

0.66%

0.66%

SpotGamma Implied 5-Day Move:

1.95%

SpotGamma Volatility Trigger™:

$5095

$520

$17850

$445

$2025

$204

Absolute Gamma Strike:

$5000

$520

$17900

$445

$2100

$200

SpotGamma Call Wall:

$5400

$525

$17900

$454

$2040

$215

SpotGamma Put Wall:

$4600

$515

$17500

$430

$1900

$200

Key Support & Resistance Strikes

SPX Levels: [5000, 5200, 5300, 5150]

SPY Levels: [520, 521, 522, 515]

NDX Levels: [17900, 18000, 18500, 17500]

QQQ Levels: [445, 440, 450, 444]

SPX Combos: [(5448,94.95), (5427,82.79), (5401,99.46), (5375,84.29), (5349,97.05), (5323,92.32), (5302,99.52), (5291,77.07), (5276,92.24), (5270,88.69), (5260,77.44), (5249,97.91), (5239,89.40), (5229,98.46), (5223,82.11), (5218,91.67), (5208,72.11), (5197,96.79), (5192,72.07), (5176,73.11), (5171,74.43), (5135,72.64), (5119,74.36), (5020,81.26), (4999,85.88)]

SPY Combos: [525.49, 535.36, 520.81, 545.24]

NDX Combos: [18332, 18295, 17893, 18661]

QQQ Combos: [434.53, 447.87, 446.98, 448.76]

Additional Key Levels

SPX

SPY

NDX

QQQ

RUT

IWM

Zero Gamma Level:

$5110

$518

$17425

$444

$2084

$205

Gamma Tilt:

1.21

0.899

1.579

0.907

0.932

0.865

SpotGamma Gamma Index™:

1.163

-0.115

0.053

-0.04

-0.005

-0.024

Gamma Notional (MM):

$436.681M

‑$476.89M

$5.715M

‑$170.317M

‑$4.90M

‑$155.79M

25 Delta Risk Reversal:

0.00

0.00

0.00

0.005

0.00

0.012

Call Volume:

446.81K

1.198M

6.455K

1.102M

13.566K

402.138K

Put Volume:

832.424K

1.468M

8.458K

1.817M

25.02K

876.252K

Call Open Interest:

7.731M

5.991M

38.896K

3.554M

213.10K

3.994M

Put Open Interest:

14.18M

14.966M

57.115K

6.641M

393.496K

7.395M