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Informe Option Levels

Dic 6, 2022 | Informe Option Levels, Option Levels | 0 Comentarios

Futures are holding the key 4000 level after a quiet overnight session. This 4000 level remains support for today, with 3975 & 3960 (SPY395) support below. Resistance above shows at 4051. A push below 4000 places markets back into a mild negative gamma stance, which suggests higher volatility.

Clearly there were some big macro flows yesterday, as there were breakdowns in several sectors. We note particular weakness in energy (XLE, -3%), & regional banks (-5%). While this served to drag down the S&P, critical support at 4000 held – a level which lined up with our expected one day implied move.

SPX Prices fed back into the large 4000 gamma level

The volumes at 4000 yesterday were very large, particularly on the put side (~140k puts traded, 73k calls). These volumes were dominated by 0DTE flows (~45% of total). Despite all of this 4000 strike volume, open interest at that level only increased by ~5k.

Despite what felt like a tough day, the S&P term structure only had a mild shift. As you can see the structure is still in contango – meaning very short dated IV is below that of longer dated IV. There is that obvious kink in the curve for CPI/FOMC we’ve been highlighting, but those IVlevels remain unchanged since yesterday.

Despite a fairly benign shift in IV, we are seeing some size added to downside puts. Shown below is the increase in open interest for SPX, and as you can see there were fairly large changes to several put strikes below, notably 3900 – which is now our Put Wall.

Below we’ve mapped out the volume in SPY options (calls top, puts bottom) and you can also note some larger, longer dated volumes in OTM puts vs more ATM volume in calls.

The takeaway from all of this is that based on longer term, OTM put flows, traders seem more concerned about future events. Further there appear to be some rotational stock flows under the hood which added market pressure. This certainly didn’t translate into panic, as implied vol only shifted mildly and our key 4000 level held.

We have been looking for a grind in market prices this week with the S&P holding 4000. We still give edge to that scenario, but must respect the downside as we shift into negative gamma territory.

To this point, we think it would likely take another day of weakness into 3950 before negative gamma options flows would trigger a larger volatility spike. The concern in this scenario is that traders may shy away from selling IV before next weeks FOMC. Therefore market weakness here may play into a reflexive, downside feedback loop*, with nothing to snap it until 12/13-12/14.


*These feedback loops are wherein negative gamma positions lead dealers to sell into weakness, and buy into strength. As dealers sell into weakness, it pushes market prices lower, and implied volatility higher. This elevates put values, which can force dealers to sell incrementally. These feedback loops may remain in place until a large event or OPEX forces a change in options positioning.

SpotGamma Proprietary SPX Levels Latest Data SPX Previous SPY NDX QQQ
Ref Price: 3999 3992 399 11786 287
SG Implied 1-Day Move:: 1.05%, (±pts): 42.0 VIX 1 Day Impl. Move:1.3%
SG Implied 5-Day Move: 2.82% 4071 (Monday Ref Price) Range: 3957.0 | 4186.0
SpotGamma Gamma Index™: -0.07 0.84 -0.12 0.04 -0.04
Volatility Trigger™: 4005 3995 399 11540 287
SpotGamma Absolute Gamma Strike: 4000 4000 400 11650 290
Gamma Notional(MM): -146.0 -386.0 -548.0 7.0 -246.0
Put Wall: 3900 3800 380 11000 280
Call Wall : 4100 4100 410 11650 290
Additional Key Levels Latest Data Previous SPY NDX QQQ
Zero Gamma Level: 4014 4037 402.0 10912.0 299
CP Gam Tilt: 0.98 0.83 0.86 1.55 0.86
Delta Neutral Px: 3966
Net Delta(MM): $1,815,576 $1,568,418 $203,566 $58,906 $94,386
25D Risk Reversal 0.03 -0.05 -0.05 -0.04 -0.05
Call Volume 509,350 511,067 2,498,862 8,202 740,476
Put Volume 920,240 812,982 3,073,310 6,148 765,851
Call Open Interest 6,673,852 5,955,742 8,564,342 71,668 5,126,206
Put Open Interest 11,831,190 11,709,169 13,977,524 68,158 7,025,390
Key Support & Resistance Strikes:
SPX: [4100, 4000, 3950, 3900]
SPY: [410, 405, 400, 395]
QQQ: [300, 290, 285, 280]
NDX:[12000, 11750, 11650, 11500]
SPX Combo (strike, %ile): [(4175.0, 86.03), (4151.0, 94.05), (4127.0, 76.84), (4099.0, 95.58), (4075.0, 83.42), (4051.0, 92.97), (3975.0, 85.47), (3951.0, 94.7), (3899.0, 93.11), (3875.0, 74.6), (3851.0, 90.25), (3835.0, 82.44), (3803.0, 74.94)]
SPY Combo: [409.58, 394.79, 414.77, 389.6, 404.78]
NDX Combo: [11645.0, 11469.0, 11881.0, 11681.0, 12294.0]
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