Macro Theme:
Key dates ahead:
- 12/18 FOMC
- 12/20 OPEX
- 12/31 OPEX Q-end
Our primary risk metric signals being long of equities while SPX >6,000 with an upside target 6,100. <6,000 we flip to risk-off. Through to 12/20 OPEX we plan to operate in “buy the dip mode” until/unless <6,000.
(12/12 Post) Into year end, we are operating from this playbook:
- SPX is unlikely to break over 6,110 before 12/18. We may elect some <=6DDTE collar some positions as a result.
- Select single stocks may have some more “juice to squeeze” this week, but we anticipate a consolidation phase into 12/18
- Assuming the SPX is within 1% of 6,055 after 12/20 OPEX, we think SPX pins 6,055 into 12/31 Exp
- January sets up to potentially weak & our prime time to look for an equity correction, with 1/17 OPEX of note.
Key SG levels for the SPX are:
- Support: 6,050, 6,000
- Resistance: 6,100, 6,112
- As of 12/06:
- Long equities if >6,000
- Short equities if SPX <6,000
QQQ:
- Support: 530, 525, 520
- Resistance: 535
IWM:
- Support: 230
- Resistance: 235, 240
Founder’s Note:
Futures are +10-20bps ahead of this weeks FOMC & OPEX.
BTC set new highs >=105k, with MSTR (+4% premarket) & PLTR (-1% premarket) added to the QQQ.
Resistance: 6,100, 6,110 (SPY 610)
Support: 6,057, 6,050, 6,040, 6,016, 6,000
This was the map we posted last week, and we see little reason to shift from this view before FOMC: “fair value” is 6,050-6,100, and we would look to buy dips into 6,000-6,050 (note thse stacked support levels into 6k), looking for mean reversion back >6,050.
A break <6,000 is “risk off” as we’d likely shift into a negative gamma stance, combined with an uptick in IV.
We came across this chart from Goldman which shows historical returns through December. As you can see, we are in a “window of weakness” (yellow) into FOMC OPEX, which syncs with our general view of the S&P500 (pinning/flat). The last week of the year certainly appears to be historically bullish, but now the S&P500 has to contend with the mountain of positive gamma being supplied at 6,055 into 12/31 (JPM collar). For this reason, post-OPEX we would be more constructive on select single stocks vs the SPX index.
The signal that there is more SPX upside available would be a shift higher in the
Call Wall,
from 6,100.
Into year end, we are seeing extreme signs of froth and over-exuberance. From our seat in the options space, we see very low realized volatility which is dragging down implied vols. This stance is hard to argue against into FOMC, and we think likely into year end due to that massive amount of gamma in the 6,000-6,100 range. Added into that the holiday(s) and its a recipe for flat to higher equities. But the end-of-year expirations remove many large options positions, which we see as a prime driver of price action.
The frothy sentiment really shines in the crypto/MSTR space, wherein the addition of MSTR to the Nasdaq 100 has people posting things like this: “My liquid net worth is all in $MSTR + bitcoin and I’ve never felt more comfy in my entire life.”, or doing things like taking loans for cars and houses, and using the cash to buy bitcoin & MSTR (the thread is wild):
This all sounds so much like housing in ’06, or GME in ’21.
And, look, we understand the idea of Bitcoin as an investment, but when you start invoking leverage and touting levered instruments, like MSTR – well, thats why we can’t have nice things.
Accordingly, we will be watching BTC closing for as an equity “risk off” signal.
Lastly, we wanted to turn to TSLA. We last week wrote a piece about a “420 high”, and the stock popped strongly into the close on Friday to 435. This pop was driven by massive June call positions – we suspect rolling from Dec. That end-of-day jump shoved vols to higher extremes but leaves us unchanged on our view that TSLA is timed for consolidation. These extreme IV’s breed instability.
If we see longer dated calls being bought in
HIRO
& Tape that would signal higher prices in TSLA.
|
/ES |
SPX |
SPY |
NDX |
QQQ |
RUT |
IWM |
---|---|---|---|---|---|---|---|
Reference Price: |
$6126.37 |
$6051 |
$604 |
$21780 |
$530 |
$2346 |
$233 |
SG Gamma Index™: |
|
0.708 |
0.224 |
|
|
|
|
SG Implied 1-Day Move: |
0.49% |
0.49% |
0.49% |
|
|
|
|
SG Implied 5-Day Move: |
1.95% |
1.95% |
|
|
|
|
|
SG Implied 1-Day Move High: |
After open |
After open |
After open |
|
|
|
|
SG Implied 1-Day Move Low: |
After open |
After open |
After open |
|
|
|
|
SG Volatility Trigger™: |
$6120.37 |
$6045 |
$603 |
$21340 |
$528 |
$2390 |
$232 |
Absolute Gamma Strike: |
$6075.37 |
$6000 |
$605 |
$22000 |
$530 |
$2400 |
$230 |
Call Wall: |
$6175.37 |
$6100 |
$610 |
$22000 |
$535 |
$2310 |
$240 |
Put Wall: |
$6115.37 |
$6040 |
$600 |
$20800 |
$465 |
$2300 |
$230 |
Zero Gamma Level: |
$6091.37 |
$6016 |
$598 |
$21239 |
$525 |
$2376 |
$234 |
|
SPX |
SPY |
NDX |
QQQ |
RUT |
IWM |
---|---|---|---|---|---|---|
Gamma Tilt: |
1.066 |
1.19 |
1.588 |
1.218 |
0.786 |
0.738 |
Gamma Notional (MM): |
$250.32M |
$1.064B |
$14.324M |
$454.605M |
‑$32.74M |
‑$377.267M |
25 Delta Risk Reversal: |
-0.032 |
0.00 |
-0.034 |
0.00 |
-0.01 |
-0.008 |
Call Volume: |
487.218K |
1.352M |
8.824K |
849.733K |
33.876K |
596.748K |
Put Volume: |
895.433K |
1.619M |
11.552K |
1.102M |
69.118K |
670.101K |
Call Open Interest: |
7.988M |
6.265M |
72.074K |
3.625M |
350.211K |
4.212M |
Put Open Interest: |
14.54M |
12.41M |
99.859K |
6.835M |
560.889K |
8.442M |
Key Support & Resistance Strikes |
---|
SPX Levels: [6000, 6100, 6050, 6055] |
SPY Levels: [605, 600, 610, 604] |
NDX Levels: [22000, 21000, 21400, 21650] |
QQQ Levels: [530, 520, 525, 535] |
SPX Combos: [(6348,89.92), (6299,96.51), (6251,97.35), (6227,84.89), (6208,81.38), (6202,99.16), (6190,69.06), (6178,72.82), (6172,92.26), (6160,93.35), (6148,99.37), (6142,76.68), (6136,80.87), (6130,83.62), (6124,94.13), (6118,94.95), (6112,72.33), (6106,97.59), (6099,99.87), (6093,81.49), (6087,96.61), (6081,85.69), (6075,95.56), (6057,99.42), (6051,94.74), (6039,96.36), (6033,97.47), (6027,94.25), (6015,76.35), (6009,93.01), (6003,94.34), (5991,86.50), (5972,92.52), (5960,83.61), (5948,92.71), (5942,78.46), (5924,85.41), (5918,75.29), (5906,69.57), (5900,91.80), (5888,68.76), (5876,70.48), (5851,85.13), (5827,76.71), (5803,90.97), (5773,70.65)] |
SPY Combos: [609.2, 601.95, 606.79, 619.48] |
NDX Combos: [21954, 21998, 21758, 22172] |
QQQ Combos: [530.19, 534.92, 531.24, 535.98] |