Futures are higher to 4045 ahead of this mornings 8:30AM ET CPI print. 4000 is the major pivot area, as its the strike with the largest amount of call + put gamma. Key resistance lines above are 4055 (SPY405) then 4100. A band of support below shows at 3955(SPY395)/3950/3940, with final support at 3900.
Futures are now up 1.7% from yesterdays open, to current 7:30AM ET levels. With that, the VIX is now up at 25.5, up 3 pts since yesterdays open. The VIX is based off of all SPX options prices that expire in <= 30 days. Options prices (aka implied volatility) are higher due to the anticipation (aka event vol) around CPI/FOMC, and that high implied volatility won’t break until this mornings CPI print. This is why we have VIX up/market up.
We also note that this futures move has served to push current indicative SPX Index prices to just over the large 4000 level, just ahead of CPI. With that, the 12/13 0DTE, ATM straddle ref (4015) is currently trading at $100 – suggesting an expected ~2.5% move on the day.
This 4000 level (+ 400 SPY) is the largest gamma strike as shown below. We consider it “fair value” from an options positioning perspective. Above this level is primarily call positions, with a balanced call & put position below down to 390. Below 390 we have mainly put positions.
Through our lens, this means the following into 12/16 OPEX:
- We see 420/4200 as our max upside level.
- Any movement lower should be generally supported as long as the SPY/SPX hold 390/3900. In other words we favor mean reversion as long as that level(s) hold.
- On a negative miss, the 380SPY/3800 Put Wall is our support level, but we do not look for a huge bounce off of that line.
- We anticipate that a neutral to positive CPI print could lead a continuation of the rally into FOMC.
There seemed to be this narrative building yesterday wherein traders built a consensus that the major risk through CPI+FOMC is a +5% higher/right tail move in stocks. We generally feel that the expectation of absolutely massive moves in the next few sessions is overdone. This is based around the view that as soon as the CPI/FOMC events pass, the extreme implied volatility should come off sharply. This should lead to large changes in 12/16 OPEX values which are supercharged due to this event volatility.
Normally people associate the decline in implied volatility with a market tailwind, but that is generally strongest in put heavy environments (put values declining leads to equity hedge buyers). In this case we have a very neutral call/put positioning, and there is this idea that a “right tail” move is just as high as a “left tail” move. Therefore we think this likely drop in implied volatility (starting with CPI) serves to drain the momentum off of an equity move – both higher or lower.
| SpotGamma Proprietary SPX Levels | Latest Data | SPX Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Ref Price: | 3990 | 3969 | 398 | 11706 | 285 |
| SG Implied 1-Day Move:: | 0.89%, | (±pts): 36.0 | VIX 1 Day Impl. Move:1.58% | ||
| SG Implied 5-Day Move: | 2.77% | 3934 (Monday Ref Price) | Range: 3825.0 | 4043.0 | ||
| SpotGamma Gamma Index™: | 0.45 | -0.57 | -0.04 | 0.06 | -0.02 |
| Volatility Trigger™: | 3940 | 3960 | 395 | 11490 | 281 |
| SpotGamma Absolute Gamma Strike: | 4000 | 4000 | 400 | 11650 | 290 |
| Gamma Notional(MM): | -84.0 | -93.0 | -324.0 | 7.0 | -205.0 |
| Put Wall: | 3800 | 3800 | 380 | 11000 | 265 |
| Call Wall : | 4000 | 4100 | 405 | 11650 | 290 |
| Additional Key Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Zero Gamma Level: | 4009 | 3988 | 401.0 | 10761.0 | 301 |
| CP Gam Tilt: | 1.11 | 0.96 | 0.9 | 1.46 | 0.88 |
| Delta Neutral Px: | 3987 | ||||
| Net Delta(MM): | $1,806,036 | $1,945,514 | $203,496 | $59,631 | $101,202 |
| 25D Risk Reversal | -0.06 | -0.05 | -0.05 | -0.05 | -0.05 |
| Call Volume | 558,221 | 455,483 | 1,672,441 | 6,898 | 733,018 |
| Put Volume | 915,643 | 880,404 | 2,072,248 | 6,150 | 762,588 |
| Call Open Interest | 6,660,716 | 7,002,713 | 8,354,238 | 74,826 | 5,460,820 |
| Put Open Interest | 12,349,410 | 12,258,561 | 14,156,117 | 72,416 | 7,380,892 |
| Key Support & Resistance Strikes: |
|---|
| SPX: [4100, 4000, 3950, 3900] |
| SPY: [405, 400, 390, 380] |
| QQQ: [300, 290, 285, 280] |
| NDX:[12000, 11750, 11650, 11500] |
| SPX Combo (strike, %ile): [(4174.0, 87.6), (4150.0, 95.03), (4126.0, 79.93), (4098.0, 96.43), (4074.0, 88.54), (4050.0, 97.0), (4026.0, 87.46), (3998.0, 96.8), (3899.0, 88.59), (3851.0, 92.02), (3835.0, 82.29), (3827.0, 77.24), (3803.0, 78.99), (3799.0, 94.74)] |
| SPY Combo: [404.93, 399.75, 409.72, 414.91, 379.8] |
| NDX Combo: [11648.0, 11882.0, 11472.0, 11273.0] |
