Futures have slid lower to 3990, down ~1%. 4000 remains the massive level here, which we see as overhead resistance into tomorrows huge OPEX. Below 4000, key levels are 3960(SPY395)-3950, then 3900 support.
The implied volatility deflation along with tomorrows giant OPEX positioning is causing some interesting “flickering” in our SPX levels. Out of the money puts are decaying rapidly, and the size at 4000 is so large that it has become the Put Wall. This is a massive level, the bulk of which (150k calls + 160k calls @4000) expires tomorrow AM. We bring this up as it also speaks to SPX put positions being quite small. Its likely some of them get rolled tomorrow – but it feels a bit like a ghost town.
We turn to SPY here to get a better sense of positioning, and you can again see the size of 400, and a fairly balanced call/put positioning down to 390. We currently believe active traders are mainly short calls >=400, and short puts <=390 and this makes the 390-400 area “sticky” into tomorrow. This all “releases” after 12/16 OPEX.
In regards to the put positioning, no one wants puts. Obviously IV dropped sharply after CPI + FOMC passed, but you can also see it in our Risk Reversal below. This measures 25 delta puts – 25 delta calls with 30 days to expiration. With fear you’d see readings down near -.10, while current readings are generally associated with markets that are at all time highs.
The summary of all this is that we are assigning edge to markets holding the 3900-4000 range into tomorrows OPEX. As OPEX clears out all this positioning, it should free up trading ranges into year end – meaning we could get some larger directional movement.
Its very murky post OPEX into year end. Not only are there likely to be some random year end flows (non options related), we also have to contend with the shortened holiday week (generally an IV drag/market market support).
The main area of exposure we are watching is to the downside, wherein a break of 3900 could catch many traders offsides. Note this is not a prediction of markets breaking lower, more of a notation that we don’t see support below 3900. Compare this to a situation wherein if the market were to break 4000, we see mean reverting hedging flows offering support down to 3900. Below 3900 those flows are likely gone.
The primary issue is that implied volatility is now zapped (i.e. VIX is 21) with 1 month realized volatility up near 25. As highlighted above, long puts don’t seem to exist. It’s possible Powell just put everyone to sleep for the next few weeks, but liquidity is still dim – particularly into this holiday period. Therefore through our lens being short IV out of OPEX feels like you are pressing your luck a bit….
| SpotGamma Proprietary SPX Levels | Latest Data | SPX Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Ref Price: | 3995 | 3987 | 399 | 11740 | 286 |
| SG Implied 1-Day Move:: | 0.86%, | (±pts): 34.0 | VIX 1 Day Impl. Move:1.34% | ||
| SG Implied 5-Day Move: | 2.77% | 3934 (Monday Ref Price) | Range: 3825.0 | 4043.0 | ||
| SpotGamma Gamma Index™: | 0.02 | 0.52 | -0.12 | 0.09 | -0.03 |
| Volatility Trigger™: | 4020 | 3995 | 400 | 11540 | 286 |
| SpotGamma Absolute Gamma Strike: | 4000 | 4000 | 400 | 11650 | 290 |
| Gamma Notional(MM): | -152.0 | -114.0 | -571.0 | 14.0 | -182.0 |
| Put Wall: | 4000 | 3900 | 380 | 10500 | 280 |
| Call Wall : | 4100 | 4100 | 405 | 11650 | 300 |
| Additional Key Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Zero Gamma Level: | 4027 | 4019 | 401.0 | 11051.0 | 313 |
| CP Gam Tilt: | 1.0 | 0.95 | 0.85 | 1.83 | 0.91 |
| Delta Neutral Px: | 3902 | ||||
| Net Delta(MM): | $1,733,757 | $1,819,472 | $193,331 | $61,198 | $99,186 |
| 25D Risk Reversal | -0.03 | -0.04 | -0.03 | -0.03 | -0.03 |
| Call Volume | 588,266 | 692,617 | 2,519,793 | 8,871 | 1,150,351 |
| Put Volume | 935,493 | 1,001,179 | 2,683,546 | 5,022 | 1,090,280 |
| Call Open Interest | 7,219,756 | 7,161,346 | 8,519,432 | 78,499 | 5,703,238 |
| Put Open Interest | 11,980,107 | 12,060,304 | 14,443,145 | 73,529 | 7,357,968 |
| Key Support & Resistance Strikes: |
|---|
| SPX: [4050, 4000, 3950, 3900] |
| SPY: [405, 400, 395, 390] |
| QQQ: [300, 290, 285, 280] |
| NDX:[12000, 11750, 11650, 11500] |
| SPX Combo (strike, %ile): [(4175.0, 84.11), (4151.0, 93.34), (4123.0, 81.22), (4103.0, 76.47), (4099.0, 97.8), (4075.0, 92.07), (4051.0, 97.71), (4023.0, 86.74), (3999.0, 97.75), (3975.0, 84.19), (3959.0, 75.04), (3951.0, 93.36), (3923.0, 77.95), (3903.0, 78.14), (3899.0, 91.56), (3875.0, 74.61), (3851.0, 87.35), (3835.0, 80.45), (3799.0, 94.55)] |
| SPY Combo: [409.78, 399.8, 404.99, 379.83, 395.01] |
| NDX Combo: [11647.0, 11471.0, 12293.0, 11271.0, 11999.0] |
