Macro Theme:
Key dates ahead:
- 4/1: ISM
- 4/2: Tariff Deadline
3/25: April 2 Tariff Scenario:
- In a positive outcome, we’d look for a move into 5,950, with major resistance at 6,000. This area is also where we believe vanna fuel would be totally “burned off” with VIX hitting 14’s
- In a negative outcome, the immediate downside support level to watch is 5,500. We see soft support <=5,500, with room for vol to increase. For this reason we look for a move to 5,400 in a risk-off move.
We do not currently see reasons for SPX to drop below 5,500, and would have to update models if/when that target zone is hit.
3/27: Vol continues to look cheap after the 3/26 ~1% SPX decline ahead of GDP/Jobs data today (3/27), Core PCE tomorrow (3/28), the JPM expiry (3/31) and an alleged tariff announcement on 4/2. This implies that “wingy” put structures (ex: put spreads, put flies) centered near the JPM 5,565 strike into 3/31 offer interesting risk/reward. Additionally, we like 1-month put spread hedges in case of a “no deal” or “hanging chad” tariff outcome (per the 3/25 update, below). ✅
Key SG levels for the SPX are:
- Resistance: 5,700
- Support: 5,500
Founder’s Note:
Futures are -40bps ahead of 10AM EST ISM.
TLDR: There is a lot of instability today. Resistance is at 5,600, with support way down at 5,500. Vol seems a bit under-bid ahead of tomorrow’s tariff deadline, adding to downside risks.
The JPM roll did not fail to disappoint, with the S&P500 rallying 2% off of the AM lows to close at 5,611. Per Barron’s this was the largest intraday reversal since 2022 (SPX from -1.65% to +0.3%).
What do you do with rallies that are purely hedge-adjustment based? You fade ’em! This is particularly true when there is a massive event in 2 days.
With that, we see futures are weak this AM, with the big JPM delta cover out of the way.
Backing this idea that the rally is very unstable is the fact that, despite that big equity rally, vols did not fade. Below is the SPX Fixed Strike Vol matrix in “stats mode”, and the bright shade of green informs us that IV’s are nearly as high as they’ve been in the last 90 days.
Implied Vol not declining into the rally is a “bat signal” that the rally was indeed trading flows related to positions changing – not a statement about seeing a “risk on” environment ahead.
The giant negative gamma supply went away with the JPM expiration, but the issue for traders now is that the 5,565 support area is no more, as that JPM put is gone. That leaves 5,500 as first support, and that general area is now likely to be a lot softer if its re-visited in the coming days.
While the support below has been reduced, vols are still elevated. *However*, there really is not that much of a volatility premium. 1-month realized SPX vol is +20%, with the VIX at 23. That is only a 3pt difference, which is the historical average.
We’ve plotted this over the past year, and you can see how thin the spread is between VIX (orange) and SPX RV (red-dashed). This is unusual to us because the main event has yet to occur. This suggests that traders may not be pricing in enough event-vol-premium into 4/2. The catch here is that SPX RV at 20% is quite high, but if the outcome of tariffs is materially bad..we’ll then we may be likely to see a significant vol event (i.e. VIX >=30).
|
|
/ES |
SPX |
SPY |
NDX |
QQQ |
RUT |
IWM |
|---|---|---|---|---|---|---|---|
|
Reference Price: |
$5655.15 |
$5611 |
$559 |
$19278 |
$468 |
$2011 |
$199 |
|
SG Gamma Index™: |
|
-2.133 |
-0.441 |
|
|
|
|
|
SG Implied 1-Day Move: |
0.77% |
0.77% |
0.77% |
|
|
|
|
|
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™: |
$5744.15 |
$5700 |
$560 |
$19500 |
$482 |
$2050 |
$220 |
|
Absolute Gamma Strike: |
$6044.15 |
$6000 |
$550 |
$19600 |
$470 |
$2000 |
$200 |
|
Call Wall: |
$5949.15 |
$5905 |
$580 |
$19600 |
$490 |
$2055 |
$240 |
|
Put Wall: |
$5544.15 |
$5500 |
$550 |
$19000 |
$450 |
$2000 |
$195 |
|
Zero Gamma Level: |
$5793.15 |
$5749 |
$571 |
$19375 |
$486 |
$2068 |
$219 |
|
|
SPX |
SPY |
NDX |
QQQ |
RUT |
IWM |
|---|---|---|---|---|---|---|
|
Gamma Tilt: |
0.688 |
0.568 |
0.932 |
0.601 |
0.652 |
0.316 |
|
Gamma Notional (MM): |
‑$812.73M |
‑$1.553B |
‑$1.71M |
‑$597.749M |
‑$36.095M |
‑$1.43B |
|
25 Delta Risk Reversal: |
-0.058 |
-0.037 |
-0.055 |
-0.044 |
-0.044 |
0.00 |
|
Call Volume: |
672.426K |
2.011M |
10.566K |
828.554K |
14.019K |
239.338K |
|
Put Volume: |
1.158M |
3.176M |
13.708K |
935.761K |
16.292K |
560.187K |
|
Call Open Interest: |
6.424M |
6.131M |
62.314K |
3.212M |
255.73K |
3.145M |
|
Put Open Interest: |
11.533M |
10.486M |
70.568K |
5.178M |
380.718K |
7.066M |
|
Key Support & Resistance Strikes |
|---|
|
SPX Levels: [6000, 5000, 5700, 5600] |
|
SPY Levels: [550, 560, 570, 555] |
|
NDX Levels: [19600, 19500, 20000, 19000] |
|
QQQ Levels: [470, 480, 490, 475] |
|
SPX Combos: [(5848,71.67), (5702,87.14), (5674,81.05), (5651,83.50), (5623,84.14), (5617,74.94), (5601,95.85), (5573,75.68), (5567,84.29), (5550,95.40), (5539,71.28), (5528,68.33), (5522,88.89), (5516,94.29), (5500,98.25), (5472,85.44), (5466,85.46), (5449,90.58), (5427,81.25), (5415,82.58), (5399,95.85), (5376,73.44), (5365,74.19), (5348,90.30)] |
|
SPY Combos: [553.99, 547.88, 557.88, 552.88] |
|
NDX Combos: [19606, 18507, 19317, 18912] |
|
QQQ Combos: [476.91, 469.88, 465.19, 450.18] |