Futures are modestly higher to 3892 as we enter the final week of trading in 2022. SG levels are little changed from last week, with major resistance at 3900. Support below shows at 3850, 3835 then 3800. We remain of the opinion that the S&P holds the 3800-3900 into Friday, 12/30 OPEX.
For this week, this suggest that SPX moves to either side of this range should mean revert back into the 3835-3850 area.
Key levels match in the SPY, which generally has a larger gamma position than SPX. The big difference is that the SPX Put Wall is at 3800, while it is 375 for SPY (3665SPX). For this reason we see 3765SPX/375SPY as a maximum low end into 12/30. If that area is tested, we would anticipate a bounce back toward 3800 (as with last week).
There are shifting dynamics around the JPM collar call after this long weekend. Namely, the gamma is more concentrated now at the 3835 strike, but has less pull farther away. This can be seen from the example gamma profile we posted last week, and shown below. Last week (blue line) had a peak gamma near .003, while this week the peak gamma is near .004 (green, red). Again, this implies the pin is stronger in the 3835 area, but has less pull at the wings of 3990 & <3800.
However, as outlined at the top, our models show large gamma strikes at 3800 & 3900 which should serve to strengthen the support/resistance at the weakened “gamma wings” of the 3835 call. This all serves to keep the S&P inside of a 3800-3900 box.
The market seems to be favoring this range, too. This is shown in the plot below wherein we estimate the odds of the S&P closing at various strikes, on a given expiration date. This is derived from current options prices, and you can see that the market prices strong odds that the S&P will close inside of this 3800-3900 range into 12/30.
We continue to believe that January will feature much more relative movement (volatility), as the pin is pulled on the 3835 area with 12/30 expiration. Further, there remains a significant catalyst with the very large equity expiration on January 20th (see last weeks post).
| SpotGamma Proprietary SPX Levels | Latest Data | SPX Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Ref Price: | 3844 | 3844 | 382 | 10985 | 267 |
| SG Implied 1-Day Move:: | 1.26%, | (±pts): 48.0 | VIX 1 Day Impl. Move:1.32% | ||
| SG Implied 5-Day Move: | 3.07% | 3844 (Monday Ref Price) | Range: 3726.0 | 3962.0 | ||
| SpotGamma Gamma Index™: | -0.72 | -0.72 | -0.31 | 0.01 | -0.10 |
| Volatility Trigger™: | 3830 | 3830 | 384 | 11250 | 276 |
| SpotGamma Absolute Gamma Strike: | 4000 | 4000 | 380 | 11275 | 265 |
| Gamma Notional(MM): | -339.0 | -339.0 | -1552.0 | 2.0 | -735.0 |
| Put Wall: | 3800 | 3800 | 375 | 11000 | 265 |
| Call Wall : | 3835 | 3835 | 390 | 11275 | 273 |
| Additional Key Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Zero Gamma Level: | 3905 | 3905 | 391.0 | 10657.0 | 306 |
| CP Gam Tilt: | 0.8 | 0.82 | 0.59 | 1.24 | 0.59 |
| Delta Neutral Px: | 3929 | ||||
| Net Delta(MM): | $1,421,416 | $1,421,416 | $155,372 | $38,157 | $84,210 |
| 25D Risk Reversal | -0.05 | -0.05 | -0.03 | -0.04 | -0.04 |
| Call Volume | 447,006 | 447,006 | 1,532,241 | 3,754 | 613,524 |
| Put Volume | 715,408 | 715,408 | 1,855,511 | 3,972 | 621,255 |
| Call Open Interest | 5,461,075 | 5,461,075 | 6,697,736 | 55,257 | 4,772,627 |
| Put Open Interest | 9,817,913 | 9,817,913 | 11,893,030 | 50,103 | 6,077,564 |
| Key Support & Resistance Strikes: |
|---|
| SPX: [4000, 3900, 3850, 3800] |
| SPY: [390, 385, 380, 375] |
| QQQ: [280, 270, 265, 260] |
| NDX:[12000, 11500, 11275, 11000] |
| SPX Combo (strike, %ile): [(3848.0, 83.33), (3833.0, 97.62), (3825.0, 75.51), (3818.0, 86.59), (3798.0, 96.32), (3775.0, 85.82), (3764.0, 89.67), (3748.0, 94.96), (3714.0, 80.1), (3698.0, 95.62), (3675.0, 74.49), (3664.0, 75.14)] |
| SPY Combo: [381.76, 378.32, 368.36, 373.34, 374.87] |
| NDX Combo: [10887.0, 10678.0, 11271.0, 11095.0, 10480.0] |
