Macro Theme:
Key dates ahead:
- 7/30: GDP, FOMC + Earnings: QCOM, ASM, MSFT, META
- 7/31: Jobless Claims
- 8/1: NFP, PMI
Update 7/30: We recommend ~8/11-8/15 exp 6,500 calls as an upside play out of FOMC, GDP, NFP and Mag 7 earnings. This is because they are trading at a 9-10% IV, and we think a vol contraction + giant positioning at 6,500 could be a target with benign to good outcomes from these events/data.
Update 7/28: SMH 1-month options scan as both very low IV, and neutral call vs put prices. As such we will be adding 1-month ~300 strike SMH calls into the upcoming earnings deluge (ref $287).
7/25: We reiterate wanting to own a sliver of >=1 month SPX puts as SPX ATM IV’s are now <=10%, with call skews sharply elevated vs puts.
7/23: Trade deals and extensions have re-pumped the bulls, and so we look to maintain longs as long as the SPX remains above the risk pivot. Further, it appears that another blow-off top phase is underway, leading to us looking to express longs in top sectors/single stocks into “stock up, vol up” scenarios.
Key SG levels for the SPX are:
- Resistance: 6,400, 6,500
- Pivot: 6,300 (bearish <, bullish >)
- Support: 6,325, 6,300, 6,200
Founder’s Note:
Futures are +10bps ahead of GDP & FOMC. Earnings tonight are big: QCOM, MSFT, META, ARM
Nearly all of the gamma in play today is in the 0DTE space, with layered positive gamma strikes from 6,400 on down through 6,300. This implies a chop zone from 6,300 – 6,400 for today, wherein price action should be relatively stable, but prone to false signals.
For today and looking forward, if the SPX breaks <6,300, then we are likely to invoke what little negative gamma exists, but its also a signal that IV should trend directionally higher. The combination of light negative gamma with higher vol could be enough to trigger a decent directional drawdown. The reality is, though, that there aren’t much puts down below with particularly little below 6,100. That could limit downside.
Lets state this another way: under 6,300 there is maybe 2-3% of correction based on current positioning. We don’t see positioning that could spark a massive vol quake.
To the upside, if we close >6,400 then VIX likely spills to 13-14 and the SPX likely moves quickly up to 6,500, which is where there is a rather large call spread (JPM dealer is long call +40k calls + another dealer short call position at 6,500).
We’ve made note of the fact that 1-month realized SPX vol is now ~6.5%, which is the lowest reading since early December ’24. Accordingly, the last time the VIX held <15 was into that same early Dec period, and it was Dec FOMC that snapped the relative quiet, with Powell triggering a fairly large VIX spike to ~30 which corresponded with a ~3% SPX decline. We don’t think its a huge coincidence that the Dec FOMC corresponded with VIX expiration, which in our view helped to add fuel to that FOMC spasm. Aiding to this view is the fact that the SPX recovered within a week.
Looking at today, there are no major expirations until mid August, so position changes are not really a factor unless the Fed deviates substantially from expectations. The thing that seems most likely to change is vol, as the VIX could easily drop toward 13-14 and be “fairly valued” based on that 6% realized vol (VIX tends to carry a 3.5 vol point premium to 1-month SPX realized).
So, whats the play?
To the downside, adding a few August 15th puts at something like 6,200 are decent lotto downsides, as they are really cheap, even though they are quite unlikely to pay. But, if the SPX spills over a la DEC FOMC, they could offer big gains. These puts may make particular “insurance” sense if you are long a bunch of stocks and sitting on gains.
That said, the trade here that we favor is Aug OPEX week (11 – 15th) expiration 6,450-6,500 calls. Given that we see the opportunity for vol to contract post FOMC (driving a vanna boost), and that big magnet position at 6,500 – we think 6,500 is a pretty reasonable target. What’s nice about this is that you can buy 6,500 area calls for a low 10% or even 9% IV (red box). The idea here is that we likely get an FOMC/GPD/Jobs/NFP vol contraction, which gives a shot in the arm to stocks. Once that vol contracts though, its likely back to grind. With that in mind, we would look to actively monetize “the move” i.e. sell these cheap calls into a sharp move >=6,450 (if that plays out) vs holding to expiration.
Plus, 9% IV is cheap, which makes being wrong sting a bit less.
We also maintain the view of owning SMH calls for tactical upside. Since we flagged this in recent days, the SMH is +2.5% to SPX +1% and the SMH calls still show in Compass as sill cheaper than SPY. Plus we have a bunch of earnings tonight which should impact that semi-sector and while we don’t know if these earnings will be bullish, the cost to play SMH upside is as cheap as its been in the last year.
|
/ESU25 |
SPX |
SPY |
NDX |
QQQ |
RUT |
IWM |
---|---|---|---|---|---|---|---|
Reference Price: |
$6402.36 |
$6370 |
$635 |
$23308 |
$567 |
$2242 |
$222 |
SG Gamma Index™: |
|
1.30 |
-0.129 |
|
|
|
|
SG Implied 1-Day Move: |
|
0.63% |
0.63% |
|
|
|
|
SG Implied 5-Day Move: |
|
1.95% |
|
|
|
|
|
SG Implied 1-Day Move High: |
|
$6420.8 |
$640 |
|
|
|
|
SG Implied 1-Day Move Low: |
|
$6340.4 |
$631.98 |
|
|
|
|
SG Volatility Trigger™: |
$6402.36 |
$6370 |
$635 |
$23350 |
$566 |
$2245 |
$223 |
Absolute Gamma Strike: |
$6032.36 |
$6000 |
$620 |
$23080 |
$560 |
$2200 |
$220 |
Call Wall: |
$6532.36 |
$6500 |
$640 |
$23050 |
$570 |
$2250 |
$230 |
Put Wall: |
$6332.36 |
$6300 |
$620 |
$23080 |
$560 |
$2170 |
$210 |
Zero Gamma Level: |
$6318.36 |
$6286 |
$634 |
$23249 |
$566 |
$2254 |
$225 |
|
SPX |
SPY |
NDX |
QQQ |
RUT |
IWM |
---|---|---|---|---|---|---|
Gamma Tilt: |
1.17 |
0.881 |
1.05 |
0.999 |
0.831 |
0.653 |
Gamma Notional (MM): |
$500.045M |
‑$45.901M |
$2.511M |
$110.364M |
‑$16.562M |
‑$542.669M |
25 Delta Risk Reversal: |
-0.049 |
0.00 |
-0.048 |
0.00 |
0.00 |
-0.023 |
Call Volume: |
550.768K |
1.122M |
9.456K |
644.967K |
11.485K |
288.074K |
Put Volume: |
949.367K |
1.529M |
14.796K |
1.23M |
23.50K |
479.743K |
Call Open Interest: |
7.293M |
5.569M |
66.253K |
3.382M |
260.523K |
3.872M |
Put Open Interest: |
12.55M |
12.853M |
77.816K |
5.435M |
425.81K |
7.962M |
Key Support & Resistance Strikes |
---|
SPX Levels: [6000, 6300, 6400, 6500] |
SPY Levels: [620, 630, 640, 625] |
NDX Levels: [23080, 23050, 23070, 23300] |
QQQ Levels: [560, 570, 565, 575] |
SPX Combos: [(6651,92.05), (6600,98.15), (6575,85.23), (6549,95.61), (6524,89.97), (6517,88.56), (6505,91.85), (6498,99.89), (6492,72.58), (6479,77.95), (6473,94.51), (6466,85.24), (6460,80.68), (6447,99.48), (6441,88.51), (6435,76.78), (6428,87.36), (6422,97.36), (6415,92.86), (6409,93.55), (6403,99.51), (6396,71.02), (6390,88.76), (6377,88.50), (6371,72.80), (6364,71.90), (6358,81.61), (6352,81.70), (6345,84.42), (6339,69.35), (6333,90.46), (6326,83.71), (6320,87.13), (6314,85.31), (6307,81.06), (6301,94.23), (6288,83.51), (6269,87.33), (6250,82.36), (6218,89.92), (6199,84.82), (6192,71.55), (6167,82.59), (6148,85.08), (6116,78.96), (6097,87.96)] |
SPY Combos: [647.77, 638.21, 642.67, 640.76] |
NDX Combos: [23075, 23425, 23052, 23635] |
QQQ Combos: [569.84, 560.75, 574.96, 580.07] |