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Informe SG Levels

Jun 9, 2022 | SG Levels | 0 Comentarios

  • A sustained rally is unlikely to occur until May 4th which holds the FOMC & Russian default. Due to these events, volatility (i.e. large puts) is unlikely to be meaningfully sold. This prevents an extended rise in equities.
  • A break of 4200 invokes our “lower bound” concept, valid into 5/4.
  • We see substantial, longer-term support at 4050 due to large open interest at 4000.

Daily Note:

Futures have gained to the 4240 level. Our volatility estimate remains in line with recent sessions at 1.16% . Light resistance shows at 4250 with more substantial resistance at 4300. Support shows at 4210(420SPY equivalent) to 4200SPX.

We did note SPY puts being net closed >=420 due to yesterdays OPEX, and some chunky 4125 SPX straddle type action (50k puts & calls each). We view this flow as adding to support and the “lower bound” concept into next week. Its seems clear that <4200 is where the lower bound invokes, leading us to flag that as a bottom into 5/4/22 (more on this below).

Earnings are being credited with the pre-market pop, and we’d suggest just a tinge of optimism can lead to an overly-strong short covering bounce. Consider for example FB. The IV going into earnings was at highs note seen since March of ’20. This is clearly due to the debacle from FB’s last earnings, and the fear that they “pull a NFLX” and drop another 20%. If FB did anything less than “horrible” they were probably going to get a stock bounce (PYPL, same story).

To this similar point, the VIX yesterday was closing near 32, which implies 2% daily S&P500 moves. Those types of moves are obviously tough to sustain, and so when there is a relatively quiet session in markets that high VIX/IV is likely to decline. This functions to support equity prices.

However, due to next weeks 5/4 FOMC/Russian default, we have some event-vol premium which is likely to remain through Wednesday afternoon. Its possible we get some very short term pre-event vol selling, particularly when there are 3 SPX options expirations before 5/4 (Friday, Monday, Tuesday). Therefore a sharp move higher in markets is quite possible – but this type of move should be framed as short-covering and not a change in fundamental views. The event is also likely to prevent long term, meaningful vol selling (ex: VIX <20).

Linked to the elevated IV, is the “lower bound” concept which we have been watching for the last several sessions. In addition to the Delta Tilt, Gamma Tilt is now flashing near its lower bound, as shown here. Both of these tilt metrics measure put gamma (or delta) against calls. Therefore these indicators (red line) approaching the blue dashed line suggest that put gamma is very high relative to call gamma.

The summary here is that downside is likely exhausted as markets break <4200. 5/4 brings the trigger for a large directional move, the direction of which is determined by the Fed & Russian default.

SpotGamma Proprietary Levels Latest Data Previous SPY NDX QQQ
Ref Price: 4183 4183 417 13003 316
SpotGamma Imp. 1 Day Move:
Est 1 StdDev Open to Close Range
1.16%, (±pts): 49.0 VIX 1 Day Impl. Move:2.01%
SpotGamma Imp. 5 Day Move: 2.67% 4271 (Monday Ref Px) Range: 4158.0 | 4386.0
SpotGamma Gamma Index™: -1.48 -1.69 -0.38 -0.02 -0.13
Volatility Trigger™: 4380 4450 432 13950 335
SpotGamma Absolute Gamma Strike: 4000 4000 420 14050 325
Gamma Notional(MM): -752.0 -810.98 -1687.0 -2.0 -725.0
Additional Key Levels Latest Data Previous SPY NDX QQQ
Zero Gamma Level: 4457 4456 0 0 0
Put Wall Support: 4100 4100 420 13000 300
Call Wall Strike: 4700 4750 450 14050 360
CP Gam Tilt: 0.54 0.54 0.42 0.79 0.51
Delta Neutral Px: 4341
Net Delta(MM): $1,400,785 $1,666,368 $169,060 $36,186 $94,012
25D Risk Reversal -0.09 -0.13 -0.08 -0.06 -0.07
Call Volume 266,063 485,618 1,446,666 2,380 786,860
Put Volume 572,946 872,774 2,379,868 3,756 1,174,948
Call Open Interest 4,594,845 4,972,093 5,872,127 46,998 3,993,914
Put Open Interest 8,307,599 9,592,913 9,899,310 43,387 5,504,070
Key Support & Resistance Strikes:
SPX: [4400, 4300, 4200, 4000]
SPY: [430, 420, 410, 400]
QQQ: [330, 325, 320, 300]
NDX:[14050, 14000, 13500, 13000]
SPX Combo (strike, %ile): [4100.0, 4201.0, 4150.0, 4251.0, 4301.0]
SPY Combo: [408.92, 418.94, 413.93, 423.95, 428.95]
NDX Combo: [13133.0, 12730.0, 12925.0, 13341.0, 13055.0]
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