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Informe SG Levels

Jun 9, 2022 | Option Levels | 0 Comentarios

Macro Theme:

  • $4,300 (Vol Trigger) is our key resistance line into Friday 5/6/2022.
  • A break of $4,200 invokes our “lower bound” concept
  • We see substantial, longer-term support at $4,050 due to large open interest at $4,000.
  • A close over 4300 signals an extended rally into 5/20 OPEX.

Daily Note:

Futures, currently 4265, have reversed some of yesterdays large gains. With yesterdays 3% SPX move, we see only a slight reduction in our volatility estimate: 1.06% (open/close). We note resistance at 4285 (Vol Trigger), then 4300 – 4310 (SPY 430 equivalent). Support shows at 4210.

We’d assigned edge to a rally out of the FOMC, and the market did not disappoint. Yesterday’s move had tremendous velocity as traders covered shorts off of a “less-hawkish” Powell. Below we’ve plotted the 1 day high/low return for SPY going back one year, and yesterday was the 3rd largest intraday move in the past year. Note there was a continuation of the rally off of 2/24, but the market shifted lower after 1/24.

1 Year High/Low SPY Returns

In line with this was a big decline in IV, as shown here with QQQ. The key point with this is that options went from being “prohibitively expensive”, to moderately priced. This means that put protection is more reasonable here, but also that there is less of a IV tax on calls (should markets rally).

Purple dots is the IV of ATM options with 10 days to expiration, scaled to 30 days to expiration in yellow.

Yesterday AM we had adjusted our target price down from 4400 to 4300, with the idea that it would take a 1-2 sessions for a market test of that strike. As we all now know, it took a mere 1.5hrs to produce a ~150 handle SPX move. Obviously, the “soft-ish” stance from Powell fueled that stronger stock move, closing the S&P on our 4300 resistance line. That 4300 strike remains our key resistance point for today.

Additionally in yesterdays AM note we highlighted that there wasn’t a large OPEX to coincide with this FOMC statement. Our point in marking this was that without a large expiration, the stock move should have less velocity. While, yes, we had 1 very large move, the big question is “will it keep going?” as it did with March FOMC/OPEX.

Interestingly (per our PM note) we saw very neutral options deltas from our HIRO model across SPY/QQQ and many large stocks. One would have thought that a huge rally would invoke large call buyers, but that didn’t seem to be the case. The updated open interest data shows some small put closures, with the closing and rolling up of calls slightly more active. This lines up with our idea of less extension to this rally vs March.

We certainly must respect the impacts of adjusted “perceptions” out of FOMC, but the options positioning did not appear to change materially. To this point(s) the somewhat obvious trade (vol crush post FOMC) is behind us, and we’re left in very neutral territory.

This is about reflexive, flow-based feedback loops, and we think it takes a break above 4300 to initiate a positive loop. A shift over 4300 invokes more bullish dealer hedging flow, buoyed by volatility sellers which would signal an extended rally. Over 4300 we see little resistance until 4400. Further, with a close >4300, we’d look for a positive market cycle until 5/20 OPEX.

Conversely the market is still prone to reversals unless we can get a close >4300. We do not see material support until 4200, but note that under 4200 we do still see the “lower bound” mechanics in play as virtually no puts were closed yesterday.

SpotGamma Proprietary Levels Latest Data Previous SPY NDX QQQ
Ref Price: 4300 4299 429 13535 329
SpotGamma Imp. 1 Day Move:
Est 1 StdDev Open to Close Range
1.06%, (±pts): 46.0 VIX 1 Day Impl. Move:1.58%
SpotGamma Imp. 5 Day Move: 2.81% 4128 (Monday Ref Px) Range: 4013.0 | 4245.0
SpotGamma Gamma Index™: -0.55 -1.53 -0.17 -0.00 -0.05
Volatility Trigger™: 4285 4300 430 13950 325
SpotGamma Absolute Gamma Strike: 4300 4000 430 14050 330
Gamma Notional(MM): -358.0 -324.31 -758.0 0.0 -315.0
Additional Key Levels Latest Data Previous SPY NDX QQQ
Zero Gamma Level: 4379 4378 0 0 0
Put Wall Support: 4000 4000 400 13000 300
Call Wall Strike: 4700 4700 437 14050 360
CP Gam Tilt: 0.86 0.82 0.72 1.03 0.79
Delta Neutral Px: 4361
Net Delta(MM): $1,635,366 $1,627,791 $169,380 $45,034 $107,103
25D Risk Reversal -0.09 -0.09 -0.07 -0.08 -0.07
Call Volume 414,908 345,698 1,867,979 3,054 910,563
Put Volume 839,790 752,006 2,538,098 2,824 1,058,174
Call Open Interest 5,246,888 5,271,323 6,063,628 50,707 4,103,209
Put Open Interest 10,096,419 9,752,514 10,710,958 53,082 6,418,734
Key Support & Resistance Strikes:
SPX: [4400, 4300, 4200, 4000]
SPY: [440, 435, 430, 420]
QQQ: [340, 330, 325, 320]
NDX:[15000, 14050, 14000, 13000]
SPX Combo (strike, %ile): [4201.0, 4283.0, 4399.0, 4352.0, 4210.0]
SPY Combo: [419.19, 427.34, 438.93, 434.21, 420.05]
NDX Combo: [13143.0, 13346.0]
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