- Rallies into June OPEX should be categorized as “short covering” and subject to failure.
- Mark June 17th (options exp. OPEX) as a key turning point due to a very large expiration.
- Updated OPEX playbook here.
- $3850 heavy resistance into 6/17 close
- The $3600 JPM 6/30 short put strike is our major downside support into June 30th.
- The $4285 JPM 6/30 long put strike is our major upside level into June 30th.
Futures have rallied to 3705 in front of this big expiration day. We see 3700 as a support/resistance “pivot” line, with further support at 3650 & 3600. To the upside we see 3755 (SPY 375) then 3800.
It does not appear that we lost much in the way of puts yesterday, with ~30% of total S&P delta’s expiring today. This indicates that a lot of the put fuel which could spark a rally is still in place. The critical positioning here is best captured through the gamma chart shown here. Now how the teal line (todays gamma) shifts markedly higher after todays OPEX (black line). This shift is due almost entirely to large puts rolling off. Further, note the “kink” in teal line at ~3700, which is due to the 35k ATM puts (which expire at 9:30AM ET).
Placing this expiration in a historical context is our Delta Tilt indicator, which measures put delta:call delta. You can see that we are at March of ’20/Dec ’18 levels as a result of these large puts. Expiration will force this metric higher (see red dotted arrow bottom right).
This has been associated with rallies in the past, and we still anticipate an OPEX rally today into Tuesday afternoon (Monday is a holiday). There is one critical difference here, and that is the Fed. In March of ’20 & Dec of ’18 officials were rolling out the QE/support carpet, whereas currently they seem to be doing the exact opposite.
To this point note how that Delta Tilt reading above has failed to “normalize” at any point this year. In March ’22 we had very large put positions and a ~10% market rally, but that faded quickly. This “failure to launch” suggests that call buyers have remained absent, and traders are maintaining large put protection.
We quite frankly don’t see a reason for this dynamic to change, which means we may be given “tradable” rallies here but they are simply short covering, and subject to reversals much like we’ve seen all year.
Lastly we wanted to mention skew here, which is a bit odd. Our RiskReversal metric registered at -0.04 yesterday which is most often associated with new all time highs. The fact that this is happening with fresh lows is curious, and suggests a flattening of skew. This suggests that despite the recent macro developments there isn’t a serious, new grab for put protection.
Corroborating this is the SKEW Index (which can be fraught with some calculation anomalies) but it signals a similar sentiment. This suggests that IV will remain “contained” as it has been for most of this year (i.e. VIX not making new highs), but we will want to see OPEX clear before reading further into this. For today it does seem to back our “OPEX rally” sentiment.
|SpotGamma Proprietary SPX Levels||Latest Data||SPX Previous||SPY||NDX||QQQ|
|SpotGamma Imp. 1 Day Move:
Est 1 StdDev Open to Close Range
|1.15%,||(±pts): 42.0||VIX 1 Day Impl. Move:2.1%|
|SpotGamma Imp. 5 Day Move:||2.49%||3900 (Monday Ref Px)||Range: 3803.0 | 3997.0|
|SpotGamma Gamma Index™:||-2.21||-1.68||-0.40||-0.03||-0.14|
|SpotGamma Absolute Gamma Strike:||3700||4000||370||12500||275|
|Additional Key Levels||Latest Data||Previous||SPY||NDX||QQQ|
|Zero Gamma Level:||4028||4109||0||0||0|
|Put Wall Support:||3700||3700||360||11000||270|
|Call Wall Strike:||4500||4200||367||14000||286|
|CP Gam Tilt:||0.38||0.3||0.4||0.76||0.44|
|Delta Neutral Px:||4073|
|25D Risk Reversal||-0.05||-0.04||-0.06||-0.04||-0.06|
|Call Open Interest||7,259,093||6,950,616||8,622,761||81,148||5,729,171|
|Put Open Interest||11,318,552||11,242,057||12,437,512||63,055||6,487,684|
|Key Support & Resistance Strikes:|
|SPX: [4000, 3700, 3650, 3600]|
|SPY: [380, 375, 370, 360]|
|QQQ: [300, 280, 275, 270]|
|NDX:[12500, 11250, 11150, 11000]|
|SPX Combo (strike, %ile): [3581.0, 3628.0, 3680.0, 3775.0, 3727.0]|
|SPY Combo: [358.11, 362.88, 368.02, 377.56, 372.79]|
|NDX Combo: [11072.0, 11272.0, 10861.0, 11027.0]|