- Rallies into June OPEX should be categorized as “short covering” and subject to failure.
- We look for a “positive drift” into 6/30 expiration, $4000 is our major upside level into 6/30
- The $3600 JPM 6/30 short put strike (3620) is our major downside support into June 30th.
- 6/30 exp removes large put positions and may expose the market to further downside into July
Daily Note:
Futures have popped higher to 3830. Volatility estimates remain near 1%, with 3800 seen as support. Beneath there support is 3750. Resistance shows at 3855 (SPY385) then 3900.
While volume & OI continues to build at 3800 in SPX, its 380 in SPY thats gained some decent size. If you check the data table below you will see that 4000 is the largest gamma level for SPX (aka “Absolute Gamma Strike”) while its 380 in SPY. This is looking like its setting up a pretty clean range of 3800-4000 into next Thursday (June quarterly OPEX).
We noted last week that the loss of June OPEX would bring a reduction in negative gamma due to puts expiring. This equates to a reduction in volatility (as dealers have smaller hedges), which generally produces upward drift in markets. You can see the lower vol thats been produced below. The bottom histogram shows us the distribution of S&P prices for the last 5 days (red) vs last 30 days (light blue).
At a more macro level the main driver of volatility is interest rates and 10 year yields appear to be tracking back some now. Relatedly, you can see the MOVE Index(blue line) is coming in and this is likely providing short term relief for equities (VIX, orange line).
If equity vol is going to start coming in here (VIX <30 this AM) that should be a key driver of higher equity prices into 6/30 expiration. This IV decompression is also being reflected in the VIX term structure shown below, where there is a minor contango.
| SpotGamma Proprietary SPX Levels | Latest Data | SPX Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Ref Price: | 3795 | 3802 | 378 | 11697 | 284 |
| SpotGamma Imp. 1 Day Move: Est 1 StdDev Open to Close Range |
1.19%, | (±pts): 45.0 | VIX 1 Day Impl. Move:1.82% | ||
| SpotGamma Imp. 5 Day Move: | 2.8% | 3673 (Monday Ref Px) | Range: 3571.0 | 3776.0 | ||
| SpotGamma Gamma Index™: | -1.03 | -1.35 | -0.20 | 0.01 | -0.04 |
| Volatility Trigger™: | 4175 | 4075 | 375 | 11050 | 281 |
| SpotGamma Absolute Gamma Strike: | 4000 | 4000 | 380 | 11150 | 300 |
| Gamma Notional(MM): | -668.0 | -564.18 | -1165.0 | 1.0 | -332.0 |
| Additional Key Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Zero Gamma Level: | 4014 | 4112 | 0 | 0 | 0 |
| Put Wall Support: | 3700 | 3700 | 370 | 10500 | 270 |
| Call Wall Strike: | 3830 | 4500 | 378 | 11150 | 285 |
| CP Gam Tilt: | 0.66 | 0.64 | 0.59 | 1.1 | 0.77 |
| Delta Neutral Px: | 4089 | ||||
| Net Delta(MM): | $1,473,069 | $1,518,558 | $163,548 | $52,619 | $97,986 |
| 25D Risk Reversal | -0.07 | -0.05 | -0.05 | -0.08 | -0.08 |
| Call Volume | 431,199 | 469,415 | 2,177,231 | 5,366 | 920,171 |
| Put Volume | 707,815 | 774,365 | 2,870,567 | 7,332 | 960,530 |
| Call Open Interest | 5,340,431 | 5,359,158 | 6,932,739 | 58,206 | 4,431,575 |
| Put Open Interest | 9,351,319 | 9,112,090 | 10,251,416 | 54,686 | 6,270,987 |
| Key Support & Resistance Strikes: |
|---|
| SPX: [4000, 3900, 3800, 3750] |
| SPY: [385, 380, 375, 370] |
| QQQ: [300, 290, 285, 280] |
| NDX:[12500, 12000, 11250, 11150] |
| SPX Combo (strike, %ile): [3735.0, 3686.0, 3838.0, 3785.0, 3750.0] |
| SPY Combo: [372.06, 367.14, 382.27, 376.98, 373.57] |
| NDX Combo: [11499.0, 11709.0] |
