- -Rallies should be categorized as “short covering” and subject to failure
- -Volatility should remain elevated until/unless the market closes >4000, the strike at which we see major resistance. 3700 is our major support line into 7/15
- -July 15th & 20th are important dates to market due to large equity & VIX expirations
- -July 27th is a key FOMC rate decision
Daily Note:
Futures were calm at 3900 overnight ahead of the 8:30AM jobs report. We think gamma is very flat here which should help continue a trend of reduced volatility. Resistance is at 3900 then 3950. Support shows at 3895 (388 SPY) then 3860 (Vol Trigger).
As we noted yesterday, positions in SPY continue to fill in around ATM, which should reduce volatility. To this point you can see how prominent the 390 strike is, with 396 being the SPY Call Wall. These should function as strong support/resistance lines, and the general theme of vol reduction. If markets go higher that theme strengthens due to gamma shifting more positively.
The other big level to watch into next week is 300 in the QQQ’s, a level which may be in play as resistance. It seems that a test of QQQ 300 would sync with the resistance we see at 4000 SPX (both levels are respectively ~1-2% away from current prices). We may see this resistance test in both major indices line up into the catalyst of next Fridays options expiration, which would likely induce some volatility.
Below are our realized volatility metrics. You can see that, in the short run, the distribution of prices has declined sharply (2nd chart, red line). We again think this continues into the start of next week, which serves to drag on the volcomplex, particularly short dated IV. This IVdrag is seen as a market tailwind. With 7/15 OPEX & VIX exp we lose volatility suppressing positions, which may lead to a tick higher in volatility.
Added to OPEX trigger is a likely demand for long vol positions into the end of month FOMC – so enjoy a bit more relative calm before the end of month action starts.
| SpotGamma Proprietary SPX Levels | Latest Data | SPX Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Ref Price: | 3901 | 3902 | 388 | 12109 | 294 |
| SpotGamma Imp. 1 Day Move: Est 1 StdDev Open to Close Range |
1.26%, | (±pts): 49.0 | VIX 1 Day Impl. Move:1.63% | ||
| SpotGamma Imp. 5 Day Move: | 2.71% | 3825 (Monday Ref Px) | Range: 3721.0 | 3929.0 | ||
| SpotGamma Gamma Index™: | -0.31 | -0.73 | -0.13 | 0.01 | -0.03 |
| Volatility Trigger™: | 3860 | 3850 | 388 | 11140 | 291 |
| SpotGamma Absolute Gamma Strike: | 4000 | 4000 | 380 | 12500 | 300 |
| Gamma Notional(MM): | -261.0 | -189.5 | -745.0 | 1.0 | -251.0 |
| Additional Key Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Zero Gamma Level: | 3973 | 3974 | 0 | 0 | 0 |
| Put Wall Support: | 3700 | 3700 | 370 | 12000 | 280 |
| Call Wall Strike: | 4005 | 4005 | 396 | 11150 | 298 |
| CP Gam Tilt: | 0.9 | 0.88 | 0.74 | 1.12 | 0.84 |
| Delta Neutral Px: | 4047 | ||||
| Net Delta(MM): | $1,521,208 | $1,546,949 | $160,292 | $59,464 | $98,364 |
| 25D Risk Reversal | -0.08 | -0.07 | -0.06 | -0.07 | -0.07 |
| Call Volume | 445,763 | 344,424 | 2,392,063 | 7,848 | 963,110 |
| Put Volume | 668,834 | 657,679 | 3,161,488 | 9,771 | 1,330,909 |
| Call Open Interest | 5,642,563 | 5,626,975 | 6,890,538 | 63,003 | 4,335,892 |
| Put Open Interest | 9,755,031 | 9,542,380 | 10,970,845 | 60,111 | 6,522,809 |
| Key Support & Resistance Strikes: |
|---|
| SPX: [4000, 3950, 3900, 3800] |
| SPY: [400, 390, 388, 380] |
| QQQ: [300, 295, 292, 290] |
| NDX:[13000, 12500, 12000, 11150] |
| SPX Combo (strike, %ile): [3798.0, 3749.0, 3714.0] |
| SPY Combo: [378.57, 373.62, 370.18] |
| NDX Combo: [11493.0, 11296.0] |
