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Informe SG levels

Jul 19, 2022 | Option Levels | 0 Comentarios

Futures are higher to 3865 overnight. We once again look for ~1% swings today with resistance at 3900-3910. Support shows at 3850 then 3800.

Today is the last trading day before VIX expiration, and this day has been associated with strength in recent months (see yesterdays note). We also believe that as IV starts to catch a bid, which creates an equity headwind as we advance towards next weeks 7/27 FOMC. Increasing implied volatility would drive put prices higher, which infers dealers needing short deltas to hedge.

We’ve been marking 3900 as this hurdle that the market needs to cross in order for volatility to trend lower. While 3900 is not the Call Wall for SPX, it is the Call Wall for SPY (392), and a large gamma area as shown below (left). We also see large resistance at 300 in QQQ, too (right).

This 390/3900 level has proven to be resistance several times over the past month. Based on current premarket trading levels (SPY ~385) and our volatility estimate (1 SD move = 1.17%) this 390/3900 resistance level is in play for today. However, as noted above, this strike could be challenged at a time wherein the options market dynamics change from an equity tailwind to headwind.

Our skew model continues to measure low put demand as traders focus starts to shift toward the FOMC. We don’t think traders will suddenly grab for tail risk hedges into FOMC, as demand for this protection has been absent of late (ex: TDEX). We do think there will be a general bid for put protection, particularly in shorter duration (i.e. traders buying next weeks puts).

On a larger time frame we’ve been of the opinion that the market cannot hold an extended rally until the bond market settles down. We’ve been watching the MOVE Index (aka bond VIX) as general barometer for bond market anxiety, and it appears the stress is easing some. If Powell can better set interest rate expectations next week, that could pave the way for MOVE drop and equity rally.

To confirm a rally setup, will be looking for long call positions to build in/around the 4000 level in conjunction with a lower move. Without those two signals (MOVE + call demand) lining up its likely this 3900-4000 area remains resistance for several weeks.

 

SpotGamma Proprietary SPX Levels Latest Data SPX Previous SPY NDX QQQ
Ref Price: 3829 3824 381 11877 289
SpotGamma Imp. 1 Day Move:
Est 1 StdDev Open to Close Range
1.17%, (±pts): 45.0 VIX 1 Day Impl. Move:1.6%
SpotGamma Imp. 5 Day Move: 3.05% 3861 (Monday Ref Px) Range: 3744.0 | 3979.0
SpotGamma Gamma Index™: -0.90 -0.47 -0.19 0.01 -0.06
Volatility Trigger™: 3910 3840 385 11750 290
SpotGamma Absolute Gamma Strike: 4000 4000 370 11925 300
Gamma Notional(MM): -498.0 -509.65 -1025.0 2.0 -386.0
Additional Key Levels Latest Data Previous SPY NDX QQQ
Zero Gamma Level: 3928 3952 0 0 0
Put Wall Support: 3700 3700 370 11000 280
Call Wall Strike: 4005 4005 392 11925 295
CP Gam Tilt: 0.71 0.68 0.63 1.28 0.71
Delta Neutral Px: 4003
Net Delta(MM): $1,411,737 $1,367,785 $153,110 $47,206 $89,513
25D Risk Reversal -0.06 -0.06 -0.06 -0.07 -0.07
Call Volume 393,535 406,147 1,597,229 7,259 728,667
Put Volume 724,857 728,583 2,708,666 7,039 883,169
Call Open Interest 5,314,869 5,170,237 6,481,450 55,713 3,814,398
Put Open Interest 9,017,317 8,966,761 10,206,300 51,796 5,779,165
Key Support & Resistance Strikes:
SPX: [4000, 3900, 3850, 3800]
SPY: [385, 380, 375, 370]
QQQ: [300, 290, 285, 280]
NDX:[13000, 12500, 12000, 11925]
SPX Combo (strike, %ile): [3799.0, 3749.0, 3772.0, 3822.0]
SPY Combo: [378.89, 373.93, 376.22, 381.19]
NDX Combo: [11925.0, 11699.0, 12103.0]
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