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Informe SG Levels

Jul 21, 2022 | Option Levels | 0 Comentarios

Futures are steady near 3960. Major, long term resistance remains at 4000, with first support at 3950. Larger support shows from 3910 (Vol Trigger, SPY 390) – 3900. Our forecast was for volatility to decline while markets are >3900, and we anticipate that trend continuing into tomorrow.

4000 is the critical level for the S&P as it markets a definitive transition from put-controlled markets, to call-controlled markets. We’ve not discussed our vanna models (shown below) in some time as they have been locked in a sharply left-skewed position (i.e. red line going from top left to lower right), which suggests high, put-driven volatility.

As this model becomes more neutral (i.e red dashed line flat) it’s a signal of this put->call transition. Again, we think this happens if markets breach 4000. The implication of this is that hedging flows have more to do with call positions (which generally carry lower IV), than puts. This is a sign that call positions are building, and volatility should trend lower.

The shift higher in both SPX/SPY & QQQ Call Wall(s) was the most notable data change from yesterday. We consider this a bullish indicator, as it suggests call gamma is building at strikes overhead.

In this case, the call positions are setting up over the large Absolute Gamma strikes at 400/4000 SPY/SPX and 300 QQQ. The Call Wall > Absolute Gamma Strike is generally a bullish indicator, and if markets get above these Absolute Gamma Strikes, particularly post-FOMC, it could be a signal for a sharp, extended rally.

Our view is that this move is likely not in play until after the FOMC, as implied volatility shifts from a market tailwind, to headwind (discussed at length yesterday).

In regards to a larger, extended market rally we are looking for 3 things:

  1. Markets > Absolute Gamma Strike(s). 4000 for SPX, 300 for QQQ
  2. Call positions to fill in over head, which would show as increases in gamma here, vanna shifting to a right-skew, and call IVlifting
  3. A decline in the MOVE Index, which suggests bond volatility coming down (see here)

 

SpotGamma Proprietary SPX Levels Latest Data SPX Previous SPY NDX QQQ
Ref Price: 3959 3965 394 12439 303
SpotGamma Imp. 1 Day Move:
Est 1 StdDev Open to Close Range
1.24%, (±pts): 49.0 VIX 1 Day Impl. Move:1.5%
SpotGamma Imp. 5 Day Move: 3.05% 3861 (Monday Ref Px) Range: 3744.0 | 3979.0
SpotGamma Gamma Index™: 0.10 0.08 -0.07 0.02 -0.01
Volatility Trigger™: 3910 3910 395 11750 299
SpotGamma Absolute Gamma Strike: 4000 4000 400 12500 300
Gamma Notional(MM): -60.0 49.68 -411.0 3.0 -134.0
Additional Key Levels Latest Data Previous SPY NDX QQQ
Zero Gamma Level: 3970 3947 0 0 0
Put Wall Support: 3700 3700 370 11500 280
Call Wall Strike: 4050 3950 400 11925 310
CP Gam Tilt: 1.03 1.03 0.84 1.29 0.9
Delta Neutral Px: 3986
Net Delta(MM): $1,497,494 $1,476,886 $163,348 $51,862 $97,521
25D Risk Reversal -0.05 -0.06 -0.05 -0.06 -0.05
Call Volume 480,225 574,841 2,055,475 8,313 1,014,959
Put Volume 871,831 801,998 2,812,391 10,362 1,236,544
Call Open Interest 5,535,683 5,495,352 6,756,614 57,159 4,032,451
Put Open Interest 9,476,045 9,280,354 11,119,053 54,820 6,283,520
Key Support & Resistance Strikes:
SPX: [4100, 4000, 3900, 3800]
SPY: [400, 395, 392, 390]
QQQ: [310, 305, 300, 290]
NDX:[14000, 13000, 12500, 11925]
SPX Combo (strike, %ile): [4050.0, 3999.0, 4003.0, 3948.0, 4011.0]
SPY Combo: [403.85, 398.72, 399.11, 393.59, 399.9]
NDX Combo: [12726.0, 12527.0]
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