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Informe SG Levels

Jul 22, 2022 | Option Levels | 0 Comentarios

Futures are at 3991, staged just below large 4000 strike resistance. We look for this 4000-4010 (SPY 400) level to hold as it is the Call Wall for both SPY/SPX. Support shows at 3979 & 3950.

4000 should be considered a magnet here as much as a resistance line. We do see light positive gamma above this level, but we would favor mean reversion back into this strike(s) if markets pull away. You can see how prominent these 400/4000 strikes are in the these plots:

The other factor here is implied volatility. Voltied to pre-FOMC expirations continues to be crushed. This creates a further chasm (i.e. contango) with post-FOMC vol. This is seen below, and is one of the reasons we see IVshifting from equity tailwind to headwind (i.e. we don’t think pre-FOMC vol can get much lower). Again we highlight this short dated vol draining off just as we hit strong 4000 SPX resistance.

Finally, there is a lot of chatter around about large VIX positions at strikes >40. Most of this open interest is at the 75-85 strikes and out in October/November. These positions would certainly hedge some tail risk, but require convexity to pay off. In other words you need a major volatility spike that is most often associated with limit-down equity moves.

As we all know this type of move has not happened this year, despite large equity drawdowns. Thats made these hedges rather worthless. We believe this lack of tail move is part of the reason equities have recently bottomed – it was clear traders were starting to sell deep OTM puts likely spurred on by the fact that they didn’t pay off YTD.

Interestingly, its those OTM puts which have a similar payoff structure to >40 strike VIX calls.

There is a well known axiom “hedge when you can, not when you have to”, and we think that this tail protection has simply hit prices that make it interesting from a risk/reward perspective.


NOTICE: We’ve launched a thinkorswim SG levels integration in BETA. Download it here, and please send any feedback to info@spotgamma.com

SpotGamma Proprietary SPX Levels Latest Data SPX Previous SPY NDX QQQ
Ref Price: 3998 3989 398 12619 307
SpotGamma Imp. 1 Day Move:
Est 1 StdDev Open to Close Range
1.23%, (±pts): 49.0 VIX 1 Day Impl. Move:1.45%
SpotGamma Imp. 5 Day Move: 3.05% 3861 (Monday Ref Px) Range: 3744.0 | 3979.0
SpotGamma Gamma Index™: 0.40 0.1 0.03 0.02 0.00
Volatility Trigger™: 3920 3910 395 11750 301
SpotGamma Absolute Gamma Strike: 4000 4000 400 12500 300
Gamma Notional(MM): 32.0 64.9 -147.0 3.0 -116.0
Additional Key Levels Latest Data Previous SPY NDX QQQ
Zero Gamma Level: 3979 3970 0 0 0
Put Wall Support: 3700 3700 370 11500 280
Call Wall Strike: 4000 4050 400 11925 310
CP Gam Tilt: 1.14 1.05 0.95 1.3 0.92
Delta Neutral Px: 4025
Net Delta(MM): $1,482,602 $1,508,806 $169,324 $55,590 $101,729
25D Risk Reversal -0.05 -0.05 -0.05 -0.07 -0.07
Call Volume 379,822 480,225 2,861,650 5,367 1,032,772
Put Volume 719,431 871,831 3,337,378 5,393 1,409,024
Call Open Interest 5,446,135 5,535,683 6,951,054 57,506 4,163,324
Put Open Interest 9,656,297 9,476,045 11,584,150 57,415 6,674,601
Key Support & Resistance Strikes:
SPX: [4100, 4000, 3950, 3900]
SPY: [400, 398, 395, 390]
QQQ: [310, 305, 300, 290]
NDX:[14000, 13000, 12500, 11925]
SPX Combo (strike, %ile): [3999.0, 4051.0, 4099.0, 4011.0, 4007.0]
SPY Combo: [398.79, 403.97, 408.76, 399.99, 399.59]
NDX Combo: [12733.0, 12317.0, 12935.0, 12645.0, 12518.0]
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