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Informe SG Levels

Ago 2, 2022 | SG Levels | 0 Comentarios

  • Markets are attempting to maintain a bullish, positive gamma position while digesting large stock gains from the past several weeks.
  • Absent a near term catalyst (i.e. no OPEX or events) options positions need to build at or above current levels ($4,100) to maintain the rally

S&P 5100 Levels:

  • $4,200.00 Call Wall Resistance Area (Top Of Bullish Range)
  • $4,000.00 Absolute Gamma Support area

What To Watch:

  • While SPX > $4,000 / QQQ>$311 positive gamma is building, which should drive down implied volatility. This trend should continue into August’s monthly options expiration (OPEX). A break of $4,000 likely invokes negative gamma, and higher implied volatility.
  • Watch 1-month realized volatility (ref: 19, 8/2/22) as a baseline for IV (i.e. VIX). If RVcontinues to decline it implies IV can drag lower, which is a market tailwind.

Daily Note:

Futures have pulled back to 4090. We continue to estimate 1% trading ranges, with support at 4060 (SPY 405) & 4051. Resistance lies at 4100 then 4151.

What we have been looking for here was a build in positive gamma and call positions above. The shift of the Call Wall from 4100 to 4200 was a signal that calls were coming in, and our SG implied move has declined in kind (from ~1.2% readings of late to 1.05% today).

What catches our eye this morning is a “gappy” look to the downside. Shown below is the S&P move for the last 5 days, and you can see the market grabbed and held the 4100 level on multiple tests. During that time we saw the ZeroGamma level shift up to 4100, while our Vol Trigger holds down near 4000. This suggests that the gamma position from 4100-4000 is pretty light and it would not take much selling to spark a retest of 4000. Recall that the 4000 level is where we see significant support.

This offers and opportunity to talk about ZeroGamma(ZG) vs Vol Trigger(VT). VT is our proprietary measurement of where dealers are likely to shift from hedging positive gamma (above VT), to negative gamma (below VT). This infers that above the VT dealers will be buying futures as the market declines and selling as the market rallies. This flow suppresses volatility. In a negative gamma environment you hedge by shorting as the market drops, and buying as the market rallies. This flow invokes volatility.

ZG is the level at which we measure S&P gamma as transitioning from positive to negative. This means, in theory, that at ZG there is no gamma. No gamma should mean no hedging requirements, and no real impact. Its not any type of trigger for anything, whereas the VT line may actually mark a change in hedging behavior.

Therefore in this case the ZG line near 4100 & VT at 4000 is telling us that 4100-4000 is a neutral zone with not a ton of hedging influence. However if we break the large 4000 level it may invoke a major negative gamma response, and we see a large spike in IV.

The fact is that the S&P has rallied +8% since July OPEX, and +4% since FOMC. Consolidation here makes sense. However if we lose the 4000 level than this should be considered a false breakout, and markets shift back into the control of puts (i.e. negative gamma).

SpotGamma Proprietary SPX Levels Latest Data SPX Previous SPY NDX QQQ
Ref Price: 4118 4118 410 12940 315
SpotGamma Imp. 1 Day Move:
Est 1 StdDev Open to Close Range
1.05%, (±pts): 43.0 VIX 1 Day Impl. Move:1.44%
SpotGamma Imp. 5 Day Move: 3.12% 4130 (Monday Ref Px) Range: 4002.0 | 4259.0
SpotGamma Gamma Index™: 0.12 0.67 -0.07 0.01 -0.01
Volatility Trigger™: 4000 3995 409 11750 311
SpotGamma Absolute Gamma Strike: 4000 4000 400 12500 300
Gamma Notional(MM): -5.0 155.51 -391.0 2.0 -114.0
Additional Key Levels Latest Data Previous SPY NDX QQQ
Zero Gamma Level: 4098 4068 0 0 0
Put Wall Support: 3600 3600 390 12500 290
Call Wall Strike: 4200 4200 420 11925 320
CP Gam Tilt: 1.06 1.11 0.86 1.22 0.92
Delta Neutral Px: 4053
Net Delta(MM): $1,352,507 $1,620,236 $184,713 $60,319 $99,231
25D Risk Reversal -0.07 -0.05 -0.05 -0.06 -0.06
Call Volume 375,034 578,685 1,562,229 7,095 598,574
Put Volume 793,173 1,083,435 2,809,268 5,690 906,758
Call Open Interest 4,610,324 5,660,705 6,885,802 60,967 4,025,871
Put Open Interest 7,624,969 9,715,238 11,865,130 61,703 6,658,774
Key Support & Resistance Strikes:
SPX: [4300, 4200, 4100, 4000]
SPY: [420, 410, 405, 400]
QQQ: [315, 310, 305, 300]
NDX:[14000, 13000, 12500, 11925]
SPX Combo (strike, %ile): [4201.0, 4151.0, 4098.0, 4003.0]
SPY Combo: [418.99, 414.06, 408.72, 399.27]
NDX Combo: [13135.0, 12928.0]
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