Futures are have slipped lower to 4277, as our Call Wall(s) remain intact at 430/SPY 4300/SPX and 335/QQQ. Support below shows at 4260(SPY 425) – 4250, then 4200. Resistance above 4300 shows at 4327.
VIX contracts expire today at 9AM EST. While we don’t anticipate an impact, its worth being aware of in case of some odd pre-open S&P movement(s).
Yesterdays intraday action was quite interesting, as markets made an afternoon charge above the 4300 Call Wall. Price was rejected sharply at 4325 which coincided with both an SG Combo Level (4323) & the SPX 200 day moving average (4325).
Adding to this was a pickup in negative delta trading (call selling, put buying) into that major technical level. This led to a sharp market reversal, slamming futures back into our major 4300 Call Wall.
The markets test above the Call Wall did not seem to produce noticeable new positions >430/4300, but it did seem to increase the gamma size at 430 SPY. As seen below the 430 level is now ~$100mm larger (notionally) vs yesterday, implying it will remain a key resistance level into Friday (as per our forecast Monday). Further we’d highlight there was over 100k in put/call volume each for SPX at 4300 which adds to that levels pull.
Traders will be watching today’s 2pm ET release of the FOMC minutes, which should produce some afternoon volatility. We think the upside reaction to that data will remained capped at 4300, with more volatility potential to the downside. Specifically there is support at 4250, but no other level until 4200.
Through our view of support levels, a “hawkish” read from FOMC minutes could produce a bit more downside, particularly with IV readings near lows (if IV (i.e. VIX) pops higher, that adds to equity selling pressure).
To this point, we remain of the opinion that options, in general, are “priced for market perfection” here. We base this from our Risk Reversal reading (-0.04 = no put demand) and other sources like SDEX (SPX skew) which all seem to point to this idea that interest in downside protection is limited.
Because our models suggest that Friday’s expiration will trigger volatility next week, we think that its currently worth considering downside protection. This is not to say we have to violently retest June lows, but it would not take much for a healthy correction which means puts could benefit from the delta change (i.e. stocks moving lower) but also a spike in IV.
Finally, for those of you interested in further content please check out the series of live shows we participated in yesterday:
> SG Live: Key Flows into August OPEX with Brent & Imran Lakha
> TastyTrade Jones & Friends: FOMC minutes and Meme Mania
>Traders Workshop with NinjaTrader: How Options Flow Affects Futures
| SpotGamma Proprietary SPX Levels | Latest Data | SPX Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Ref Price: | 4305 | 4307 | 429 | 13635 | 332 |
| SpotGamma Imp. 1 Day Move: Est 1 StdDev Open to Close Range |
1.06%, | (±pts): 46.0 | VIX 1 Day Impl. Move:1.24% | ||
| SpotGamma Imp. 5 Day Move: | 2.88% | 4279 (Monday Ref Px) | Range: 4156.0 | 4403.0 | ||
| SpotGamma Gamma Index™: | 1.37 | 1.47 | 0.05 | 0.02 | -0.01 |
| Volatility Trigger™: | 4195 | 4145 | 428 | 12790 | 331 |
| SpotGamma Absolute Gamma Strike: | 4300 | 4300 | 430 | 12500 | 330 |
| Gamma Notional(MM): | 417.0 | 507.23 | -78.0 | 3.0 | -139.0 |
| Additional Key Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Zero Gamma Level: | 4217 | 4219 | 0 | 0 | 0 |
| Put Wall Support: | 3900 | 4000 | 425 | 11000 | 300 |
| Call Wall Strike: | 4300 | 4300 | 430 | 14000 | 335 |
| CP Gam Tilt: | 1.44 | 1.35 | 0.97 | 1.23 | 0.91 |
| Delta Neutral Px: | 4143 | ||||
| Net Delta(MM): | $1,946,755 | $1,923,302 | $200,950 | $73,897 | $117,563 |
| 25D Risk Reversal | -0.04 | -0.04 | -0.06 | -0.06 | -0.06 |
| Call Volume | 528,476 | 522,002 | 2,083,429 | 5,735 | 752,997 |
| Put Volume | 806,204 | 817,463 | 3,416,598 | 9,295 | 1,339,522 |
| Call Open Interest | 6,326,704 | 6,249,457 | 7,229,973 | 68,340 | 4,396,692 |
| Put Open Interest | 11,335,954 | 11,104,674 | 14,284,633 | 77,867 | 7,883,433 |
| Key Support & Resistance Strikes: |
|---|
| SPX: [4300, 4250, 4200, 4000] |
| SPY: [430, 429, 425, 420] |
| QQQ: [335, 330, 325, 320] |
| NDX:[14000, 13500, 13000, 12500] |
| SPX Combo (strike, %ile): [4301.0, 4348.0, 4327.0, 4400.0, 4310.0] |
| SPY Combo: [429.27, 434.0, 431.85, 439.15, 430.13] |
| NDX Combo: [13744.0, 13949.0, 13703.0] |
