Futures are giving some back this AM, down to 4245. Resistance is at 4260 (SPY 450) and 4300. Support shows at 4200. Our volatility estimate for today is only 0.85% which implies fairly tight trading ranges.
While futures are down nearly 1%, there is little apparent news. We still favor mean reversion back into the 4250-4300 zone for today, as our models see roughly 25% of total S&P/QQQ gamma expiring. This should, we believe, should keep volatility more muted in today’s cash session.
As you can see below, the loss of gamma today is rather large, particularly at the 4300 strikes (grey = next expiration only). Its not a massive expiration, but its very concentrated at 4300, which kept volatility muted this week.
Again, we believe this expiration leads to some volatility into net week. As we discussed at length on Wednesday, we believe downside protection is interesting here as not only could OPEX trigger volatility, but this volatility trigger syncs with low IV (i.e. VIX 20, SPY/QQQ skew flat).
If there is a stronger selloff today, it reduces the amount of gamma expiring – which is call heavy in single stocks. If the S&P is at 4200 today or into Monday, it signals that the directional distribution of volatility may be more even for next week. In other words, at 4300 the path of least resistance is/was lower (i.e. skewed price distribution), but at 4200 the potential price distribution is more normal (1-2% up is as likely as 1-2% down). An oversimplification of this idea is: “we favor puts at 4300, but straddles at 4200”.
One other interesting view here is looking at RV on a close to close basis, vs intraday basis. Clearly volatility is trending down. This measure also shows that intraday (black line, cash session high/low range) is not far off of lows seen in the high-gamma days of 2021. The big market moves this year appear to happen overnight (teal) it a more drastic way. With todays expiration we’d anticipate this intraday measure to move higher, suggesting wider trading ranges.
|SpotGamma Proprietary SPX Levels||Latest Data||SPX Previous||SPY||NDX||QQQ|
|SpotGamma Imp. 1 Day Move:
Est 1 StdDev Open to Close Range
|0.85%,||(±pts): 36.0||VIX 1 Day Impl. Move:1.23%|
|SpotGamma Imp. 5 Day Move:||2.88%||4279 (Monday Ref Px)||Range: 4156.0 | 4403.0|
|SpotGamma Gamma Index™:||1.05||0.94||-0.01||0.02||-0.04|
|SpotGamma Absolute Gamma Strike:||4300||4300||430||13500||330|
|Additional Key Levels||Latest Data||Previous||SPY||NDX||QQQ|
|Zero Gamma Level:||4228||4225||427.0||12975.0||332|
|Put Wall Support:||4000||4000||425||11000||300|
|Call Wall Strike:||4350||4400||430||13600||335|
|CP Gam Tilt:||1.26||1.19||0.91||1.18||0.88|
|Delta Neutral Px:||4122|
|25D Risk Reversal||-0.04||-0.04||-0.05||-0.05||-0.05|
|Call Open Interest||6,627,516||6,531,049||7,778,790||67,351||4,488,418|
|Put Open Interest||11,616,964||11,459,888||14,753,765||83,502||8,256,597|
|Key Support & Resistance Strikes:|
|SPX: [4300, 4250, 4200, 4000]|
|SPY: [430, 428, 425, 420]|
|QQQ: [335, 330, 325, 320]|
|NDX:[13600, 13500, 13400, 12500]|
|SPX Combo (strike, %ile): [4349.0, 4400.0, 4327.0, 4306.0, 4310.0]|
|SPY Combo: [434.31, 439.44, 432.17, 430.03, 430.46]|
|NDX Combo: [13736.0, 13533.0, 13128.0]|