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Informe SG Levels

Ago 23, 2022 | Option Levels | 0 Comentarios

Futures are flat to 4150, but off of overnight lows of 4118. We see a fair amount of negative gamma in the SPX, but heavy negative gamma in SPY & QQQ. This infers that today will be another high volatility session, with both 4100 support & 4200 resistance in play for today.

Yesterdays selloff did not seem to invoke a large amount of put demand despite the market decline. There was a bid to IV, as noted in our Risk Reversal metric which closed at -0.06 (below). However, there was certainly no signal of fear, more off a shift from last weeks uber-bullish IV readings. Ultimately, the price action read like a post-OPEX adjustment.

The issue now is that markets have moved low enough to break the reflexive “buy the dip” behavior, in favor of larger directional trading swings.

Larger swings is the type of behavior that we’d anticipate in this negative gamma environment, particularly one in which there isn’t a clear reason to short volatility. Dealers behavior here should be to continue selling declining markets and buying rising markets – aka trading with the prevailing market trend.

This is implied in the vanna model below (right graph), which has a right skew. In today’s environment, our model forecasts that dealers will have to sell futures as markets decline and IV increases. Compare this to last week (left) wherein we had the mirror image position – lower SPX prices and increasing IV led to dealers buying market declines and selling rallies.

Declining delta exposure (y-axis) suggest dealers must buy futures to hedge. Rising delta suggests dealers buy sell futures to hedge.

Recall that last week we had large call positions and were testing the Call Wall. In today’s negative gamma environment we are more under the control of put options. The former leads to tighter trading ranges, and therein lower volatility. The latter leads to higher volatility.

Because of Jackson Hole later this week (25th- 27th), there is little reason for markets to snap this negative gamma/elevated IV environment. Traders don’t want to be short IV in through FOMC events, and that removes one key source of “rally fuel”. On the flip side we did not see signs of high put demand which would likely pressure markets lower.

Mixing in with this idea that traders don’t want to be short longer dated IV, there are numerous expirations this week that, if IV shifts higher, may become enticing enough to short. This likely keeps price action choppy and a bit tense in through the rest of this week.

Zooming out in time, we think that into next week there is little resistance to prevent a move up to 4300 or down to 4000. Both levels are about 3.5% away, with no major gamma strikes in between.

SpotGamma Proprietary SPX Levels Latest Data SPX Previous SPY NDX QQQ
Ref Price: 4139 4137 413 12890 314
SpotGamma Imp. 1 Day Move:
Est 1 StdDev Open to Close Range
1.07%, (±pts): 44.0 VIX 1 Day Impl. Move:1.51%
SpotGamma Imp. 5 Day Move: 2.77% 4228 (Monday Ref Px) Range: 4111.0 | 4345.0
SpotGamma Gamma Index™: -0.50 0.21 -0.22 0.02 -0.13
Volatility Trigger™: 4175 4225 415 12975 322
SpotGamma Absolute Gamma Strike: 4000 4000 415 12500 310
Gamma Notional(MM): -366.0 -484.22 -1118.0 4.0 -790.0
Additional Key Levels Latest Data Previous SPY NDX QQQ
Zero Gamma Level: 4178 4208 425.0 12291.0 337
Put Wall Support: 3900 4000 400 11000 300
Call Wall Strike: 4300 4300 430 13250 350
CP Gam Tilt: 0.87 0.75 0.66 1.3 0.55
Delta Neutral Px: 4074
Net Delta(MM): $1,690,149 $1,686,586 $194,122 $51,134 $103,290
25D Risk Reversal -0.06 -0.06 -0.07 -0.05 -0.07
Call Volume 487,883 450,080 1,603,797 6,649 682,907
Put Volume 905,651 860,180 2,715,783 8,892 1,075,813
Call Open Interest 5,988,870 5,890,469 6,870,165 61,003 3,846,462
Put Open Interest 10,158,360 10,184,461 11,867,696 70,762 7,001,818
Key Support & Resistance Strikes:
SPX: [4300, 4200, 4100, 4000]
SPY: [420, 415, 410, 400]
QQQ: [330, 325, 310, 300]
NDX:[14000, 13250, 13000, 12500]
SPX Combo (strike, %ile): [4052.0, 4077.0, 4106.0, 4201.0, 4102.0]
SPY Combo: [404.67, 407.15, 410.04, 419.55, 409.63]
NDX Combo: [13251.0, 12710.0, 12916.0, 13123.0]
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