Macro Theme:
- A sustained rally is unlikely to occur until May 4th which holds the FOMC & Russian default. Due to these events, volatility (i.e. large puts) is unlikely to be meaningfully sold. This prevents an extended rise in equities.
- We see substantial, longer-term support at 4050.
Daily Note:
Futures are trading at 4190 up from overnight lows of 4135. Our volatility estimate remains in line with yesterday: 1.2% open/close for the S&P500. Resistance is at 420 SPY/4200SPX, followed by 4250. Support lies at 4100.
While 4200 support put up a solid fight yesterday, it failed into the close. This was spurred on by major weakness in tech. This was headlined by the -12% decline in TSLA, but heavy selling was across the board. As many of you are well aware, the top member weightings in the S&P500 are tech.
The big takeaway from an options perspective is the “roll down” continues – a signal that options traders are accepting these lower prices. Yesterday AM we discussed the map wherein the key level was originally 4400, and that key level shifted down to 4300. Today it appears that flow filled in on the call and put side at 420SPY, and to a lesser extent 4200 SPX. The market is stair-stepping lower, and the options flow is going with it.
It is of note that we are starting to see some chunkier call positions being added in the 4400-4500 area.
Overall, this price action is in line with our expectations and we are still focused on 5/4 as a key date (read here). We continue to view the 4000-4050 area as major options-induced support, and its possible we see the market compress into this level as we approach 5/4/22. A snap back short cover rally could happen rather quickly into 4300, but below 4200 we’re subject to that reflexive feedback loop of dealers shorting which leads to lower prices, and more dealer shorting.
We think the lower the market goes into 5/4, the better the odds of a snapback relief rally. As implied volatility goes higher, traders need increasingly larger moves to justify payoffs. Unless we get a major Russian default and uber-hawkish Fed, there could be a nice bounce higher driven simply from extreme sentiment.
Lastly, together with @TheLastBearStanding we put together a video analyzing Elon Musk’s TWTR loan details, and its potential impact on the stock. Its a rather interesting situation…
| SpotGamma Proprietary Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Ref Price: | 4175 | 4175 | 416 | 13009 | 317 |
| SpotGamma Imp. 1 Day Move: Est 1 StdDev Open to Close Range |
1.22%, | (±pts): 51.0 | VIX 1 Day Impl. Move:2.05% | ||
| SpotGamma Imp. 5 Day Move: | 2.67% | 4271 (Monday Ref Px) | Range: 4158.0 | 4386.0 | ||
| SpotGamma Gamma Index™: | -1.68 | -1.13 | -0.39 | -0.02 | -0.13 |
| Volatility Trigger™: | 4450 | 4400 | 445 | 14000 | 345 |
| SpotGamma Absolute Gamma Strike: | 4000 | 4000 | 420 | 14050 | 325 |
| Gamma Notional(MM): | -830.0 | -897.28 | -1631.0 | -2.0 | -618.0 |
| Additional Key Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Zero Gamma Level: | 4462 | 4497 | 0 | 0 | 0 |
| Put Wall Support: | 4100 | 4100 | 410 | 13000 | 300 |
| Call Wall Strike: | 4750 | 4750 | 423 | 14050 | 321 |
| CP Gam Tilt: | 0.54 | 0.5 | 0.45 | 0.77 | 0.58 |
| Delta Neutral Px: | 4445 | ||||
| Net Delta(MM): | $1,663,177 | $1,576,013 | $186,786 | $42,022 | $115,441 |
| 25D Risk Reversal | -0.13 | -0.1 | -0.12 | 0.0 | -0.17 |
| Call Volume | 485,618 | 582,692 | 2,615,219 | 8,117 | 1,703,622 |
| Put Volume | 872,774 | 1,186,435 | 3,715,388 | 4,610 | 1,765,184 |
| Call Open Interest | 4,972,093 | 4,946,543 | 6,080,135 | 46,032 | 4,081,098 |
| Put Open Interest | 9,592,913 | 9,434,983 | 10,534,565 | 49,419 | 6,531,582 |
| Key Support & Resistance Strikes: |
|---|
| SPX: [4400, 4300, 4200, 4000] |
| SPY: [430, 420, 410, 400] |
| QQQ: [330, 325, 320, 300] |
| NDX:[14500, 14050, 14000, 13000] |
| SPX Combo (strike, %ile): [4100.0, 4200.0, 4150.0, 4108.0, 4250.0] |
| SPY Combo: [408.61, 418.6, 413.6, 409.44, 423.59] |
| NDX Combo: [12710.0, 13335.0, 13127.0, 12919.0] |
