Futures have recovered from Friday’s losses, trading near 3955. Heavy resistance holds at 4000-4010(SPY400). 3960(SPY395) – 3950 is a pivot level, with 3910 (SPY390) – 3900 support.
We continue to mention large SPY levels as many of them are >= equivalent SPX levels.
While markets have recovered from Fridays vacuum-move lower, the mechanisms to produce similar moves are still in place. This should continue to produce large directional swings within the 3900 (put Wall) to 4010 (400 SPY Call Wall) box.
Note our 3900 Put Wall has not shifted for several sessions despite the tests lower. This implies low Index put activity. The other interesting note is our 4005 Call Wall is the call strike of the JPM collar, which expires on 9/30. We continue to see the 4000/4005 level as important in through month-end.
The other key data we’re reviewing this morning sources from the OCC. For the second week in a row there appears to be very large equity put buying from institutional players (these are transactions which are 50 lots or more). This put buying is not a retail/small trading lot phenomenon.
Placing this flow in context, we’ve plotted below total customer options flow – this is all trades from entities like retail & hedge funds. You can see the surge in equity puts (yellow) and sharp decline in equity calls (blue).
This is the strongest level of equity put buying in the data going back to 2018.
Further, there is a continued increase in both Index (red) and ETF (brown) puts.
We’ve consistently been of the view that for markets to materially rally, call positions have to be laddered in at strikes above. However, both the above data from the OCC & our proprietary data see little in the way of call buying.
To this point, that 4005 Call Wall is really rather weak. Its more of a wall through attrition, wherein there is little in the way of material net calls at any other strike. As shown below the positive bar at the 4005 line is smaller than all other material strikes (ex: 4000, 4100, 4200).
On the flip side (equities aside) the put buying appears to be increasing. However, we are not seeing the Put Wall roll to lower strikes. Further, our risk reversal metric (-0.06) indicates little demand for further put side protection.
Because implied volatility (i.e. VIX) is elevated, and gamma is negative across off indicies/ETF’s we should continue to see large trading ranges. The downside may currently be contained as we do not forecast lower markets until/unless the Put Wall shifts down. Further, we mark that bulls regain the edge if the S&P closes back above 4000.
| SpotGamma Proprietary SPX Levels | Latest Data | SPX Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Ref Price: | 3925 | 3925 | 392 | 12098 | 295 |
| SpotGamma Imp. 1 Day Move: Est 1 StdDev Open to Close Range |
1.1%, | (±pts): 43.0 | VIX 1 Day Impl. Move:1.61% | ||
| SpotGamma Imp. 5 Day Move: | 2.92% | 3925 (Monday Ref Px) | Range: 3811.0 | 4040.0 | ||
| SpotGamma Gamma Index™: | -1.26 | -1.26 | -0.39 | -0.01 | -0.17 |
| Volatility Trigger™: | 4000 | 4000 | 400 | 12850 | 310 |
| SpotGamma Absolute Gamma Strike: | 4000 | 4000 | 400 | 12500 | 300 |
| Gamma Notional(MM): | -721.0 | -720.62 | -1958.0 | -2.0 | -1102.0 |
| Additional Key Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Zero Gamma Level: | 4084 | 4084 | 409.0 | 12252.0 | 321 |
| Put Wall Support: | 3900 | 3900 | 390 | 11000 | 290 |
| Call Wall Strike: | 4005 | 4005 | 420 | 13250 | 325 |
| CP Gam Tilt: | 0.7 | 0.67 | 0.5 | 0.87 | 0.43 |
| Delta Neutral Px: | 4042 | ||||
| Net Delta(MM): | $1,689,964 | $1,689,964 | $205,938 | $44,711 | $104,056 |
| 25D Risk Reversal | -0.06 | -0.06 | -0.06 | -0.06 | -0.07 |
| Call Volume | 484,792 | 484,792 | 2,356,175 | 7,435 | 857,547 |
| Put Volume | 974,825 | 974,825 | 3,261,742 | 13,441 | 1,128,172 |
| Call Open Interest | 6,299,057 | 6,299,057 | 7,540,839 | 64,907 | 4,357,513 |
| Put Open Interest | 10,389,375 | 10,389,375 | 12,451,279 | 73,204 | 7,063,279 |
| Key Support & Resistance Strikes: |
|---|
| SPX: [4000, 3950, 3900, 3800] |
| SPY: [400, 395, 390, 380] |
| QQQ: [310, 300, 295, 290] |
| NDX:[13250, 13000, 12500, 12000] |
| SPX Combo (strike, %ile): [3902.0, 3851.0, 3953.0, 4000.0, 4008.0] |
| SPY Combo: [389.89, 384.79, 394.99, 399.69, 400.48] |
| NDX Combo: [11881.0, 12292.0, 12086.0, 12219.0] |
