Using the Options Market to Forecast the Stock Market
Knowing the drivers behind market movement is key to establishing, managing or exiting positions. We provide actionable daily options flow data to traders and investors.
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THE USUAL SUSPECTS
Today, most people think the market is driven by just a few factors...
Information such as monthly employment numbers plays a role each time numbers are released.
When quarterly earnings reports are released to the public, the market inevitably reacts.
When the geopolitical climate heats up based on world events, markets shift globally.
Technical analysis like Fibonacci retracement lines aim to predict overarching trends.
Empowering Traders to Identify the Biggest Drivers of Market Movement
Monitoring how derivative traders are positioned, we estimate when and where they may hedge. This provides invaluable insight into:
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At SpotGamma our data is used by top institutions and professional traders across the globe.
High Volume Derivative Market Insights
At SpotGamma we provide:
With a SpotGamma subscription, you'll receive a twice-daily newsletter analyzing key trading levels in the S&P 500, Nasdaq, and equity markets.
Our proprietary SpotGamma Index and option modeling metrics, updated daily.
Exclusive access to the SpotGamma Equity Hub™, giving you instant access to our models for over 3,500 individual stocks & ETFs.
Could gamma really be the key to my new trading edge?
Positive gamma = less volatility + positive skew returns
Total Market Gamma is the metric most people are familiar with. Studies have show that when total gamma is >0 the market tends to have smaller price distribution, with a slightly positive average daily return. When gamma is <0 the price distribution widens out substantially and we estimate a negative average daily return. Said another way: things get more volatile when gamma is negative.
This may mean that you select a different trading style depending on the market gamma levels. We think that markets with high positive gamma tend to be mean reverting with a tight trading range. Negative gamma markets may feature wide price changes with more of a directional basis.
Returns of trading by using zero gamma. On February 24, 2020 gamma flipped negative signaling the possibility of large volatility.
The SpotGamma model is based on the options open interest in the major equity indices. The data is downloaded and calculated each night to produce actionable trading levels.
SpotGamma produces price levels and triggers which can be overlaid on just about any trading strategy:
Our proprietary option models seek out key support and resistance areas based on large options positions. By understanding when options dealers are estimated to adjust hedging, you may be able to anticipate movement in the underlying stock.