Macro Theme: |
Key Levels: |
| >We expect the passing of 11/8 elections to be supportive of equities >IV is extremely elevated for 11/10 CPI, and that data point likely sparks a second directional trend into Nov OPEX (11/18) | Ref Price: 3769 SG Implied 1-Day Move: 1.0% SG Implied 5-Day Move: 3.15% Volatility Trigger: 3780 Absolute Gamma Strike: 4000 Call Wall: 4100 Put Wall: 3600 |
Daily Note:
Futures are higher to 3800. Key SG levels are largely unchanged. Support shows at 3780 (Vol Trigger), then 3755 (SPY 375). Resistance lies at 3833 & 3850.
Last week, we were on the lookout for the market to extend its post-FOMC downside trajectory to 3600, but put sellers stepped up and formed 3700 support. You can clearly see this behavior implied by the VIX which made lower-lows as equities dropped to 3700. This change in flow, as we outlined on Friday, led us to remove our downside 3600 target, opting to assign an edge to a higher markets.
This week holds two major events which are linked to some high event vol. First, are the 11/8 elections, and as it is a mid-term election we think there is little near term impact. As a result the event vol is likely sold, which supports markets into Thursday.
Thursday is the big CPI print. Over the last two weeks we covered the backwardated state of IV into FOMC, and how the Fed could trigger a shift in that curve (video here) as traders adjusted to new guidance. Initially, we saw longer dated IV shift higher as the market dropped to 3700. However, what seems to have happened now is that traders have punted their “hawkish Fed” concerns to Thursday CPI. You can see this in the plot below, wherein the have current IV (yellow) peaking on Thursday. CPI is, and lately has been, the new FOMC.
This leads us to look for those very active short dated options traders to sell pre-CPI vol, which should support markets. We will then see Thursdays CPI reading as most likely triggering a large directional move into 11/18 OPEX.
Why? That elevated IV from above does not have another near term data point to latch onto (like CPI out of FOMC). Therefore the short term backwardated IV either has to release as fear subsides, or equities have to drop hard to justify the volatility implied by these elevated IV levels.
Second, Nov Monthly OPEX has fairly sizeable options positions. Time is going to move forward and either burn up the $200bn delta notional in big index/ETF put values (leading to a market rally), or start fueling a strong market decline with more negative gamma.
| SpotGamma Proprietary SPX Levels | Latest Data | SPX Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Ref Price: | 3769 | 3766 | 376 | 10857 | 264 |
| SG Implied 1-Day Move:: | 1.0%, | (±pts): 38.0 | VIX 1 Day Impl. Move:1.55% | ||
| SG Implied 5-Day Move: | 3.15% | 3900 (Monday Ref Price) | Range: 3778.0 | 4023.0 | ||
| SpotGamma Gamma Index™: | -0.55 | -1.31 | -0.25 | 0.01 | -0.10 |
| Volatility Trigger™: | 3780 | 3780 | 376 | 11000 | 275 |
| SpotGamma Absolute Gamma Strike: | 4000 | 4000 | 375 | 11050 | 270 |
| Gamma Notional(MM): | -392.0 | -466.0 | -1312.0 | 3.0 | -745.0 |
| Put Wall: | 3600 | 3600 | 360 | 10500 | 260 |
| Call Wall : | 4100 | 3835 | 395 | 11050 | 282 |
| Additional Key Levels | Latest Data | Previous | SPY | NDX | QQQ |
|---|---|---|---|---|---|
| Zero Gamma Level: | 3844 | 3841 | 387.0 | 10440.0 | 296 |
| CP Gam Tilt: | 0.85 | 0.77 | 0.64 | 1.25 | 0.56 |
| Delta Neutral Px: | 3881 | ||||
| Net Delta(MM): | $1,675,113 | $1,725,451 | $188,946 | $41,322 | $95,929 |
| 25D Risk Reversal | -0.04 | -0.04 | -0.03 | -0.02 | -0.02 |
| Call Volume | 586,609 | 545,634 | 2,310,078 | 10,607 | 885,828 |
| Put Volume | 1,093,310 | 1,027,763 | 3,421,802 | 8,472 | 1,149,980 |
| Call Open Interest | 6,628,695 | 6,654,975 | 8,022,566 | 67,276 | 4,890,288 |
| Put Open Interest | 11,284,958 | 11,393,899 | 13,586,798 | 55,143 | 6,627,073 |
| Key Support & Resistance Strikes: |
|---|
| SPX: [4000, 3900, 3800, 3700] |
| SPY: [385, 380, 375, 370] |
| QQQ: [275, 270, 265, 260] |
| NDX:[12000, 11500, 11050, 11000] |
| SPX Combo (strike, %ile): [(3950.0, 78.12), (3897.0, 84.83), (3848.0, 75.17), (3833.0, 84.98), (3829.0, 77.24), (3814.0, 73.31), (3750.0, 78.78), (3724.0, 78.0), (3705.0, 75.76), (3698.0, 93.66), (3675.0, 82.99), (3649.0, 92.91), (3622.0, 79.04), (3603.0, 78.25), (3600.0, 95.55)] |
| SPY Combo: [359.41, 369.2, 364.31, 382.75, 389.15] |
| NDX Combo: [11052.0, 10662.0, 10868.0, 11074.0, 10455.0] |
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