Understanding the prevailing gamma regime helps traders better anticipate price behavior for the names they trade. On June 9, SpotGamma’s TRACE heatmap showed positive gamma, indicating a lower-volatility, mean-reverting environment as SPX rallied.
After HIRO confirmed rejection off a key level, traders aggressively sold calls and bought puts, forcing market makers to hedge by selling ES futures.
As the gamma regime, structural resistance, and real-time flow all aligned, SpotGamma contributor Doug Pless sold a 7,475/7,480 SPX call spread for a $2.65 credit. SPX closed well below the short strike, allowing the position to expire for full profit.
Author: Doug Pless
Professional Trader & SpotGamma Content Contributor
| The Setup | The Tools | The Execution | The Payoff |
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Instrument: S&P 500 Index (SPX) Options Trade Type: Intraday bearish call credit spread Bias: Bearish continuation within a broader correction Volatility: Positive gamma suggested lower-to-moderate volatility and mean reversion Thesis: A rally into the 7,470 Volatility Trigger from below could fail if options flow remained bearish |
TRACE • Showed SPX opening with positive gamma • Supported a lower-volatility, mean-reverting thesis • Confirmed rejection near the 7,470 Volatility Trigger HIRO • Options activity failed to support the opening rally • Traders shifted to aggressive call selling and put buying • Flow Alert confirmed significant bearish options activity Options Calculator • Modeled the call spread at expiration • Defined maximum profit and risk before entry |
Entry: Sold the SPX 7,475/7,480 call spread for a $2.65 credit Trigger: SPX reached 7,483.15, then rejected below the 7,470 Volatility Trigger, and reversed lower Confirmation: HIRO showed trader call selling and put buying as market makers sold futures to hedge Risk: $2.35 per spread Management: No adjustment required as SPX remained below the short strike |
Expiration Condition: Full profit below SPX 7,475 Intraday Low: 7,237.85 Closing Price: 7,386.65 Reward/Risk: Slightly greater than 1:1 Result: The spread expired for full profit after TRACE identified resistance and HIRO confirmed the bearish reversal. |
- Positive gamma framed the environment, favoring a mean-reversion setup rather than chasing volatility expansion.
- The 7,470 Volatility Trigger acted as resistance, validating the bearish thesis.
- HIRO confirmed the downward move in real time, showing downward dealer hedging pressure as traders sold calls and bought puts.
- The defined-risk call spread expired for full profit, with SPX closing comfortably below the 7,475 short strike.
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