SpotGamma™

S&P 500 Stock Market Gamma Trading Levels Based on Options Open Interest

Fed Day Market Move from a Gamma Perspective

Equity markets had an incredibly volatile day on 7/31/19 triggered by actions of the Federal Reserve. Its our view that the moves were exacerbated by the positioning of dealers in S&P 500 options. A quick wave of selling entered the markets just above 3000, pushing the market under our “volatility trigger” level of 2995. At this level we calculate that dealers were short gamma and therefore traded in large size, fueling the downside move.

SpotGamma start of day SPX report detailing major SPX levels.
SpotGamma start of day SPX report detailing major SPX levels.
SPX market crash explained by Spot Gamma open interest model. Chart courtesy TradingView.com
Short Volatility was triggered at the 2995 level, causing a major move lower. Chart courtesy TradingView.com
SPY vs QQQ during market crash on 7/31/2019 Fed Meeting. Chart courtesy TradingView.com
Comparison of SPY with high open interest and QQQ with lower open interest. The SPX/SPY complex will have a stronger mean reversion tendency over QQQ due to larger open interest. Chart courtesy TradingView.com

There was a very large amount of volume supplied in this period as seen in the chart below.

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