JPM says that liquidity disappears as VIX spikes. This seems to make intuitive sense. The fact that the VIX is higher means the market is pricing in larger moves which means dealers don’t want to get stuffed with large trades as the market rips through them. This chart doesn’t tell us what level this depth […]
Market Analysis
Gamma Market From 8/16/19
Volatility will continue to reign until (if) the market recaptures 2920. There is a ton of fuel ready to burn and one headline (or tweet) will send the market flying. The only recommendation that is safe here is to not sell any options, being short volatility is very dangerous here, as a >3% rally is […]
Dealers Running Out of Gas 8/16/19
After a sharp rally this morning the S&P500 stands at ~2890. This is where dealers buying starts to soften up. You can see their volume profile in the chart below. They were strong buyers up to this level but we calculated 2891 as the level where their buying wanes and 2920 where they flip to […]
Dealer Futures Flow 8/14/19
Here is a chart estimating the futures action with the S&P500 at 2850. If markets head lower it looks like dealers will sell more futures, compounding the move down. The same works in a rally, but instead of selling those dealers will be buying. All this flips when/if the market moves over the VFLIP line […]
VFlip Strikes Again 8/13/19
Like Haden warned us, based on ASDFG levels, on 7/31 markets broke under the VFLIP Volatility Indicator, triggering a market environment market by high volatility. As you can see that proved true with >10 days in a row with a >1% move. With a major options expiration at the end of the week there should […]
SpotGamma Trading Levels Vs Nomura
Here is a report from Nomura compared to the same days market forecast from SpotGamma.com. Notice the “zero gamma” levels are the same in both reports at 2935 in the S&P500. We call the “zero gamma” level “volatility trigger”. Using this level can help forecast the level of stock market volatility. Under this market price […]
Nomura: Volatility Crush Market Options Gamma on CNBC
Nomura analyst on CNBC discussing how dealer gamma effects the equity market. He mentions the large open interest in the VIX (“50 Cent”) and how a volatility crush could spur an equity rally. This is because (as seen through the SpotGamma model) a drop in volatility forces dealers to rehedge through buying stocks. As the […]
Volatility Trigger INDICATOR KEEPING LID ON MARKET 8/9/19
SpotGamma calculates the market level at which options dealers gamma position flips from long to short. We call this the “VOLATILITY TRIGGER” indicator. Below this S&P500 price dealers trading can increase market volatility, and over this level their trading may damped volatility. You can see over the last two days the markets drove hard into […]
Stock Markets Gamma Squeeze 8/6/19
After several days of selling the S&P500 and other stock markets gamma squeeze higher. It appears to be a gamma squeeze play as options dealers were most likely forced to buy back short hedges. As implied volatility (e.g. VIX) goes down and put options are sold the delta of out of the money put options […]
SpotGamma Update 8/5/19
Our market model has dealers short gamma with the market below 2950. This means that dealers will push the market further in its prevailing direction. If the market is selling then dealers will push is lower. It also means that when the market snaps back up it will be a violent move.