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SpotGamma Quarterly Report Card: Q3 2022

SpotGamma-Q3-2022-Quarterly-Report-Card-

Market Synopsis: Q3 2022

Q3’22 was another volatile quarter. In July, despite concerns about runaway inflation and economic uncertainty, the S&P 500 ended the month up around 9%. In August, the equity strength continued through the first half of the month, supported by the call option complex. However, when options expired mid-August, the market lost its footing and paired with a tight Fed outlook from Chairman Powell, the S&P dropped more than 4% for the month. In September, following the 75bp rate hike, the markets experienced increased volatility and the S&P fell by more than 9% for the month.

During this period, SpotGamma provided three meaningful key correct analyses during critical times in the quarter that reflect both bullish and bearish guidance. These include:

7/19 - Equity Markets Could Rally into VIX Expiration
8/15 - If The S&P 500 Stalls at 4300, Look Out Below
9/21 - The FOMC Can Send the Market to 3580 in Ten Days

SpotGamma Key Market Analysis

Q3 2022
q2 2022
q1 2022

7/19 - VIX EXPIRY RALLY

Equity Markets Could Rally into VIX Expiration

In our AM Founder’s Note, we alerted our subscribers in our “What to Watch” section that we could see strength as, “Equity Markets may jump into the Wednesday, July 20, 2022 VIX Expiration.” We then suggested that as, “Today is the last trading day before VIX expiration, and this day has been associated with strength in the recent months”, with our levels indicated a break above 3900 will then allow for the market to run higher. What followed was a near 3% move higher into the FOMC meeting the following week, exactly matching the SpotGamma expected 5-day move of 3.05%.

8/15 - large move downward likely

If The S&P 500 Stalls at 4300, Look Out Below

We alerted our subscribers that heading into the August 19th monthly options expiration, we expected to see $4300 on the SPX act as significant resistance. If this level cannot be breached to the upside, we would expect to see a large move downward. Next, the market dropped hard, and it only took 10 days to retest our $4000 SPX Put Wall level.

9/21 - post-fomc drop expected

The FOMC Can Send the Market to 3580 in Ten Days

On this day, traders were waiting for a major FOMC announcement at 2 PM ET. Our AM Founder’s Note projected that we could see a large move lower as we, “highlight 3580 as a major downside level into the end of the month."  The FOMC spooked markets, and over the next ten days we saw the market drop to ~3580 at the end of September.

4/19 - VIX EXPIRY RALLY FADES

Options Expirations Remove Supportive Positions and Create Downside Risk

In our daily Founder’s AM Note, we alerted our subscribers that we see a likelihood for market weakness.  Specifically, mean reversion back into 4400 is quite possible, and we give edge to that scenario as VIX expiry & S&P expiry removes supportive options positions. What followed was a -2% drop in SPX within 2 days, and -7.5% into month end.

5/4 - PROJECTed SELLING AHEAD

Look Out Below as the SG Vol Trigger Breached and the SG Call Wall Holds Strong

We alerted our subscribers that our proprietary metric, the SpotGamma Vol Trigger, moved lower as well as our resistance level dropped from 4400 to 4300.  If the market failed to recover above the 4300 level, then we could see a quick test of 4000-4050. The market hit 4300 that day, then sold off -8.5%

6/3 - INVESTORS BACKING AWAY 

Short-term Volatility is Shrinking as we Approach a Risky Period  

Subscribers were alerted that there was only more week before the big VIX expiration / FOMC / OPEX window, and that the value of short-dated volatility was shrinking. As such, we offered the opinion that these next few sessions could be an advantageous time to consider some downside insurance. The market declined 10% from our recommendation into June OPEX.

1/14 - JANUARY OPEX CRASH

SpotGamma Models Indicate Net Options Delta Expiration at Over $125 Billion

SpotGamma based its case on the expiration of deep in-the-money calls as a catalyst for volatility.

1/25 - THE LOWER BOUND

After Historic Stock Market Reversal, SpotGamma Calls Arrival at Lower Bound

After some extreme move in equities, SpotGamma called for the market hitting its lower bound. The put positions that were on, in a way, became fully hedged which may have resulted in a violent “snap back rally.”

3/11 - FOMC MARKET RALLY

Brent Calls for Market Rally Ahead of March OPEX on the Contrarian Investor Podcast

On the Contrarian Investor Podcast, Brent discussed how options hedging may impact stock prices, and why he thought markets may rally into the following week's options expiration, 3/18/22. 

Brent Calls for Market Rally Ahead of March OPEX on the Contrarian Investor Podcast

March 11, 2022

On the Contrarian Investor Podcast, Brent discussed how options hedging may impact stock prices, and why he thought markets may rally into the following week's options expiration, 3/18/22. 

Markets did, in fact, rally [OTHER COMMENTARY]

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