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SpotGamma Quarterly Report Card: 1H'23


Market Synopsis: Q2 2023

Q2’23 begin with a lift as April earnings season and economic data continued to show signs of strength with a 1.6% S&P 500 return. In May, we saw mostly sideways trading, as another fed funds rate increase of 25bps helped hold in market enthusiasm resulting in a nearly flat monthly return. In June, GDP estimates exceeded expectations and investors started another upswing in buying equities leading to a 6.4% monthly return and 8.3% for the quarter.

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

04/03 - SpotGamma Anticipates a Period of Consolidation
05/17 - Popular Megacaps Are in a Position to Lead a New Rally
06/15 - Structural Weakness is Expected After Today (Triple Witching)

SpotGamma Key Market Analysis


4/3 - consolidation coming

SpotGamma Anticipates a Period of Consolidation

“Because the Call Walls rolled higher our models are not officially "overbought", but we maintain our view of consolidation to start this week. This led to 5 weeks of trading in a narrow window before the next breakout.

5/17 - megacap rally

Popular Megacaps Are in a Position to Lead a New Rally

“The upside cap for SPX remains at the 4200 Call Wall, and we continue to favor the popular mega-cap tech names to express upside.” Next, these are the names which led the following strong market performance.

6/15 - Weakness expected

Structural Weakness is Expected After Today (Triple Witching)

“We have been looking for a window of weakness to open into and after this expiration… The argument for a pull back now is of course driven by today's expiration, which now sees a massive amount of call delta's set to expire which could in turn reduce upside momentum.” This resulted in a short term pull back in equities.

1/11 - upside reversal

SpotGamma Calls for an Upside Reversal to start 2023

"Recently we have been discussing the chance of a very strong January rally." The result was a 6% increase to the end of January. This interrupted a full year of bearish momentum from 2022, which closed near the low of the year.

2/15 - temporary dip

A Temporary Dip Should Be Expected

"We have seen a shift lower in the SPX Call Wall to 4150 SPX, which is a bearish signal." This bearish signal proved to be ideal timing. There was initially a fakeout at the open where it rose higher, but this was the last frothy day, and the market sold off for a full month until it hit the bottom for the year.

3/13 - go long

Time to Transition Long

"From the trading perspective, you cannot rule out overly-exaggerated rallies, and ultimately there is plenty of fuel to run this market back up into the 4000-4100 area." This day ended up marking a turning point as being the low point before a very strong and extended rally.



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.


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.”


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. 


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.


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%


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.


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.


Look Out For the “Sucker Punch” Rally Reversing Lower

Markets had rallied on the back of short-dated (and even many same-day options). We warned that we had seen this before, and the markets were susceptible to a sharp short-term decline. The market dropped by 4pct over the rest of the week.

12/12 - Post-CPI Thrust to Fail

SpotGamma Beats Banks to the Forecast

SpotGamma's call that the CPI market move would be crushed was a unique one, and turned out to be spot on. As a result, a large bank (Goldman) shifted their view to match that of SpotGamma, heading into a giant options expiration.

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]