The following is a guest post from Doug Pless.
When I plan to trade ES futures during the day, I begin my morning preparation by reading the SpotGamma AM Report (which looks like this). The report provides commentary on overnight shifts in gamma levels for SPX as well as many key metrics including the following:
- Anticipated trading range for the day,
- The SpotGamma Gamma Index: This is a proprietary measurement of the total amount of Gamma in the underlying asset, and
- Gamma Notional for SPX and SPY: The sum of Call Gamma – sum of Put Gamma.
With this information, I can anticipate the volatility and trading range for the day.
The report also provides updated gamma levels including the Volatility Trigger, Zero Gamma, Call Wall, Combo Levels, etc. These levels are automatically updated on my Bookmap chart every morning through a Cloud Notes link (futures trading links are available to SpotGamma Advanced and SpotGamma Pro subscribers).
As seen below, I draw a white dashed line at these levels on my chart to increase visibility as shown in the image below of ES on Friday, July 23. In my experience, these levels consistently act as support, resistance, and price targets as shown in the image.
A trade example from Friday, July 23
Knowing that the AM Report noted SPX 4382 (ES 4371, Combo L5 level) as “large support,” I anticipated a reversal at that level.
The level held and market maker hedging flow shifted from bearish to neutral to bullish as shown on The HIRO Indicator below, confirming the move higher.
Aggressive buyers started buying just above the Combo L5 support level as shown by the green dots in the Bookmap chart. Ideal long entries were 4076-4078 from just after 10 AM ET to 10:25 AM.
The Call Wall at SPX 4400 (ES 4391) and the large gamma Combo L1 level at SPX 4404 (ES 4395) were the first and second profit targets. The ES 4400 round number level was a final profit target.
For further definitions and information on the terms used in this article, please see the SpotGamma Support Center for a list of dozens of SpotGamma proprietary terms, as well as context for common market terminology.
SpotGamma Products Used: