SPX Gamma AM
The SPX is down 1.4 percent this morning, and it certainly tells you something about the fragile state of the market , if a company like Snap is able to turn yesterday’s sentiment on its head.
Over in Asia meanwhile the Nikkei closed 0.9 percent lower and the Hang Seng declined 1.8 percent after mixed Japanese PMIs and a Chinese stimulus package that failed to impress.
On the old continent the Euro Stoxx is down 0.8 percent currently as the (also mixed) PMIs of France, Germany and the UK signaled an economy that is still growing but at a stagnant/slower pace, while ECB rhetoric is turning increasingly hawkish.
Gamma discussion
Implied dealer gamma declined by -126MM to -871MM (SPX reference price 3929), largely as a function of a lower index, but also partly because of some put buying at lower strikes.
4000 remains the main resistance and we continue to see the probability tilted towards lower lows. Support levels can be identified at 3900/3800 and 3700 as those are the strikes with high open interest, which translates into high gamma.
Yes, those large gamma strikes have the ability to pull prices lower as dealers are forced to sell more futures when they get approached, but dealer flows also tend to come to a stop at those levels, which often acts as a signal for other participants to halt selling or even as a buy trigger.
Over in Asia meanwhile the Nikkei closed 0.9 percent lower and the Hang Seng declined 1.8 percent after mixed Japanese PMIs and a Chinese stimulus package that failed to impress.
On the old continent the Euro Stoxx is down 0.8 percent currently as the (also mixed) PMIs of France, Germany and the UK signaled an economy that is still growing but at a stagnant/slower pace, while ECB rhetoric is turning increasingly hawkish.
Gamma discussion
Implied dealer gamma declined by -126MM to -871MM (SPX reference price 3929), largely as a function of a lower index, but also partly because of some put buying at lower strikes.
4000 remains the main resistance and we continue to see the probability tilted towards lower lows. Support levels can be identified at 3900/3800 and 3700 as those are the strikes with high open interest, which translates into high gamma.
Yes, those large gamma strikes have the ability to pull prices lower as dealers are forced to sell more futures when they get approached, but dealer flows also tend to come to a stop at those levels, which often acts as a signal for other participants to halt selling or even as a buy trigger.
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