GammaLab

GammaLab

I do not have much time tonight and there might be or might not be a full EOD update, so here is a quick note without much commentary regarding the current gamma situation. Today the market was a classical example of "gamma strike hopping" and currently the S&P 500 is pushing into the 4700 strike. Most open interest is located here, so this will be an important...

GammaLab

Today's price action was a continuation of the impulse that started yesterday around noon (see our last EOD update) and driven by the belief that the US will not blow Omicron out of context (like parts as Europe), as Biden reassured markets that the US is "absolutely not" going back to March 2020 in terms of lockdowns. The S&P 500 was certainly boosted today by...

GammaLab

Last post (for today) in the context of my sporadic coverage of the european energy debacle. The chart displays the German baseload future for electricity deliverable in February and the development is absolutely insane. What in the what is the market pricing in here?? A russian invasion? Omicron related shutdowns of the entire energy sector? Anyways. I hope folks...

GammaLab

I eventually got tired to post those crazy natgas charts, but this one deserves another mention. Europe heading for an outright energy disaster.

GammaLab

The S&P 500 closed 1.1 percent down at 4568 points on Monday. Most losses accumulated in the overnight session, due to new Covid restrictions in Europe and also worries that Senator Joe Manchin is likely vote No Bidens fiscal measures. Around noon the picture started to brighten up, since it became increasingly clear, that the US are not going to follow Europe...

GammaLab

To give my readers a glimpse how I derive my levels "behind the scene": Here is a typical chart with the current gamma distribution across all strikes from where I then distill my Tradingview charts. As you can see 4550 is crucial. If markets fall below dealers have to up their gamma hedges via the selling of additional futures.

GammaLab

The market lost about one percent today and we are back at about the same level shortly before the FOMC statement Wednesday. Interesting enough, that the front end as well as the long end of the yield curve both lost about eight basis points from their post-FOMC highs, which is hard to reconcile with a booming economy, accelerating tapering and a series of yield...

GammaLab

Today's market action made it clear, that yesterday`s rally was indeed a option flow driven squeeze and had not much credibility to it. Traders dumped what got bid yesterday (growth) and vice versa. Check out the ticker pairs SPYG/SPYV or MGK/RSP for more insightin your favorite charting software (hopefully Tradingview). The gains in the cyclical sectors, the...

GammaLab Updated 

Crazy times. In the morning traders were circulating a very hawkish piece from uber-dive Kocherlakota and preparing for a major taper tantrum, but after all was said and done, dips were bought especially in the mega-cap/growth spectrum and the S&P 500 closed 1.6 percent higher. The FOMC statement itself was very hawkish as expected and send yields on a explosive...

GammaLab

I speculated yesterday that it is to be seen if yesterdays squeeze-like move can be sustained. Well, at least under the hood of the market it it seems like it can't. Mega Caps get sold after they moved higher yesterday post-FOMC, while the broad basket gets bid up. Similar situation over at the FI complex: Yields come down as we speak as if the FOMC never happened.

GammaLab

I have not much time to add a lot of color on Tesla, but to provide some continuity and to honor the crazy move, here is a chart with some basic levels. 1000 should be a pin. Please see chart.

GammaLab

Futures are trading sideways as expected, and there is not much vertical movement to be expected before today FOMC statement. Markets are pretty much "in neutral". Above 4640 gamma turns positive and above 4650 (that is a new gamma level that was added overnight) markets are supported by a "option dealer put". A word of caution: The Feds decision today is an...

GammaLab

The S&P 500 lost 0.8 percent on Tuesday, as markets got concerned about red hot inflation data, which will certainly put even more pressure on the Fed to accelerate the taper. Value (-0.1%) outperformed growth (-1.2%), or another way to express a similar dynamic: Mega caps lost relatively to a equal weighted S&P 500 basket (Vanguard Mega Cap Growth MGK -1.3% vs...

GammaLab

Quick S&P 500 gamma update. Levels are pretty much the same, but weights differ a little bit. Please see chart for additional details.

GammaLab

Growth is down 1.93%, while value is down only 0.17%. This suggests that the current rut can still be characterized as a rotation rather a broad sell-off. Should vol spike higher this can of course change quickly.

GammaLab

Slightly offtopic put this is once again epic: European natgas is exploding higher again, after the new German government blocks Nord Stream 2. I am posting this, because it will have profound implications not only politically but also for the EZB/other CBs and their monetary decisions.

GammaLab

As I mentioned in my last update, markets seem to be pretty surprised about PPI inflation, which is in itself "surprising" IMHO. Dealer are net gamma negative by about 170M, which points to a high-vol environment. Also, from a gamma perspective there is not much support between 4640 our current price and 4450 where -25M gamma notional is located. Be careful...

GammaLab Updated 

The S&P 500-Future is breaking below our main put barrier at 4650 because inflation (PPI) is surprising to the upside. Dealer gamma is net negative, we could be in for a volatile session. I'll post a new gamma update shortly.