$SPX: A Look at the Options Data from Friday, Dec 6

Key Points

    • Long gamma continues to suppress volatility, although GJR-GARCH predicts a small increase in volatility on Monday.
    • Current levels of long gamma exposure support MMs buying as prices decline and selling as prices rise.
    • Estimated level where long gamma could flip to short gamma, accelerating selling and incentivizing CTAs to monetize profits: 3082-3065 (highest OI at 3075).

Implied Move (blue lines):

    • 3185.00 High
    • 3106.50 Low

In the absence of a macro shock:

    • Level to sell calls (shaded red):  3200 (prob touch ~36%)
    • Level to sell puts (shaded red):  3100 (prob touch ~56%) [past]

Current probability of price declining to gamma “flip” point at 3075 (shaded yellow):  ~15%

Friday’s large lot trades:

    • 1800 puts previously sold at 3100 partially covered (bearish)
    • 2700 calls sold at 3200 at day’s high (bearish)