AM Report on Gamma Positioning, Valuations, and the Auction Process

Click on thumbnail to enlarge image of today’s data.

  • Dark pools still buying, long gamma remains high.  Fed Minutes coming up on Thursday.
  • Those overpriced 3300 calls (initially long 12/13) saw substantial profit-taking.  2670 puts (initially short 11/7) were covered.
  • While some selling into the new year is to be expected, yesterday’s fall in $SPX was driven primarily by selling in Technology, especially AMZN, FB, MSFT, GOOGL, and AAPL.
  • More importantly, Financials (XLF) held up relatively well, losing only a third of what $SPX lost.
  • Volatility’s uptick was a pure function of $SPX options.  While $VIX options sizzled, trading 2.03x their 5-day average …there was relatively little change in the volatility of volatility (VVIX).
  • Implied Correlation (ICJ) saw an uptick but stayed within its range.

Taken together:  So far, there is insufficient data to support a short bias in $SPX.  Barring a geopolitical shock, the following factors would support a more bearish outlook:  1) coincident signals in DIX-GEX-TSMOM, 2) a concomittant rally in /ZB and selling in the Financials sector, 3) an increase in VVIX and ICJ.