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#Macro – $SPX, $VIX
- RTM: Still Grinding
- RTM: Sleepy End Of Year?
- Realized Vol On The Rise
- RTM: Long-Term Outlook Update
- RTM: What Went Wrong In 2023
Anyway, I took half a day off today to spend time with my family, and I did family things in New York City in the rain. But I think I paid attention to the day’s main points and understood what was happening well. It appears that tomorrow has turned into a mini-monthly opex and could serve as a mini-turning point.
According to Gammlabs, the net gamma in the S&P 500 right now is about $625 billion, and tomorrow, 33% percent will expire, or $207 billion. All things being equal, the total gamma should be $418 billion after tomorrow, down from a sizeable $1.5 trillion at the December 15 opex. As gamma levels in the S&P 500 fall, the market tends to become less stable, and when it flips into negative gamma, that is when volatility picks up; the market slips into negative gamma when the S&P 500 falls below the 0 gamma level.
Currently, the zero gamma level is around 4,750, and the level with the largest amount of gamma comes at 4,800. Essentially, at this point, the S&P 500 is stuck between the zero gamma level and the absolute gamma level. That is why the market has been pinned and just stuck.
Also, tomorrow will be the infamous JPM collar expiration date for the call at the 4,510 strike price and the creation of a new collar for the March end date. I have no idea how this would or could impact trading tomorrow, but generally, we can see strange and observable swings in the market during the day due to this.
At this point, the S&P 500 is very close to breaking the rising wedge pattern. If it breaks the pattern, the market is certainly overbought enough that we could see a sizeable move lower, especially given that we flip into negative gamma at 4,4750, which would increase volatility and most likely cause a spike in the VIX index, especially given how low the VIX is.
I often talk about windows of opportunities for the market, and with the year-end, tomorrow based on how the options market is positioned and the slew of data due next week. The window of opportunity for the Bears to take the ball back will be open probably for the next week or so.
Next week, things will return to normal regarding my schedule and write-ups. Until then, have a happy new year. I am looking forward to a better and more exciting 2024.
Charts used with the permission of Bloomberg Finance L.P. This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.