SPX Gamma EOD
Growth/value rotation continued today, but SPX was able to stabilize and ended the day on a positive note. Total gamma decreased from yesterday by 25M to 343M, but compared to the gloomy noon update which identified only 163M gamma notional this was a solid intraday reversal. Lots of gamma came into the afternoon at the 4750 strike (+11M) and other OTM strikes like 4775 (+7M), or 4800 (+7M) also saw significant increases. Gamma inversion occurs at 4620.
I want to point out a noteworthy dynamic that played out today. As i pointed out in the noon update, prices were sitting on a cluster of put barriers (PBs) and were able to stabilize there. PBs in itself are not a direct support to the market, but they can act as sort of a "launch pad" for reversals. As prices close in on a PB coming from above, dealers have to hedge their short put position by selling futures. If the momentum exhaust itself and volatility decreases (as happened today), these hedges need to get reduced and dealers buy back futures. Ideally prices can snap back above the initial PB and build upward momentum from there.
I want to point out a noteworthy dynamic that played out today. As i pointed out in the noon update, prices were sitting on a cluster of put barriers (PBs) and were able to stabilize there. PBs in itself are not a direct support to the market, but they can act as sort of a "launch pad" for reversals. As prices close in on a PB coming from above, dealers have to hedge their short put position by selling futures. If the momentum exhaust itself and volatility decreases (as happened today), these hedges need to get reduced and dealers buy back futures. Ideally prices can snap back above the initial PB and build upward momentum from there.
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