ODTE Trader

1/Tomorrow is OpEx. Understanding OpEx is important for traders, this is when options contracts expire and lose their value. This period can significantly impact investment strategies and market movements. Let's break it down a little 🧵

1/ A break below 4650 could easily take us to 4600 tomorrow. At 4600 there is a Put Wall, a lot of put Open interests, which will grow into a larger GEX as/if we approach it. These big levels can often act as an area where price bounces off $SPX

One thing to keep in mind, as we move in negative gamma (slightly at the moment), higher volatility will change the gamma profile of options and its delta. As volatility increases, the gamma curve flattens. In this chart the blue line is the the gamma profile in a low IV environment, while the red line is the gamma curve in a high IV environment. Low Volatility (Blue): The gamma curve should be higher, indicating higher sensitivity of delta to price changes in the underlying asset. Medium Volatility (Green): The gamma curve should be lower than in low volatility, showing reduced sensitivity. High Volatility (Blue): The gamma curve should be the lowest among the three, reflecting the least sensitivity of delta to price changes in the underlying. If you want to go a little deeper, and market dynamics associated with volatility we wrote an article about gamma, delta and vanna here 👇 menthorq.com/guide/vanna/

1/ We look at this chart in conjunction with the $SPX CTA. That is because we know CTAs have trigger levels at moving averages. At this point we broke the 5Day (1). The 20 day SMA (2) is still holding as well as the (50). As we pointed out yesterday, a lot of downside convexity if market hits those levels (2,3)

1 As a reminder to what we said in last night’s thread, SPX is in a positive gex regime, 'forcing' dealers to buy the dip/sell the rip in a slow grind higher manner - particularly if OTM calls keep coming in

1/ Today we continued to see spot hovering around that 4600 strike and with in that 1D expected move, the market continues to be pinned as we get closer to expiration (OpEX). But what is a GAMMA PIN? Let’s break it down tonight 🧵

1/ We closed another week with another rally right at that 4600 level. That level acted as a resistance for most of the day and we then closed slightly above it. Let's check out the data for our Sunday evening wrap 🧵

1/ 🚨Morning Wrap: As we approach the Dec OpEx the GEX pull will increases. Institutions placed their $ as far as a year ago and structured products (ETFs, banks and PMs) have long positions there. Those are illiquid structures in that positions tend to remain there

If we then jump on the Option Matrix, we see another big increase in call gamma tomorrow, another effect that will help keep volatility compressed #SPX

If we look at the NetGex of the $SPX, we see that 4600 is consolidating once more, we are seeing an increase in call gamma check the X axis at the bottom. There was also a big increase above 4800 in the left chart

GS - Dealers are stuck in long gamma. We are seeing some of the biggest long gamma going back to 2019. Note that gamma diminishes mainly on an up move from here, but for now dealers must buy downticks and sell upticks. acting as a stabilizer of moves Source @themarketear