SPX Gamma Wrap
The SPX remained relatively unchanged after a choppy session and closed 0.2 percent higher, while 10Y note yields jumped five basis points to 2.836 percent, and the VIX closed at an elevated level of 31.6 percent.
In terms of geopolitics Putin threatened western nations with “lightning fast” response via “tools no other nations has” (hypersonic nukes), should an unacceptable threat emerge, while Germany now officially seems to support an oil embargo, even though consumer sentiment dropped to a new record low today.
In the US pending home sales declined for the fifth month in a row in March amidst the steep rise in mortgage rates (see chart). Given that mortgages were about 100 basis points cheaper back then, there is certainly a lot more pain to be expected in the housing market in the coming months.
https://www.tradingview.com/x/I0FRi0s2/
With minus 981MM notional, dealer gamma is still at extremely negative levels, even though it improved a little.
Put options with a strike of 3700 saw high volume today, which suggests that portfolio managers were actively hedging with deep out-of-the-money puts despite their rich price.
On Friday gamma representing about 20 percent of total gamma will expire with most contracts getting killed at 4100, but also lots of in the money puts, which could be rolled lower and cause more trouble.
The OPEX event will be accompanied by a huge batch of data that will start to hit the market tomorrow (German inflation, GDP, initial claims) before Friday will shed more light on PCE inflation and the UnMich Consumer Sentiment.
Prepare for vol.
In terms of geopolitics Putin threatened western nations with “lightning fast” response via “tools no other nations has” (hypersonic nukes), should an unacceptable threat emerge, while Germany now officially seems to support an oil embargo, even though consumer sentiment dropped to a new record low today.
In the US pending home sales declined for the fifth month in a row in March amidst the steep rise in mortgage rates (see chart). Given that mortgages were about 100 basis points cheaper back then, there is certainly a lot more pain to be expected in the housing market in the coming months.
https://www.tradingview.com/x/I0FRi0s2/
With minus 981MM notional, dealer gamma is still at extremely negative levels, even though it improved a little.
Put options with a strike of 3700 saw high volume today, which suggests that portfolio managers were actively hedging with deep out-of-the-money puts despite their rich price.
On Friday gamma representing about 20 percent of total gamma will expire with most contracts getting killed at 4100, but also lots of in the money puts, which could be rolled lower and cause more trouble.
The OPEX event will be accompanied by a huge batch of data that will start to hit the market tomorrow (German inflation, GDP, initial claims) before Friday will shed more light on PCE inflation and the UnMich Consumer Sentiment.
Prepare for vol.
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