SPX Psych Levels for /ES Futures (Fair Value)

Overview
This indicator displays S&P 500 psychological levels adjusted for ES futures fair value premium. These levels act as powerful magnets for price action due to the convergence of technical trading and options market dynamics.

What is Fair Value Premium?
Simply put, its the difference between the SPX price and the ES futures price. This changes dynamically based on interest rate, dividends, and time to expiration.

Why Psych Levels are Increasingly Important

Psychological levels are round numbers where traders naturally place orders. These obvious levels attract stop losses, profit targets, and breakout orders from both retail and institutional traders. Algorithms often target these same levels, creating a self-fulfilling prophecy of support and resistance. Importantly, this effect has been exacerbated by the options market.

Using May 2025 as an example, SPX options averaged 3.46 million contracts a day ≈US $1.8 trillion notional, dwarfing trading in SPY or ES/MES futures. 0-day-to-expiry (0DTE) trades hit a record-high 61% share of all SPX volume, making the options complex the primary arena for intraday price discovery.

Strikes at psychological numbers (ending in 00 and 50) captured 66% of total open interest and 58% of 0DTE volume for the entire month. This massive concentration at round number strikes creates powerful hedging flows:

• Dealer Gamma Hedging: As price approaches these levels, market makers must dynamically hedge their options exposure, creating reflexive buying/selling pressure
  
• Pin Risk: Options dealers face maximum uncertainty at these levels near expiration, leading to increased hedging activity
  
• Charm Flows: Time decay accelerates near these levels, forcing position adjustments
  

How It Works
The indicator automatically:

• Calculates the fair value premium between ES futures and SPX using real-time interest rate data, dividends, and time to expiration
  
• Adjusts SPX round numbers by this premium to show where they appear on ES charts
  
• Updates once daily at futures session open (5PM CT) to maintain stable reference points throughout the trading session
  

Key Features

• All TradingView Native: All calculations performed automatically using data available within TradingView - no external data feeds or manual updates required
  
• Multiple Level Increments: Display major (100-point), intermediate (50-point), and minor (25-point) psychological levels
  
• Margin of Error Zones: Optional ±2.5 point zones accounting for fair value calculation variance
  
• Full Customization: Colors, line styles, and widths for each level type
  
• Fair Value Info Table: Displays current contract, fair value calculation, interest rate, and days to expiration
  
• Automatic Contract Detection: Works on ES1!/MES1! continuous contracts and automatically detects the current front month contract
  

Important Notes
This indicator does not access any options data. It identifies levels where options activity naturally concentrates based on market structure. The power comes from understanding that these obvious levels create predictable dealer hedging flows, making them high-probability reaction zones.

Trading Applications
These levels can be used as dynamic areas of interest to be incorporated into a complete trading strategy.