Stocks Suddenly Plunge Into Red
Mon, 10/19/2020 – 10:20
US equity markets have very quickly erased their overnight gains on no obvious news-driven catalyst this morning.
It looks like the ramp was to erase the late-day plunge on Friday, run stops…
The Small-Caps/Big-Tech unwind continues…
Our suspicion, as we warned on Friday, is this is gamma-related.
Futures have retraced the late Friday swoon and are trading near 3490. Our gamma index does not pick up that much of a change from Fridays close and is anticipating at a 1% range today. 3500 is still registering as the largest gamma strike, with very little in the way of call positions below. This chart shows the size of call closures after the October OPEX wherein every strike <=3500 saw call OI closed.
The resulting setup seems to indicate that any move under 3475 could spark sharp selling. To the upside we think the 3500-3525 range is fairly sticky in the short term. However, if there is some further election or stimulus consensus we note 3600SPX/360SPY as a large area of call concentration and overhead target into November OPEX.
So what happens next?
via ZeroHedge News https://ift.tt/2ILDv1Z Tyler Durden