Volatility & Gamma Report - Issue #6

Gamma Structure Cheat Sheet for SPX

[Note: This post is being added on Substack after originally being posted on Revue (which has discontinued their hosting operations).]

In May 2022, SPX Index options started trading with expirations for every day of the week. These new listings now provide traders and investors with new options to help manage risk.

The securities also generate new gamma flows which can be identified on a daily basis.

Each morning shortly after the open, we calculate the overall gamma exposure for SPX and chart out the gamma structure for near-term expirations. From this data we can learn what actions Market Markets will need to take in order to stay delta neutral.

(If you’re already confused please see Issue #2 of our gamma blog)

The following is a guide of what to look at when viewing SPX gamma structure.

Gamma Structure Cheat Sheet

In partnership with Point Blank Trading (Twitter, Free Newsletter), a source of excellent gamma analysis & market analysis, we have created a version 1.0 of a cheat sheet that can be used to categorize gamma structures based on the current GEX Regime (overall positive GEX or negative GEX) and identify the most probably outcomes for the day.

Positive GEX Regime

(Twitter link fo larger view)

Negative GEX

(Twitter link for larger view)

Additional Notes

As previously stated, these are merely the most probably outcomes based on gamma structure. The options market changes during the day as investors close and open new options positions so the structure can change significantly during the trading day, especially if there is a news or data event.

Gamma forces from daily options will frequently be dominated by gamma from monthly and quarterly expirations when they are within a few days of each other.

We will be adding additional scenarios for SPX as well as a cheat sheet for securities which carry a positive call skew.

Comments? Thoughts? Questions? Let us know!