Building on yesterday’s rationale for a period of higher volatility and stretched positioning is to put it within the context of dealer S&P gamma

 

“The most common SPX option flows, post-2008, are customers buying OTM puts and selling OTM calls. This creates and sustains a momentum effect, whereby higher prices lead to higher GEX, and higher GEX improves top-of-book (nearby bid-ask) liquidity, and better liquidity means that dips always get bought. This works to keep volatility in check… until it doesn’t. Eventually, the effect of vanna overwhelms the effect of gamma, and that’s when things get crazy”

The Implied Order Book (squeezemetrics.com) (an excellent read)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Within this context S&P 500 Futures Market Depth Liquidity should continue to deteriorate reinforcing a bias towards higher volatility amid stretched positioning across the board

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

While participants largely are sitting around waiting for pent up demand to kick in, markets have already largely priced that in limiting any motivation for a buy the dip mentality from here

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In my opinion this should keep treasuries well supported, dollar strong and reflationary positions under the pump. Of particular note is GBPUSD, where a daily close under 1.362 would signal a change in trend which it has held since late March

 

 

 

Chris Jarvis <Designation> T +44 (0) 20 7422 E Chris.Jarvis@archr.com 49 Carnaby Street, London, W1F 9PY United Kingdom ARCHR.COM

 

 

---

Archr LLP is Authorised and regulated by the Financial Conduct Authority (FCA reference 617163).
Archr LLP is not covered by the Financial Services Compensation Scheme (FSCS).
Archr is registered in England and Wales No. OC371018. Registered office 115B Drysdale Street, Hoxton, London, United Kingdom, N1 6ND

This message may contain confidential or privileged information. If you are not the intended recipient, please advise us immediately and delete this message. The unauthorised use, disclosure, distribution and/or copying of this email or any information it contains is prohibited.

This information is not, and should not be construed as, a recommendation, solicitation or offer to buy and sell any securities or related financial products. This information does not constitute investment advice, does not constitute a personal recommendation and has been prepared without regard to the individual financial circumstances, needs or objectives of persons who receive it.

You are receiving this email because you are a valued client of Archr.