As Stocks Slide Under ‘Gamma Gravity’, An Eerie Analog Appears

After a brief rally overnight, US futures have pulled back, under what appears to be the mysterious (well, not so mysterious) ‘gamma gravity’ of excess options positioning, back to the 3,900 “Call Wall” level.

Source: Bloomberg

As SpotGamma notes this morning, the positive gamma at 3900 remains quite a bit larger than overhead strikes, indicating it will hold as major resistance for a few days. From from an intraday trading perspective we anticipate another tight trading range today (~80bps), with that large 3909 resistance bar shifting down to 3893 support.

Perhaps more notable is the fact that amid all the chaos (and losses) of the GME roller-coaster, single-stock gamma levels remain near record highs signaling call-buyers weren’t scared off…

SpotGamma anticipates this position to build into 2/19, opening the window for a trend change into the last week of February, which brings up some eerie analogs to last year’s market performance…

Specifically:

• Blue line exact same angle of increase from Q3 to now

• Red line = Jan monthly OPEX

• Red arrows = both markets saw drawdowns into Feb

• Orange line = Feb monthly OPEX

• Feb ’20 pinned to the large 3400 gamma strike

• Feb ’21 seems poised to pin to 3900 gamma strike

But remember, it’s different this time.