“Bounce-Fuel” Is Non-Existent As Quad-Witch Gamma Battles FOMC Fears
That’s the message from the options market as ~30% of SPX gamma will expire at 9:30AM ET (and 60% of SPY, 35% of QQQ, and a very large set of stock options expiring on the close).
SpotGamma warns that 4500SPX/450SPY is still the biggest overhead level, with another heavy concentration of gamma at the 4475 area (and 4450 is the Put Wall)
The visual below on this expiration is well framed by this gamma table wherein light grey depicts the gamma expiring today.
As you can see the “board” will be reset for next week, just ahead of the 9/22 FOMC.
This implies there are no big strikes for markets to pin to on Monday and “anythings game”.
SpotGamma points out that they will be watching implied volatility (ie VIX) very closely for a signal today, as we anticipate traders now starting to focus on the FOMC meeting.
If they choose to roll to new put hedges today that could pressure markets, and further we expect the supply of short volatility to diminish greatly (traders don’t want to be short vol into Fed).
This, along with what will be very flat to negative gamma means that “bounce fuel” is non-existent. This doesn’t mean markets have to crash, it just means a key support mechanism is gone.