{"id":1333,"date":"2025-10-06T14:12:54","date_gmt":"2025-10-06T14:12:54","guid":{"rendered":"https:\/\/diegogarciadelrio.com\/?p=1333"},"modified":"2025-10-14T18:58:41","modified_gmt":"2025-10-14T18:58:41","slug":"spx-options-analysis-positive-gamma-structure-and-volatility-in-contango-06-10-2025","status":"publish","type":"post","link":"https:\/\/diegogarciadelrio.com\/en\/spx-options-analysis-positive-gamma-structure-and-volatility-in-contango-06-10-2025\/","title":{"rendered":"SPX Options Analysis: Positive Gamma Structure and Volatility in Contango - 06\/10\/2025"},"content":{"rendered":"

With the risks associated with end-of-quarter rebalancing already completed<\/strong>including VIX maturities<\/strong>the triple witching hour<\/strong> (expiration of three types of derivative contracts, options on individual stocks, futures and options on stock indexes) and the JPMorgan necklace roll<\/strong>the SPX maintains firm upward trajectory<\/strong>It is quite likely that it will continue to point to new highs towards the end of the year.<\/p>\n\n\n\n

Mainly, the 7000 point zone<\/strong> acts as natural magnet for December<\/strong>The market currently retains the short leg of the JPM necklace. Currently, the market retains positive gamma above 6630 points<\/strong>The price of the commodities below this level could accelerate.<\/p>\n\n\n\n

Referring to \"natural magnet for December\", keep in mind that it is a large quantity of open interest contracts<\/strong> directly influencing the performance of the index. When this level coincides with a strong gamma exposure<\/strong> or with a strike key to a systemic fund<\/strong> (such as the JPMorgan necklace), the market tends to to look for it progressively as the expiration date approaches<\/strong>especially if the volatility remains contained<\/strong>. Therefore, these levels act like \"magnets\", the price tends to converge towards them<\/strong> before maturity.<\/p>\n\n\n\n

There is a excessive long exposure<\/strong> y extreme positions<\/strong> in volatility control funds and CTAs, which implies that, if the market enters volatility control negative gamma<\/strong>Any correction could quickly intensify. A rebound in volatility would also force hedging purchases<\/strong>amplifying the downward movement. The market is quiet, but investors are paying high premiums for protection<\/strong>This can be clearly seen in the behavior of VIX and SPX, both indexes have a negative correlation, which means that when one rises, the other systematically falls, in the last few days this behavior is changing, both indexes are rising in parallel.<\/p>\n\n\n\n

According to Goldman Sachs<\/strong>This reinforces what has been said in the last few weeks, the market is showing a constant search for protection<\/strong>as if the chaos was just around the corner<\/strong>. However, unless that scenario actually materializes, these hedges will prove to be an extremely expensive gamble<\/strong>.<\/p>\n\n\n\n

In itself, options are expensive<\/strong>, so that, mathematically<\/strong>makes more sense sell options<\/strong>, create ratio differentials over $VIX<\/strong> o sell short-term volatility<\/strong> This tells me that the market is in a very difficult situation. state of preventive paranoia<\/strong>everyone expects a shock, but as long as it doesn't happen, volatility sellers are the ones capturing the profitability of fear<\/strong>.<\/p>\n\n\n\n

Gamma and Institutional Positioning<\/h2>\n\n\n\n

Regarding the gamma structure<\/strong>a significant strong concentration of positive gamma above 6635 points<\/strong>which reinforces the market stability<\/strong> as long as the index remains in that range. Below that level, the dynamics of the becomes destabilizing<\/strong>since the dealers<\/em> are forced to sell on dips and buy on rises<\/strong>amplifying price movements.<\/p>\n\n\n\n