When it comes to understanding options flow, few have a better grasp of the intricacies that drive these markets than our friends over at SpotGamma. As they say, “Trying to forecast stock market movement without paying attention to the impact of options flows is like trying to build a sandcastle on the beach with a blindfold over your eye.”
Their expert index option flow analysis provides an unrivaled daily roadmap that is relied upon by traders and investors worldwide. With this release, we are thrilled to introduce the integration of the SpotGamma Levels directly into TrendSpider. Let’s dig into the details.
Adding SpotGamma Levels To TrendSpider
The SpotGamma Levels indicator is available directly within the indicators menu. Simply search ‘SpotGamma’ and add it to your charts from the Marketplace listing. Please note that while the SpotGamma Levels indicator is available for all TrendSpider traders to access, you must have a SpotGamma account to access the input data and effectively utilize the indicator.
How To Input SpotGamma Levels
Inside your Spotgamma account, click on the ‘Market Overview’ tab. At the top right, you’ll see a list of ‘Index Levels’. These are updated in premarket each morning. To add these levels to your indicator, click on the copy button in the upper right corner.
Next, navigate back to your TrendSpider account. Inside the indicator, paste the levels into the ‘Input Data’ field. That’s it! The levels will automatically appear on all of your index charts.
The SpotGamma Levels indicator offers important key levels for the following Index and Index Futures symbols.
- $SPX
- $SPY
- $ES1
- $QQQ
- $NQ1
- $IWM
- $RTY1
Understanding The Levels
The SpotGamma Levels indicator comes complete with a series of important levels to help you understand and gauge expectations for the price movements each day.
SpotGamma Key Levels:
- Call Wall
- Definition: The Call Wall represents the strike with the largest net call gamma.
- Significance: This level often acts as a resistance point as market makers hedge their positions by selling the underlying stock when it approaches this level, creating downward pressure.
- Put Wall
- Definition: The Put Wall is the strike price with the largest net put gamma.
- Significance: This level typically acts as a support point, where market makers hedge by buying the underlying stock as it approaches this level, creating upward pressure.
- Volatility Trigger
- Definition: The Volatility Trigger is the level below which the behavior of market makers’ hedging flips from lower volatility to higher volatility.
- Significance: Expect higher volatility when price falls below the Volatility Trigger due to more intensive dealer hedging feedback loops. Conversely, expect lower volatility when price remains above this level.
- Absolute Gamma Strike
- Definition: This is the strike price with the highest total gamma for an underlying index.
- Significance: This level tends to be strongly magnetic, acting as both a resistance and support level due to market makers’ hedging activities at and around this strike.
- Implied 1-Day Move
- Definition: The Implied 1-Day Move is the expected price range for the stock over the next trading day, derived from the current options pricing.
- Significance: This metric helps traders anticipate potential daily volatility and plan their strategies accordingly.
- Large Gamma Strikes 1-4
- Definition: These are the top four strike prices for each index with the largest overall gamma measurements.
- Significance: These levels act as key areas of support and resistance due to the significant hedging activities of market makers.
- Combo Strikes 1-4
- Definition: These strikes identify combined areas of high gamma measurements across both ETF and Index (e..g, SPY/SPX, QQQ/NDX)
- Significance: These levels indicate significant areas of support and resistance due to the combined hedging impacts from both ETF and Index options, acting as critical points for potential price reactions.
Examples
The 1-Day Estimated Move
When the price breaks above or below the 1-day estimated range levels, the market is considered to be overbought or oversold. In fact, according to SpotGamma’s data, the market closes the day within the boundaries of the 1-day estimated range 78% of the time, thus making these levels low-risk areas to attempt mean-reversion trades.
The Call Wall
The Call Wall can act as a very heavy resistance area, due to the amount of call gamma positioned at that level. On average, there is a 5-day positive return of ~1.6% leading up to a call wall touch or breach, followed by a 5-basis point move in the five days that follow. If the below chart moves sideways over the next few sessions, the call wall test is the reason why.
The Put Wall
The Put Wall is the strike with the largest amount of put gamma for a product or instrument. This level tends to come into play during times of high volatility, often acting as support when tested from above.
TrendSpider Functionality Makes SpotGamma Levels More Powerful Than Ever
Visualizing SpotGamma Levels directly on your chart is only one piece of the puzzle. We’d be remiss if we didn’t fully incorporate them into every facet of the platform that we can. With that in mind, SpotGamma Levels are fully functional within your scanner and alerts.
Scanning For SpotGamma Levels
To scan for SpotGamma Level conditions, search ‘SpotGamma’ within an Indicator parameter. You’ll notice every level is definable. This means you can hunt for things like a Call Wall, Put Wall, or 1-day Estimated Range breach, or even price within a range of any level that’s important to you. Get creative and the scanner will do the rest! Import the free SpotGamma Levels Watchlist for quick access to all the assets that can be utilized in the scanner.
Alerting on SpotGamma Levels
Just like you’re used to with all of your other favorite on-chart indicators, you can right-click on any SpotGamma Level and create a breakthrough, touch, or bounce alert on it.
Alerting on Spotgamma levels is helpful to a trader who wishes to be notified of intraday breaches of important index/etf/futures gamma levels while monitoring alternative symbols. As SpotGamma levels are variable day to day, alerts on said levels are only valid for the day they’re created. In that way, traders should utilize the ’12-hours passed’ expiration option. This will ensure that an alert from a previous day is inactive on the current day.
As with all updates, we hope you find this new integration helpful! To learn more about SpotGamma, visit their website. If you have any questions about the functionality of the SpotGamma Levels, feel free to reach out to us via the ‘Contact Us’ button in the bottom right corner of your platform view.
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