🌅 Good Morning, Reader!
This is the only May 24th of 2024 we get, so let's make it a great one.
👋 Howdy to the 33 new traders who have joined us over the past week! You are now part of a 1,550+ strong tribe outperforming the competition together.
🔌Shameless Plug
“You’ll learn more by finding your group of people than looking at content.” - Sam Owens, Skool Co-Founder
GammaEdge Subscriptions can be found here (FREE 14-day trial included):
Need Help? Schedule a time with GammaEdge:
🚨GammEdge Intro (For New Folks!)
If you’re new, not yet a subscriber, or simply missed it, below is the cliff notes version of The GammaEdge Framework. If you have been with us for a while, feel free to skip!
At GammaEdge, we simplify the options markets for you by seeking to understand market sentiment, structure, and key levels to focus on, all of which we derive from underlying options market structure. We follow the same process every single day to formulate our gameplan, that being:
1) Identify the transition zones: these are key areas in the options structure where we see bullish/bearish shifts (i.e., call or put speculators are in control) as well as low-pressure areas that offer minimal dealer influence.
2) Identify key delta, gamma, other major strikes: these are key levels in the options structure where call and puts speculators are targeting. These levels have multiple uses including ranges for the day and trade entries/exits.
3) Identify other changes that are relevant: this could be the shifting of key levels or transition zones, gamma conditions, and call/put speculator dominance above and below spot price (i.e., delta dominance.
With that, let's get into today's pre-market prep.
✍️SPX 0DTE Recap (Prior Day)
Below is a replay GIF of $SPX spot price (5 minute bars), gamma levels (green/red horizonal bars) as well as our key levels (PTrans, +GEX, etc.) throughout the day.
Below is our $volm command, which displays the "centroid" of put and call volume for each 15 minute slice of yesterday's session. Paired with the GIF above, it's powerful to see how both the call and put centroids moved throughout the session. Notice the confluence of the trending move lower in the call and put centroid. This corresponded with the move lower in the Market Trend Model (shown below). These two used in combination, along with the key levels/zone noted from market structure, are powerful tools used for intraday setups.
✍️SPX 0DTE Levels (Today)
🔄GEX Transition Zone: 5290/95*
♻️DEX Transition Zone: 5290/95*
⛵️Drunken Sailor Zone: 5280/5320**
📈Upside Targets (>5295): 5295 (+GEX) & 5300 (COI)***
📉Downside Targets (<5290): 5250 (-GEX)***
*Choppy price action is often a characteristic when within this range.
**This zone is not a science like the GEX/DEX transition zones -- it's an observation of structure where NetOI is weak(er). While we are in this range, market volume intraday overwhelms the structure -- and participants can move price around up and down without much consideration for the overall structure. Lastly, this zone does not apply to SPXP All Expiries, so no need to perform it aside from the 0DTE complex.
***Stay alert to intraday level changes using: 1. WebApp 2. $em command ($em spx) 3. $s command ($s spx 0 0) 4. $netstat spx
💡Other Notes
→ Gamma Condition: Put Dominated
→ Delta Condition: Above: ITM Puts | Below: ITM Calls
→ Be cognizant of price in relation to transition zone. Are we above or below? Create your If/Then scenarios. As for us....
We closed below GEX and DEX Transition, as well as below the lower Drunken-Sailor strike -- this biases us to the downside today; however, we would not be surprised at a mean-reversion upward towards the Transition zone.
5295 is the current 0DTE +GEX value. It's not very large from the current spot so it's convexity isn't in full view. As we move up, it will become more dominant. 5300 is the 0DTE COI and shows the near-strike, upside target. Expect the 0DTE +GEX level to shift there is we move into the Transition. We think pressure subsides above 5300 until markets force us up thru 5320.
To the downside, 5250 is the 0DTE -GEX level and is fairly large below us. 5250-5265 contain a large, put-dominated "gamma glob" to the downside, so be aware of this and consider what can happen if we get captured by the 5265 strike.
✍️SPX Full Complex (Today)
Below is the $SPXP output for the full PM settlement.
Market Sentiment
Delta Condition
- Above Spot Price = OTM Call Dominated (do note the amount of ITM Put dominated strikes from spot price through 5350. This is a sign that OTM call speculators have been overrun in the meat of the complex)
- Below Spot Price = ITM Call Dominated
Gamma Condition
Transition Zones (TZ)
- Delta: 5275/95
- Gamma: 5290/95
- Drunken Sailor: N/A (most applicable for 0DTE timeframe)
Key Levels
+GEX & COI at 5300 | -GEX at 5250
Putting It All Together
The structure has significantly weakened day over day. We remain more bearish in nature so long as we remain the transition zone and even 5300 to a greater extended, which is and has been a key psychological number in the complex.
Net Delta is showing far more red in the overhead, indicating that OTM calls have vaporized, allowing ITM puts to dominate those strikes. This stated, once we get above 5300, strike-for-strike we'll be call dominated as we move up, so there is a recovery path, should the market choose to walk up it.
We see that Net Delta range BELOW spot price (LHP) that is red (put-dominated delta) and we don't like it as we're longer than we are shorter. This is screaming that OTM puts are positioned to take advantage of any further weakness to the downside. Below 5275 the bears will increasingly run the table.
✍️Market Trend Model
The trend is momentum/trend in the market is quite clear through the lens of our Market Trend Model (which is lower for the avoidance of doubt). Yesterday, we saw price action move lower coupled with strong selling via the filtered tick (cyan line and registers +/- 1000 tick readings).
✍️GammaEdge Scan Results
NOTE: For the sake of completeness and performing a consistent routine, we are providing both call and put dominated scans. However, we are not representing to go long or short any of these.
CallDomDel: Returns stocks with are call dominated below and above spot price. This scans helps us to monitor overall market sentiment by seeing the number of stocks that are populated in the scan. Additionally, the scan helps us find favorable candidates to the upside as we know that a bullish signature is when we see call holders below spot price (as opposed to put speculators) as well as call speculators above spot price (as opposed to put holders). This condition of call speculators above and call holders below indicates that the wisdom of crowds is more favorable on the stock than not.
PutDomDel: Returns stocks with are put dominated below and above spot price. This scans helps us to monitor overall market sentiment by seeing the number of stocks that are populated in the scan. Additionally, the scan helps us find favorable candidates to the downside (or at least not to go long) as we know that a bearish signature is to see puts speculators below spot price (as opposed to call holders) as well as puts holders above spot price (as opposed to call speculators). This condition of put holders above and put speculators below indicates that the wisdom of crowds is more pessimistic on the stock than not.
Zero2Ptrans: Returns stocks that closed above ZeroGex but below Ptrans. ZeroGex is generally in the middle of the transition zone and is theoretically where call and put gamma is balanced. In a bullish environment, this level can act as support and resistance in a bearish environment. Trades off ZeroGEX can be thought of as aggressive first entries with an anticipation of a move through PTrans (more on this discussed in the scan below). For confluence, we want to see these stocks also populate on the $calldomdel scan above.
Ptrans2PGex: Returns stocks that closed above PTrans but below PGEX. We know that a bullish characteristic of a stock is when it's above it's PTrans level, as has entered a call dominated environment. The natural first target is +GEX as this is where short-term call speculators are targeting. From there, it is COI as this is the level with the most call open interest. For confluence, we want to see these stocks also populate on the $calldomdel scan above.
✍️Single Stock Review
*As we did with 0dte above, walk through the process. Identify (i) key transition zones, (ii) key levels of reference, and (iii) gamma/dela conditions. Feel free to email us with any questions as you perform your own self-analysis.
$AAPL
$TSLA
$MSFT
$NVDA
$GOOGL
$AMZN
$META
$NFLX
$AMD
🤝 Thank you for reading, and wishing you all a successful trading day! We’re committed to providing you with the latest and most actionable market insights. Here's to a successful trading day ahead.
🤖GammaEdge Charting Commands
With in the discord, GammaEdge offers 25+ proprietary charting commands that hit on all things gamma, delta, charm, vanna, open interest, and volume. We will highlight key commands from time to time in the newsletter.
Prior Posts
$gr (GEX Ratio): https://gammaedge.ck.page/posts/before-the-bell-with-gammaedge-96
$em (price chart + key levels): https://gammaedge.ck.page/posts/before-the-bell-with-gammaedge-97
📚GammaEdge Education
YouTube
All education videos can be found on our YouTube channel using the link below:
FREE Email Courses
Below is a link to our free 4-day email course that covers all things related to our 100% mechanical PTrans2PGEX long trading strategy.
👀Want More GammaEdge?
Click the button below to access your 14-day trial, which includes access to:
- World-Class Community of Like-Minded Traders
- Industry Leading Education via The GammaEdge Lab
-
All GammaEdge Proprietary Tools
- 25+ Charting Commands
- First In-Class Web App
- Market Trend Model
- Stock/ETF Scans
- and more!
🔥Enjoying GammaEdge?
If you find value in what we produce, please consider leaving us a positive review at https://whop.com/gammaedge/.
DISCLAIMER: This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.
