Brandon Chapman found a $13 box around SPY this week. Bank earnings land tomorrow morning.
Brandon thinks those reports could turn that tight range into an accelerator.
Today was Columbus Day. The S&P 500 usually finishes higher on this holiday, with most of the week’s gains coming on the day itself.
This year broke the pattern.
Brandon leaned into the seasonal tendency with the S&P 500 sitting in positive gamma territory. He took a long and looked for a close at the prior high.
The trade didn’t work. A rally right before the close got a few traders near break even.
The bond market was closed, and volume ran at 50% to 60% of normal. The S&P 500 still couldn’t finish higher on a light tape built for an upward bias.
Tomorrow kicks off earnings season. JPMorgan (JPM), Wells Fargo (WFC), Goldman Sachs (GS), and Citigroup (C) all report.
Brandon also spotted a little put buying in Wells Fargo today.
He pulled up gamma exposure on SPY to find where the walls sit for Friday’s expiration. In tonight’s video, Brandon breaks down the levels that matter:
785 is the biggest call wall this week, with almost 74,000 contracts and very little put open interest to offset it.
772 is the major put wall, setting the floor of a $13 range.
770 is where put and call open interest sit virtually identical. Below that level, a chasm of negative gamma starts to build.
Last week’s range was similarly tight, and SPY stayed bottled in.
The banks change the setup this week. Brandon sees a rally with rising volatility or a break below 770 as far more plausible now.
He expects volatility to expand on a move out of the range in either direction. Brandon says SPY may break out either way this week.
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