Weekly GEX of SPX | Option Chain Analysis for Option Traders

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I’d like to share my thoughts below after analyzing the SPX option chain. In this analysis, I focus exclusively on the weekly time range, examining the SPX option chain and the changes in top-tier options metrics.

🔶 Breakout and Bullish Outlook

Last Friday's price action saw the SPX break through the 5800 call gamma wall, generating strong bullish momentum. This breakout opens the door for further upward movement throughout the week, especially if buying pressure persists. Breaking through a call gamma wall often leads to a rapid price increase, as these levels act as resistance, but once broken, they support further upward moves.

However, caution is advised, as additional call gamma levels (around 5850 and 5875) could act as resistance, where the price may stall. These levels can reverse roles and, if the price falters, could act as significant resistance, potentially leading to a pullback toward the 5800 level.


🔴 Put Skew and IVx Changes



The put pricing skew on the Options Oscillator shows a declining trend, meaning that while put options are still more expensive than calls at equivalent strikes, this trend is softening when looking at the November expiration. This indicates a weakening of put options relative to calls, which could be another bullish signal as demand for puts may be declining.
The five-day IVx average declining, indicating a decrease in market volatility = VIX is melting down.

🟨 Backwardation and Diagonal/Calendar Strategy Opportunities



It's also worth noting the 10.5% backwardation based on the IV skew for the expirations between 10/18 and 10/21 (4/7DTE). This backwardation (downward sloping volatility curve) could benefit calendar and diagonal spread strategies, as options with different expirations have varying volatility conditions.

🔶GEX Wall Levels: Where Is Support and Resistance?



🔹Gamma Exposure (GEX) levels continue to play a crucial role in the market’s movements:

🔹On the upside, the largest call gamma wall for the next 7 days is at 5850, while the 5875 level may also act as significant resistance. The 5875 is a more likely a realistic bullish target, supported by the Options Overlay’s blue OTM delta 16 probability curve.

🔹On the downside, the 5750 put support level currently offers strong support, with sellers forming a barrier here. The 5800 level is also interesting because it was the largest call gamma level last week, meaning there could be significant volatility as bulls and bears battle around this point.

(NOTE: GEX levels is not part of the TanukiTrade Options Overlay indicator yet. The automatic GEX levels will be available by the end of October.)

🟨 How Delta 16 Curves Define My Rational Price Range in Options Trading



The blue OTM Delta 16 curves from the Options Overlay define the rational probability range for me based on a lognormal distribution. This is important because there’s a 68% chance the price will stay within this range by expiration. These values are also visible in the Overlay Expiry table.

This represents the 68% probability range defined by OTM 16 delta PUTs and OTM 16 delta CALLs, showing a clear directional expected move value. It provides an insightful view of the expected price movement’s directional range, often used by delta-neutral strangle traders like those at TastyTrade.


⅀ SPX Summary

The SPX options chain is showing a bullish direction with the breakout above 5800, but it will be key to watch the gamma levels where the market might stall this week. The rising IV and declining put skew trend could provide further signals that the bull market might continue, but the possibility of resistance or a pullback remains. For those considering diagonal strategies, the backwardation may offer interesting opportunities to capitalize on.

(NOTE: GEX levels is not part of the TanukiTrade Options Overlay indicator yet. The automatic GEX levels will be available soon, by the end of October!)