Information on SPX interaction with key levels based on data from 10 May 2019 - 28 May 2024

Call Wall

Definition: This defines the upper bound of the probable daily trading range.

• The Call Wall has held in 83% of daily trading sessions, meaning the intraday high did not exceed the Call Wall
• In 88% of sessions, the SPX closed below the Call Wall.

• Following a Call Wall breach, average forward returns are diminutive: -7bps for 1 day forward return, and 5bps for 5 day forward returns.

Use case: Consider a call spread above the call wall to capitalize on the resistance at this level, expecting the stock price to not rise above this level.

Put Wall

Definition: This defines the lower bound of the probable daily trading range.

• The Put Wall has held in 89% of daily trading sessions, meaning the intraday low did not fall below the Put Wall.
• In 93% of sessions, the SPX closed above the Put Wall.
• Following a Put Wall breach, forward returns are noticeably positive: average 1-day return of 14bps, average 5-day return of 7bps, and average 10-day return of 39bps.

Use case: Sell secured puts at or just below the put wall to collect premium, anticipating the put wall to act as support.

Volatility Trigger

Definition: This proprietary indicator detects the level below which we expect higher-volatility behavior; above this level we expect lower market volatility.

• When SPX opens above the Vol Trigger, the average 5-day Realized Volatility is lower compared to when the SPX fell below the Vol Trigger.

• When SPX closes above the Vol Trigger, the standard deviation of both the 1-Day and 5-Day Forward Return is lower than when the SPX closes below the Vol Trigger.

Use case: When price is above the Vol Trigger, consider selling secured puts to collect premium, betting the price will stay above the volatility trigger; if price falls below the Vol Trigger, users may want to execute a bear put spread to profit from the expected decline with controlled risk.

1-Day Move

Definition: This level reflects a 1 standard deviation move for the day based on proprietary analysis of historical data.

• The Implied 1-Day Move is not broken 35% of trading days for the SPX.
• The SPX closes within the Implied 1-Day Move in 76% of trading days.

Use case: Consider putting on a short-dated iron condor with wings structured around the Implied 1-Day move to take advantage of the expected volatility for that day.