Nb. Our comment from 10/24/22
Partly the reason for explaining the closing few hours of the Oct expiry is that it also sheds some light on this, the Nov expiry.
And as one can see in the table above the ratios are so underdeveloped in Nov that this may be a problem for the next few weeks.
Admittedly, this is one of those times that we are going from an intermediary expiry to another intermediary one, so activity is always thinner but, even taking this into consideration, the ratio levels are dangerously low.
At least the R ratios start a bit closer below the zone, at 6850, but this is only R1, and you have to go all the way down to 6250 before you get the next level.
Above the zone, the R ratios don’t kick-in until 7350, but at least the next level is slightly closer, only being a further 300-points away.
Despite these huge ranges, don’t miss the fact that the highest the ratios even go in either direction is just R2, which is very low and will not provide that much support or resistance.
But it is the 500-point wide Y ratio bandwidth that is the most concerning.
From 6850 all the way up to 7350, and with no ratio to speak of then it could get very volatile indeed.
And because of the distance involved, if the market does build up a head of steam, then R1, or even R2, are going to struggle to make a difference.
Hopefully, the circumstances that are evidently keeping the players on the side-lines, will dissipate and normal conditions will return but, in the meantime, best fasten those seatbelts nice and tight.
Range: 6950 to 7050
Nb. Our comment on 10/31/22
Well, respect to the zone.
How it managed to contain the FTSE for an entire week we have no idea, but that is exactly what it did with the slight exception of Thursday.
On Thursday Shell reported, which set the oil sector ablaze with them alone finishing up 5.5%. This does highlight another of the oddities of this index, as it is populated by a few very heavily weighted sectors. The oil sector being one, and with the weighting attributed to the oil majors if they get some bullish wind in their sails, like Thursday, it is very difficult for any amount of dynamic delta to contain that.
Although, it is fascinating to watch.
And also, you do tend to get a large deviation in the fair value. That is the difference between the cash (the index itself) and the futures price. Which can make for some good trading opportunities, at least for those that like that type of scalping.
Getting back to the more mundane issues and, although activity has been high this was from a very low baseline, the huge amount of Y ratio remains.
Although, this overall bandwidth has shrunk from 500 to 300-points, this is still a lot of ground to cover, especially for the FTSE.
The zone may come to the rescue again, and it has been known to contain this index for three weeks at a time, but we can’t see it ourselves this time round.
Every day last week either the upper boundary, 7050, or the bottom, 6950, was tested.
So, the market definitely knows what is where in respect of the dynamic delta, and both are on strike three or more anyway.
On top of which the ratio on either side is just the absolute minimal Y1, so not really a huge hurdle, therefore best not to loosen that seatbelt just yet.
Range: 6950 to 7050