The SPX batters Y2 Ratio into submission.

Is Y2 Ratio fighting a losing battle with the SPX?


Nb. Our comment from the 07/21/21


It has certainly been an exciting start to the August expiry, but regular readers should not have been at all surprised.

Although it is a shame, as back in the day, throughout the rollover week (last week) we would publish daily the expiring month on the left and the upcoming month on the right, in the table above.

This always gave more of a sense of how the upcoming front month was shaping up.

Our only moan is that the market, once it gets below its zone, doesn’t bounce off Y2 – even our step-up level was just below 4200.

Anyway, a lot of the recent fallout was courtesy of Europe, and didn’t the FTSE break out of its zone crying “freedom at last”. Although it was perhaps not the freedom many expected.

Getting back to the August SPX and only today have they brought it up to speed (adding 75 strikes no less), which just goes to show how incredibly underdeveloped it was before.

However, the first couple of days of this expiry have shaken a few awake, so activity has been good, today not so much, and overall, it’s still dismal.

This leaves the Y1 ratio bandwidth at 235-points, and the complete Y ratio bandwidth 460-points, so these moves are only to be expected.

In fact, so much so that should we not be seeing these moves it would then be more of a worry.

We suspect it is going to feel like a very long five-week expiry, as it is really the same old song that we have seen and heard for the last several expiries, with the only prospect of breaking this monotony might be the next triple coming up, September.


Range:            4305  to  4405           

Activity:          Moderate

Type:              On balance just bearish



Nb. Our comment for 07/28/21


The exciting start to this expiry, as having scrambled straight back into bullish territory like a scalded cat, it continued on its upward trajectory.

Which was really the least we would expect, having found being below its zone so distasteful.

The first real ratio test came last Friday 23rd August when the market hit Y2 for the first time.

And it did a very reasonable job of stemming what was a very strong tide at that time, as having been as low as 4233.13, by the time it hit 4405, this was a rally of 172-points, or 4.06%. The high was 4407.54 for almost 2 hours.

And in just 5 trading days, so that is some momentum behind it, so, hence, good job.

Obviously, the market then hit a new all-time-high, which is always difficult to compete against, that day, and again on Monday, but only managing to add just 10 more points to Friday’s level.

The drop yesterday was significant, but also because it ended below 4405.

Interestingly, today is the first time that Y2 has fallen, and as you can see from the table above, it is now standing at 4415.

Overall, the picture remains much the same as the Y1 ratio bandwidth has increased slightly, but the overall Y ratio one has decreased.

Also, there is blatantly far more ratio below than above, revealing a fairly obvious path of least resistance.

Adding to all this is that the zone will move up to 4345-4355.

We could see the next four-weeks of this index knock knock knocking on the retreating Y2 ratio door, after all it wouldn’t be the first time. But, please do not loose sight on the fact that it continues to sit atop an abyss of ratio, and one which continues to not want to fill in behind the rising market, which is a real worry.


Range:            4305  to  4415           

Activity:          Moderate

Type:              On balance bearish


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July 28th, 2021 by