Three Steps to Better Trade the S&P 500

For traders looking to gain an edge in the fast-moving S&P 500 futures market, Matt Fox, CEO and co-founder of SpotGamma, outlined a three-step framework designed to improve trade precision and confidence. Drawing on years of experience in hedge funds and biotech investing, Fox introduced a unique methodology known as positional analysis, which leverages insights from the options market to guide futures trading.

 

Step 1: Understand daily support and resistance levels

 

To help begin each trading day with a clearer perspective, SpotGamma delivers a daily premarket “Founder’s Note” authored by Brent Kochuba. These notes identify key support and resistance levels within the S&P 500 using options market data. Unlike traditional technical or fundamental analysis, positional analysis focuses on where options-driven hedging pressure is most likely to impact price action.

This premarket roadmap allows traders to anticipate where buying and selling pressures may emerge. For example, on April 3 and April 4, SpotGamma called out the 5400 and 5000 levels respectively as critical support zones, and both turned out to be accurate inflection points in the market. Having this context before the open can help traders prepare, adjust their strategy, and enter the market with more clarity.

 

Step 2: Monitor intraday options flow

 

During the trading day, SpotGamma’s HIRO (hedging impact of real-time options) tool provides real-time insight into how options activity may be influencing market direction. HIRO tracks the hedging behavior of market makers in response to options trades, offering a dynamic read on shifting intraday momentum.

This real-time flow data helps traders recognize when large options transactions are influencing price moves. For instance, if the HIRO line drops significantly while the S&P is trending sideways, it may indicate that market makers are selling futures to hedge a sudden increase in put buying, which could foreshadow a broader move lower.

Knowing how options trades are affecting the futures market in real time allows traders to better manage their entries and exits, particularly when combined with the premarket levels identified in the Founder’s Note.

 

Step 3: Track end-of-day pressure with heat maps

 

The final step in SpotGamma’s approach involves forecasting late-session price behavior using TRACE, a heat map tool that highlights zones of expected volatility and stability. TRACE updates intraday, revealing how the options landscape evolves and where significant resistance or support is forming.

The heat map incorporates gamma exposure, delta pressure, and charm (delta decay) to visualize potential pinning areas into the close. Red zones often suggest higher volatility, while blue zones suggest price stability. This helps traders identify likely closing ranges and spot potential reversals during the final trading hours.

One key feature of TRACE is its ability to identify “pinning” behavior—when prices settle between major options strikes due to the hedging behavior of zero-DTE (zero days to expiration) options. Understanding these dynamics can help traders better forecast where the market might close.

 

Putting it all together

 

SpotGamma’s framework blends three essential tools to offer a layered, options-driven perspective on the S&P 500: premarket support/resistance levels, real-time intraday flow analysis, and closing-day heat map forecasts. While not predictive in the traditional sense, this approach helps futures traders see how market positioning and hedging flows can impact price action throughout the trading day.

For active traders focused on short-term movements in the S&P 500, incorporating positional analysis into an existing strategy may offer a more nuanced view of market dynamics and support more informed decision-making.

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