From ZH Update (1000ET): It appears the unclenching has begun! * * * While the S&P has been weaker since Friday’s opex, Nasdaq is the “messiest” due to the index-level price-movement “unclenching” based upon the sheer amount of $Gamma running-off post last Friday’s Op-Ex. As Nomura’s Charlie McElligott notes, the effect was particularly notable in […]
Market Analysis
Brace For Surge In Volatility: Goldman Warns Record February Op-Ex Could Lead To Market Chaos
From ZH In case the market didn’t have enough things to worry about, Goldman has flagged a new scare that could spark a turmoil in today’s option expiration. As Goldman’s Vishal Vivek writes, today’s option expiry “is setting up to be the biggest for single stock options, outside of a January expiration.” Indeed, while open […]
The GME Gamma Squeeze
In late January 2021, GameStop experienced a once-in-a-decade squeeze that has captivated the world’s attention. This was a premeditated and programmatic exercise, orchestrated by coordinated stock and option buying across the retail and professional community, that resulted in large institutional entities losing billions of dollars. These investment houses with significant short positions did not expect a stock with […]
TLRY & Pot Stock Gamma
When a stock trades higher at a very rapid pace the price of the stock can pass the highest available options strike. For instance, at the start of the day on 2/9/21 the available call options strikes for Tilray (TLRY) ranged from ~5-$50. However the stock ripped over 50%, passing the 50 strike. When a […]
GME Options Pin
On 2/1 with GME stock at $225 we wrote about how options dealer flows could result in the stock dropping to the $60 strike. We highlighted this strike because it was where the largest concentration of options were placed (from a gamma perspective). You can see that is is precisely what has played out: This […]
Nomura’s McElligott: ‘The VIX Is Broken — Again’
From Heisneberg: “From a Vol market perspective, the issue is that the VIX is broken — again,” Nomura’s Charlie McElligott said Monday, in one section of a sweeping note documenting recent dynamics and detailing what a trio of backtests might foretell for markets on the heels of last week’s somewhat deranged developments. It’s “all demand” […]
“Hard Purge” – Nomura Warns The Vol Market Signals Risk Of “Outright Crash Down”
From ZH As we detailed earlier, futures were down quite sharply to start the overnight session only to stage a significant recovery to current highs (perhaps on the back of a lack of glaring clearing issues… for now… appearing over the weekend). However, as SpotGamma notes, despite this move higher the options structure deteriorated, and we will […]
GME Gamma Trap
The GME squeeze is struggling a bit today as the stock is off $96 (30%) to $225. We think this could be the result of put buying in the stock. Option implied volatility has surged recently, sending the price of call options massively higher. You can see this reflected in the graph below. For example […]
The Great Silver Gamma Squeeze
Silver prices were up over 5% last week as WallStreetBets switched its focus from stocks like GME and AMC, to silver and stocks like SLV and PSLV. As you can see in the chart below SLV surged on Thursday directly to the $25 strike, only to pin that level into Fridays close. $25 just happens […]
Weaponized Gamma Reloaded
The latest options data revealed that equity option call buying surged this week, blowing out the previous record week. Shown in the chart below is the total number of contracts bought to open netted against contracts sold to close. This suggests that traders on net did not elect to close out of their long calls […]