My view of the past week has been this: The markets slipped into negative gamma on Monday 2/24 under the narrative of Coronavirus fears. As large concentrations of puts went in the money their hedging requirements increased, meaning gamma got more negative as the market moved lower. Once in negative gamma territory options dealers change […]
Market Analysis
Searching for a Market Bounce: Feb 2020
Below are a few charts that we’ve been watching as we’re in the midst of the Crash of Feb 2020. Several indicators are showing extreme readings and we wanted to chronicle those. If you have one you think we should add email us: sg@spotgamma.com. One of the things we look at “Gamma Tilt” which is […]
February 2020 Selloff & Gamma Trap
There has been relentless selling during the end of February attributed to Coronavirus fears. There are clearly sellers of all types active in the current market, but much of this selling may be attributed to negative market gamma and the “gamma trap”. As you can see below on over the weekend of Feb 24th futures […]
Gamma Tilt & Market Bottoms
One of the indicators we watch for a potential bottom is Gamma Tilt – or the ratio of call gamma to put gamma. When this level hits lows it may be an indication that the market is oversold. Currently the S&P500 Index is about 8% in ~5 trading days. Here is the current indicator for […]
SpotGamma 2/24/20 AM Report
We’ve moved well through the zero gamma area and are testing the first “put wall” and “absolute gamma strike”. Puts are now in control of gamma which indicates more volatility ahead. I would not look at the put wall as a solid support line, but more of a pivot or “band” around which larger moves […]
Feb 2020 OPEX Roll
Today (2/19) we are looking at the size and potential of the Feb SPX AM OPEX roll that takes place on Friday (2/21). As you can see below there are some decent sized call positions which will have to be addressed – either closed or rolled. You can see there are some decent sized positions […]
Feb 12 – Absolute Gamma Bounce
ES Futures moved sharply lower overnight on 2/12-2/13 as fears of the Coronavirus moved higher. This created selling pressure which went unchecked until markets hit the key 3350 level. Its at this level which we measured the highest level of “Absolute Gamma” which the absolute value of call gamma + put gamma. We also calculated […]
Yes, Gamma Works Both Ways
There has been quite a rally of of recent lows as the market has been digesting Coronavirus headlines. A bit over one week ago the market was testing the “zero gamma” level – which can present a challenging choice for traders. The chart below shows ES futures with our levels noted from the first week […]
Gamma Model Positioning Adjustments
Following a LinkedIn blog(?) by a Deutsche Bank fellow who took issue with market gamma models, I decided to run a few quick simulations to look at model error. Many gamma models assume all calls are sold to dealers and all puts are bought from dealers. Certainly this cannot be 100% true, but the back […]
Somethings Gotta Give – The SPX Box
A quick note, particularly for documentation. Currently (1/31/20) the market awaits a slew of catalysts including: coronavirus updates, Iowa caucuses and the Chinese market reopening. For the last few days we’ve been contained in this fairly volatile range between ~3300 (our high gamma strike) and ~3240 (zero gamma). Above we can bask in the comfort […]
