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 […]
Market Analysis
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 […]
Virus Outbreak – Week in Review
Ahead of important AAPL (Apple) earnings and the FOMC we wanted to review the market over the past week. We have spent a lot of time drawing an analogy between todays market and that of January ’18 (see here). Interestingly the Jan ’18 market topped the same day as the current market. Currently gamma is […]
Zero Gamma Holds Again – Virus Edition
A combination of new regarding the Chinese virus spreading and Iraq being bombed sent futures lower on Monday AM. Oddly the low of the overnight session was 3237, which we calculated to be the zero gamma threshold. Remarkably the same thing occurred a few weeks ago on the eve of the Iranian bombing. Should the […]
Nomuras Combined Gamma May Be Off
Here are the Nomura gamma charts via ZH. Not their flip point at 3263, id argue this is too high. Nomura combines SPY and SPX and I believe they can have very different profiles. Compare the Nomura gamma chart with our separate SPY and SPX charts. The zero gamma level on our charts is where […]
Hedging Into the Close
@VolCurve brought up a great point today – ” Don’t mistake gamma hedging for strength.” It was an interesting example today of what looks like gamma hedging moving the market into the close. The market was quite weak today, but some force kept bringing us higher towards 3300 into the close. SPX options settle at […]
Explaining OPEX Drift
This is a repost from MacroTourist. Excellent site and co-host of The Market Huddle podcast. This post will be a little more technical, but it’s important, so I urge you to read on. Over the past couple of years there has been an increased interest in dealers’ gamma charts to help explain market movements. […]
Nomura Gamma Update 1/22/20
Heisenberg posted an updated gamma note from Nomura, and we like to note them here versus SpotGamma data. Nomura posts a combined SPX/SPY figure whereas we break the data out. The note and charts sync with much of what we have been saying: That long gamma is still in control. Last week, Charlie noted that […]