From Heisneberg we get a glimpse into Nomuras gamma view, which seems to coincide with what we see. Namely gamma is about as high as we’ve ever seen, this past week hitting $2.7 billion compared to an all time high of ~$2.9bn in August of 2018. At the same time, investors have leaned into equities […]
Market Analysis
The Man Who Solved the Market
An interesting quote – one of many from the book. I believe pertains greatly to market gamma and what we are trying to model. These were pulled from a great twitter thread, linked at bottom. “LTCM’s basic error was believing its models were truth,” Patterson says. “We never believed our models reflected reality — just […]
Volume vs Dealer Gamma
As volatility spikes S&P E-mini top of book depth decreases. Anecdotally this doesn’t come as a surprise because higher volatility should make dealers reduce size and be less aggressive. Whats interesting is that (in theory) in a negative gamma world options hedgers don’t reduce their size, so they just face less liquidity which means their […]
Delta Hedging Example
We talk a lot of gamma, but here is delta in action. Someone sweeps up a bunch of SPX calls making market maker hedge right away. While everyone is checking for china tweets it turns out was just a hedge. Not he timestamp on the trades is 11 AM (blue box, left column) as is […]
Gamma Does Exist! Pin Edition
3075 dominated volume and $SPX closes 3074.77. Gamma forecast was range of ~15 handles on day. Here is an explainer on market gamma for those new to the concept.
Monitoring the Call Gamma Squeeze
The idea has been that the roll-up of the 3050 calls to 3100 calls has caused a squeeze (see here) and that the 3100 strike currently holds the key to the next move in the SPX. November SPX expiration may help to get things moving – you can see in the chart below there is […]
Call Roll Gamma Trap
Most of the time when we talk about “gamma traps” people assume its a downside only event. I don’t think thats true. As I once read somewhere “gamma happens both ways”. There is evidence the last several days rise in stocks was caused by calls being rolled up. If market makers are on the other […]
SPY Gamma Visualization
Below is a chart of gamma across all strikes in SPY. You can see that there is a large amount of gamma supply at 305 (right most arrow) and gamma flips from positive to negative around 301. It is below that strike where our model predicts increased volatility as dealers go from buyers to sellers. […]
Fed Versus High Gamma
Today we have an interesting confluence of events: a FED FOMC rate day and ultra high S&P500 market gamma. As of this posting( 10/30 @ 10:30 AM EST) market gamma is ~$1.8 billion which is quite high and forecasts an S&P500 trading range of 50 bps (1/2%). The Fed is widely expected to cut rates […]
Does Gamma Create Overnight Market Out-performance?
One of the working theories we’ve had is that the out performance of the S&P500 during the overnight session is due to market gamma. The idea is that options dealers gamma hedging keeps the market in check during cash sessions, and overnight the market can move about more. The chart below shows how much more […]