Here is a quick example to illustrate how market gamma may be useful for a futures trader. The last week SpotGamma has calculated a very large amount of gamma in the market, north of $1 billion. That predicts a tight, range-bound market. Below is a chart of the last month, the yellow box highlights a […]
Market Analysis
Why Market Gamma Levels Matter
Here is a very low level primer as to what dealer gamma means and why those levels appear to influence the markets. There are many assumptions and oversimplifications made here. See our other articles and FAQ for more detailed information. Dealer gamma is a dollar value that estimates how much options dealer may have to […]
Has Gamma Made the VIX “Useless”
Posting this as something to revisit later. Zerohedge posted the following recently: If one observes a conventional indicator of prevailing risk sentiment such as the VIX, which is trading in the low teens and near the lowest levels over the past two years (and far below its long-term average of 20), one would be left […]
Gamma Effect Seen In Index Movement
Lets classify this as what it is: speculation (at best) but its quite interesting on days like yesterday when the S&P is down only 34bps while Nasdaq and DOW were down ~90bps. Yes, Boeing (BA) hurt the DOW in particular but that wouldn’t explain the Nasdaq performance. The theory that should be bookmarked here is […]
How an Option Pin Plays Out
The current October options expiration portrays how an options pin can play out. For several days we have seen 3000 as our high gamma strike, with options volume at 3000 strike dominating the market. As the market moves away from this strike options dealers and other options hedgers move the price “back in line” to […]
Mid October Rally
Here is a chart mapping out how we viewed this recent rally back up to 3000 in SPX, along with a bit of a prediction. The volatility crush sparked a rally today up to our “high gamma strike” of 3000. Because gamma is very high (~$1bn per S&P500 point) and 3000 is a high gamma […]
Nomuras Gamma View after the Rally
Via Heisenberg, here is Nomuras Gamma View after the Rally. They note the following: “[The SPX was ]gravitationally pulled higher (spot 2970) and now sits comfortably between the two large $Gamma upside strikes of 3000 ($3.7B) and 2950 ($2.5B)”…“As the bullish macro catalysts have indeed begun materializing, the various hedge expressions (VIX upside, S&P downside, […]
Options Vanna Rally
Now a prescient time to talk about options Vanna, and a Vanna rally. Vanna measures the change in delta for a change in Implied Volatility. Long calls + short puts = Long Vanna We view options market makers as typically long vanna. When volatility crushes they therefore must buy stock back to reduce their hedges. […]
Gamma Before China Trade Talks
We started the day negative gamma but had a rally to just above the zero gamma level. There appears to be a sizeable market hedge at 2900 which could provide support for the markets. If volatility breaks the put hedges that dealers are holding will act as fuel to spark a strong rally. The 3000 […]
SPX Distribution vs Gamma Levels
from Heisenberg: you can see when gamma is large and positive the market moves much less than when gamma is large and negative.