Bloomberg posts an article about the effects of negative gamma in oil markets. Its full of hyperbole, but portrays the general idea right. Traders frenetically sell futures to manage their options exposure; that drives down prices and brings more options into the danger zone; dealers are then forced to sell even more crude contracts. This […]
Market Analysis
Gamma & Spy Going Ex-Div
Tomorrow SPY trades Ex-Div which means if you own SPY you will collect the dividend. Here is a brief thought expermient on why Ex-Div is bullish for SPY: If you are short SPY you have to pay out the dividend. If you are short ITM calls you will probably be exercised. If you own ITM […]
SPX Pin Risk Exemplified
The last two days have had large volume at the 3000 strike in the S&P 500 and this has held the market in a very tight range around….3000. With the Fed FOMC tomorrow volume is very low, so all that is left is for dealers to pin the market where all the options volume is. […]
Option Expiration Roll Starting?
Lots of volume at the 3k strike today, but so far only about ~45k of the ~125k traded expire in the next 3 months. Our tables from last night show about 330k of total OI at the 3000 strike for September. Last months CBOE Buywrite Index strike (BXM) was 2895, so those will be deep […]
Saudi Oil Attack Options Gamma
Here is a quick snapshot after the Saudi Oil attack – options gamma is still quite long with over $1bn long gamma per point in the S&P500. This may have had an effect on muting or “deleveraging” the reaction to the news about the Saudi Oil attack. There was a very large move in crude […]
Large Options Gamma Roll 9/20/19
September 20th has a large options gamma roll ahead in the S&P500 (SPX, SPY). There are substantial call and put positions and there was obviously a lot of movement up this month. We also have the Fed which is expected to lower rates by 25 bps. This could provide a market catalyst just as large […]
How Options Trading Influences Market
Today had an interesting movement in the S&P500 (SPX, SPY) where the market essentially went completely vertical. It appeared to be caused by options hedging, as the 3000 strike was very active especially in tomorrows expiration. The theory is that someone is buying calls (could be closing a short, or just getting long the 3000 […]
Short Gamma vs Long Gamma
As dealers were short gamma for most of August they have moved to long gamma. Below is a chart comparing their theoretical behavior in each gamma regime. You can see when dealers are short gamma and the market is falling they are trading with the market, fueling the drop. Conversely when long gamma they are […]
Starting Short Gamma – September Market Outlook
There are several catalysts in September that could cause the same volatility we saw in August. So far this morning there is appears that China Trade has made no headway and futures are around 2900. As you can see in the chart below that has the SPX & SPY markets starting short gamma and therefore […]
Long Gamma Kick Save 8/30/2019
There have been lots of short gamma charts lately but today’s action looked like a long gamma kick save. News about Iranian enrichment pushed the market down at ~11EST and there was a decent drop to ~291 – a dip that was bought. The previous close was 292.5 and we model that because of the […]