“Market Gamma” may be a powerful market timing signal to incorporate into your existing investment and trading models. As you can see below owning, and holding the S&P500 (SPX, SPX, etc) when our SG Gamma Index is >0 has outperformed the general market since 2018.
You can see in the chart below that the gamma timing signal is quite useful in avoiding the significant draw-downs of December 2018 and March 2020.
Why does the strategy not perform better? As many experienced investors can attest, some of the largest positive market returns occur after large drawdowns. While “positive gamma” is effective at marking a change from high to low volatility, it is not a great tool for marking significant bottoms in markets.
Because of this SpotGamma provides a host of other data sets to supplement this “market gamma” indicator, to help estimate when markets may have met their lows.