Market Makers & Coronavirus: The Mechanics of a Market Sell-Off How do sell-offs actually happen? With the S&P 500 selling off hard and fast, Hari Krishnan, fund manager at Doherty Advisors, breaks down the mechanics of market meltdowns. Krishnan explains the role of different institutional players like market-makers and drills down on the individual components […]
gamma
Nomuras View of Feb 2020 Crash
My view of the past week has been this: The markets slipped into negative gamma on Monday 2/24 under the narrative of Coronavirus fears. As large concentrations of puts went in the money their hedging requirements increased, meaning gamma got more negative as the market moved lower. Once in negative gamma territory options dealers change […]
Nomura Gamma Report 1/7/20
Here is an updated Nomura gamma snapshot to compare vs ours. Note we both have gamma flip at ~3185 with peak gamma around 3275. He also sees 3250 as a “pin” much as we’ve shown in subscriber reports. Thanks to Heisenberg report. “And the same song remains—SPX Dealer ‘Gamma flip’ level is meaningfully below market”, […]
BusinessInsider.com Talks Gamma
A good primer on market gamma from BI: So why do markets move at all if gamma is, like in this example, the big decelerator? Because it depends who owns it. Market makers use their gamma because they must. There is nothing worse than sitting on a position and bleeding white over time as your […]
Options Model Shows Shift Starting
December is always a large options expiration as we have large open interest and a SPY dividend payment. Because of all of this the expiration has the potential to mark turning points in the market as large positions are closed, roll or expire. 3200 has been a key level the last week with major options […]
Why Dec ’19’s Large Open Interest Could Cause Volatility
December OPEX has a many strikes that have large open interest (OI). For calls there are many in the money strikes as you can see in the grid below with OI greater than 20k or 40k – the 3000k strike has 125k contracts. There is large size in puts as well, but these are currently […]
SPX Skew Nears All Time Highs
As per Bloomberg, Skew (which measures the price of calls vs puts) can often spike when investors are concerned about market risk. Puts will be in higher demand than calls and this moves the skew measurement higher. Currently skew is very high due to a slew of events in the next week: FOMC, BREXIT vote, […]
Nomuras Pre-Event Gamma View
From heisenberg: Charlie McElligott, Nomura: “As VVIX & Skew went ‘bid’ BIG TIME yday, this indicates that the market is now once again beginning to price-in ‘tail’ scenarios”, “[That] offers attractive risk-reversal opportunities to play for an upside S&P breakout following a potential ‘hedge puke’”, he added, noting that in the event we do get […]
December 2019 Market Decline Review
Here is a chart outlining how we saw the selloff during the first week of December 2019. There was record high gamma going into the first week of December which indicates that call:put ratios were at extremes. After a few negative tweets about trade and a poor ISM number selling started, and put buyers stepped […]
Nomura’s Gamma December Note
Our model has gamma flipping at 3065, Nomuras is a bit higher. From ZeroHedge The interpretation of Trump’s “better to wait until after the election” for a China trade deal comments is that the Hong Kong human rights bill sponsorship by POTUS has clearly caused agitated the Chinese side (plus this morning’s Reuters report stating […]