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 […]
gamma
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 […]
SpotGamma vs Nomura
We like to post the banks gamma model output as way to check our own models. The two line up almost exactly. For now, US equities are “pinned” thanks to helpful greeks – at least until something really bad happens. “The fact remains that SPX will stay ‘sticky’ up here between the enormous 3100- ($9.4B […]
Action on “China Phase 1 2020” Selloff
Here is our view of the trading day today. The market started off the day long abut $2bn in gamma and at the lows of the day it was down to ~$1.75 bn. Despite the reduction that is still a hefty amount of gamma that supports a mean reverting market. On top of that we […]
Gamma vs Realized Volatility
Gamma appears to give traders an edge in predicting market volatility. Here we show the last few months of historical volatility as a quick method to back up this point. Volatility does not imply a direction in the market, just expanded movement. Often this is correlated with market drops, but also rapid rises as seen […]