Fed gave a speech that was “volatility dampening” at 10AM. Trump didn’t like what the Fed had to say so he started tweet-trashing the Fed and China triggering a “gamma trap“. Stock markets were just at the volatility trigger level of 2920 (black horizontal line) so the gap down flipped the trigger and dealers were […]
SPX
Gamma Driven VIX Drop
There was quite a large move down in the VIX overnight (8/20/19) and Nomura claims that was due in part to the gamma around a large VIX position. This gamma driven VIX drop is apparently related to hedging around a large VIX position. When options decay this can effect the amount of hedging that a […]
Gamma Market From 8/16/19
Volatility will continue to reign until (if) the market recaptures 2920. There is a ton of fuel ready to burn and one headline (or tweet) will send the market flying. The only recommendation that is safe here is to not sell any options, being short volatility is very dangerous here, as a >3% rally is […]
Dealers Running Out of Gas 8/16/19
After a sharp rally this morning the S&P500 stands at ~2890. This is where dealers buying starts to soften up. You can see their volume profile in the chart below. They were strong buyers up to this level but we calculated 2891 as the level where their buying wanes and 2920 where they flip to […]
Dealer Futures Flow 8/14/19
Here is a chart estimating the futures action with the S&P500 at 2850. If markets head lower it looks like dealers will sell more futures, compounding the move down. The same works in a rally, but instead of selling those dealers will be buying. All this flips when/if the market moves over the VFLIP line […]
VFlip Strikes Again 8/13/19
Like Haden warned us, based on ASDFG levels, on 7/31 markets broke under the VFLIP Volatility Indicator, triggering a market environment market by high volatility. As you can see that proved true with >10 days in a row with a >1% move. With a major options expiration at the end of the week there should […]