Nomura analyst on CNBC discussing how dealer gamma effects the equity market. He mentions the large open interest in the VIX (“50 Cent”) and how a volatility crush could spur an equity rally. This is because (as seen through the SpotGamma model) a drop in volatility forces dealers to rehedge through buying stocks. As the market goes higher, volatility drops further and brings more buying.
It should be noted that expiration is on 8/16 (Friday) and that many positions will be rolled into this week which causes the gamma position to change quite a bit.
Nomura Managing Director Charlie McElligott, who has called a number of big market moves this year, explains why he sees a rally ahead pic.twitter.com/0HJfmhDdsA— Squawk Box (@SquawkCNBC) August 9, 2019