Quick Gamma Update
Diupdate
Most of you by now know I like to follow these big hedges in the market as a gauge for volatility.
It's a driving factor behind things like Vix Highs and Lows being pinned at very specific ranges.
CPI was really just a catalyst that pushed some larger Marco flows negative like the hedges I track.
The closer these funds get to their long put strike, the more selling pressure these dynamic funds will have on the markets.
JHQTX, the youngest.
Time is also a big factor for these flows. The smaller fund just rolled over in august.
You can see by the gamma curve now compared to when the options expires in November, we’re still in positive gamma territory.
At ~3700 this fund will add to volatility.
JHQDX, the middle child.
This fund also went negative the past few days adding to selling pressure.
While the fund is still 46 days to roll over.
The closer to expiry, the more the negative gamma effects will be (dotted purple line in gamma curve)
JHEQX, The Big Tamale
Is approaching expiry in 2 weeks.
These flows are now approaching the strongest.
The gamma curve not only dictates the direction of delta hedges but also the amount.
In 11 days the gamma curve will be at its peak potential for daily flows (positive or negative).
What I can tell you is the closer to gamma zero, the less supportive flows will be.
The more markets drop below 3800 the more chance of a significant drop to ~3600 than to ~3200.
The key here is volatility. The selling over the past few weeks has consistently been capped around this 27 mark for weeks.
I think there is a good chance the next week there could be some sideways movement until FOMC.
It's a driving factor behind things like Vix Highs and Lows being pinned at very specific ranges.
CPI was really just a catalyst that pushed some larger Marco flows negative like the hedges I track.
The closer these funds get to their long put strike, the more selling pressure these dynamic funds will have on the markets.
JHQTX, the youngest.
Time is also a big factor for these flows. The smaller fund just rolled over in august.
You can see by the gamma curve now compared to when the options expires in November, we’re still in positive gamma territory.
At ~3700 this fund will add to volatility.
JHQDX, the middle child.
This fund also went negative the past few days adding to selling pressure.
While the fund is still 46 days to roll over.
The closer to expiry, the more the negative gamma effects will be (dotted purple line in gamma curve)
JHEQX, The Big Tamale
Is approaching expiry in 2 weeks.
These flows are now approaching the strongest.
The gamma curve not only dictates the direction of delta hedges but also the amount.
In 11 days the gamma curve will be at its peak potential for daily flows (positive or negative).
What I can tell you is the closer to gamma zero, the less supportive flows will be.
The more markets drop below 3800 the more chance of a significant drop to ~3600 than to ~3200.
The key here is volatility. The selling over the past few weeks has consistently been capped around this 27 mark for weeks.
I think there is a good chance the next week there could be some sideways movement until FOMC.
Catatan
Market doesn't like being below 3905...
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