SPX Gamma EOD
The SPX dropped further into negative gamma territory and closed 2.3% down at 4594.6 points, while futures slipped even more in the after hours and currently sit -2.7% at 4583.8 points (we take this as the basis for our calculations).
Total gamma is at -378M, down 173M since our AM report and down 836M from Wednesday. The market was able to stabilize at 4600 where -17M gamma is located and hedging flows caused heavy whipsawing. Next downside target is 4550 (-16M gamma notional) and 4400 (-33M gamma notional). Even further down we have our first main put barrier that can be identified at 4100 (-37M) and another one at 4000 (-38M), but lets rather tune those levels out for now.
Remember: Negative gamma forces option dealers to hedge their exposure procyclical (they have to sell into weakness and buy into strength), so both down- AND upside-moves are strongly exaggerated. Be prepared for some volatile waters ahead.
Cheers
Total gamma is at -378M, down 173M since our AM report and down 836M from Wednesday. The market was able to stabilize at 4600 where -17M gamma is located and hedging flows caused heavy whipsawing. Next downside target is 4550 (-16M gamma notional) and 4400 (-33M gamma notional). Even further down we have our first main put barrier that can be identified at 4100 (-37M) and another one at 4000 (-38M), but lets rather tune those levels out for now.
Remember: Negative gamma forces option dealers to hedge their exposure procyclical (they have to sell into weakness and buy into strength), so both down- AND upside-moves are strongly exaggerated. Be prepared for some volatile waters ahead.
Cheers
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