Quad-Witch Quandary: How Will Friday's $2 Trillion Gamma Expiration Impact Markets

zerohedge2021-06-15

Last week, when discussing thebizarre summer doldrumsin the market which pushed the VIX to the lowest level since the onset of the covid pandemic, we said that this period of abnormal market quiet is ...

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Comments

Sctzilla
2021-06-17
Sctzilla
What does it really mean?
- SCWH:
  nothing
Stahnk
2021-06-17
Stahnk
For the letters!
- ZacN:
  ??
Meshaarias72
2021-06-16
Meshaarias72
Ilke n comment pls
- YS_ZENG:
  Sure
GoG
2021-06-16
GoG
I hate quad witching. Time wasting
- GoG:
  I hate quad witching. Time wasting
32b78f82
2021-06-16
32b78f82
Gme
32b78f82
2021-06-16
32b78f82
Huat ah

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Furthermore, with stocks at all time highs, it is to be expected that most of the June open interest is below the current SPX spot price. As shown in the chart below, the dual peaks are at 3,900 and 4,150. This means that after Friday, there may be a certain \"anti\"-gravity around those spots until gamma is refilled.\n\nThe Goldman strategist then explains what he believes is below the abnormally low level of realized market vol, noting that - as we discussed last week - it is consistent with long gamma positioning. Consider that SPXrealized volatility over the past 13 trading days has been just 5.1% - the lowest 13-day realized vol since 2019.\n\nThis contrasts with extreme volatility in pockets of the single stock market; AMC, which had the highest contract volume among single stocks last week (but far less notional volume at$7bln/day than AMZN’s leading $120bln/day), has had close to 400% realized vol over the same period.\n\nThen, as Nomura's Charlie McElligott first noted last week, Goldman's derivatives team agrees thatthe extremely low SPX realized volatility is consistent with the possibility that 18-Jun has left “the street” long index gamma, in which case Fishman echoeswhat we said last week, namely that \"realized volatility could pick up once positions are cleaner. \"Meanwhile, the rising beta of VIX futures to the SPX indicates that investors expect short gamma dynamics to pick up should markets sell off. Translation:the market will become much more volatile in a selloff.\n\nMeanwhile, and in keeping with the latest memo stock squeeze, Goldman also notes that while single stock option volumes continue to be high, it is well short of Q1 peaks. The large percentage of all single stock option activity driven by retail, and the predictive value of retail activity, have both heightened the attention on the single stock option market in recent weeks. Recent growth in single stock option activity has been concentrated in low-share-price stocks, leaving a shar prise in contract-volume over the past two weeks that has not been matched by notional volume. When adjusting notional volume for the size of the equity market, Goldman finds that single stock volume has actually been on the low of its 2021 range over the past two weeks which means that the latest ramps had little to no gamma squeeze components to them.\n\nOne final point which we discussed recently and which is in keeping with the growing retail participation in trading, is Goldman's observation that the trend toward shorter-dated SPX options (weeklies) and away from quarterlies, continues. That also is one of the reasons why Friday’s SPX expiration is smaller than many recent quarterlies, and why as it as approached expiration, its trading volume has been falling.\nAs Goldman explains, investors have been increasingly adopting the full calendar of SPX expirations, including expirations every Monday and Wednesday, as they tailor their views around events. In fact,the percentage of SPX option volume happening in 3rd Friday expirations is at an all-time low,and is now smaller than the percentage happening in Monday and Wednesday expirations. One explanation for heightened ultra-short-dated volumes is the strong single stock volumes: and here an interest suggesting from Goldman - \"to the extent market makers are unable to cover the short single stock gamma generated by retail investors’ call buying, they may be actively trading long positions in strips of ultra-short-dated SPX index options to offset this gamma.\"\n\nWhy is this important? because if this trend is large enough, it directly contributes to low implied and realized correlation.Ironically, by ramping single name, \"most-shorted names\", retail investors are ushering a period of unorthodox calm across the rest of the market!","kind":null,"is_publish_news":true,"is_publish_highlight":true,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":168040287,"gmtCreate":1623945255349,"gmtModify":1703824337294,"author":{"id":"3575088615997337","authorId":"3575088615997337","name":"Sctzilla","avatar":"https://static.tigerbbs.com/da92fdf7b2ad123c19abd6ec086d68d6","vip":1,"crmLevel":6,"crmLevelSwitch":0},"htmlText":"What does it really mean?&nbsp;","listText":"What does it really mean?&nbsp;","text":"What does it really mean?","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":1,"repostSize":0,"link":"https://ttm.financial/post/168040287","repostId":1191245053,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":5055228,"gmtCreate":1624890629685,"gmtModify":1663230213839,"authorId":3578871300414158,"author":{"id":3578871300414158,"authorId":3578871300414158,"name":"SCWH","avatar":"https://static.tigerbbs.com/0e4c0e65723837b8f26cdda54d3ed9c6","vip":1,"crmLevel":4,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":168040287,"type":1,"supId":0,"prevId":0,"content":"nothing","text":"nothing","html":"nothing"}],"langContent":"EN"},{"id":161628503,"gmtCreate":1623923649402,"gmtModify":1703823612115,"author":{"id":"3577782757457558","authorId":"3577782757457558","name":"Stahnk","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"crmLevel":1,"crmLevelSwitch":0},"htmlText":"For the letters!","listText":"For the letters!","text":"For the letters!","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":1,"repostSize":0,"link":"https://ttm.financial/post/161628503","repostId":1191245053,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":4910893,"gmtCreate":1624183275701,"gmtModify":1663229498450,"authorId":3577220211671569,"author":{"id":3577220211671569,"authorId":3577220211671569,"name":"ZacN","avatar":"https://static.tigerbbs.com/4b39e21f419b5bf9c135c152e2e2b227","vip":1,"currentWearingBadge":{"badgeId":"1026c425416b44e0aac28c11a0848493-2","templateUuid":"1026c425416b44e0aac28c11a0848493","name":"Senior Tiger","description":"Join the tiger community for 1000 days","bigImgUrl":"https://static.tigerbbs.com/0063fb68ea29c9ae6858c58630e182d5","smallImgUrl":"https://static.tigerbbs.com/96c699a93be4214d4b49aea6a5a5d1a4","grayImgUrl":"https://static.tigerbbs.com/35b0e542a9ff77046ed69ef602bc105d","redirectLinkEnabled":0,"hasAllocated":1,"isWearing":1,"stampPosition":0,"hasStamp":0,"allocationCount":1,"allocatedDate":"2023.11.22","individualDisplayEnabled":0,"individualDisplaySort":0,"categoryType":1001},"crmLevel":6,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":161628503,"type":1,"supId":0,"prevId":0,"content":"??","text":"??","html":"??"}],"langContent":"EN"},{"id":169409662,"gmtCreate":1623845896156,"gmtModify":1703821171542,"author":{"id":"3577781617271173","authorId":"3577781617271173","name":"Meshaarias72","avatar":"https://static.tigerbbs.com/c5282cda6a9d3948fc067b21adcb578c","vip":1,"crmLevel":2,"crmLevelSwitch":0},"htmlText":"Ilke n comment pls","listText":"Ilke n comment pls","text":"Ilke n comment pls","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":1,"repostSize":0,"link":"https://ttm.financial/post/169409662","repostId":1191245053,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":4874913,"gmtCreate":1624031554578,"gmtModify":1663229326148,"authorId":3561416218644754,"author":{"id":3561416218644754,"authorId":3561416218644754,"name":"YS_ZENG","avatar":"https://static.tigerbbs.com/80872255ccfe73879d5d778410465550","vip":1,"crmLevel":5,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":169409662,"type":1,"supId":0,"prevId":0,"content":"Sure","text":"Sure","html":"Sure"}],"langContent":"EN"},{"id":169862826,"gmtCreate":1623828325465,"gmtModify":1703820690707,"author":{"id":"3570186020309805","authorId":"3570186020309805","name":"GoG","avatar":"https://static.tigerbbs.com/1c9fbe31d027bcf439a17955df60352f","vip":1,"hat":"https://static.tigerbbs.com/646756f1284a5a6480ed02cc4fa7d1d2","crmLevel":6,"crmLevelSwitch":1},"htmlText":"I hate quad witching. Time wasting","listText":"I hate quad witching. Time wasting","text":"I hate quad witching. Time wasting","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":1,"repostSize":0,"link":"https://ttm.financial/post/169862826","repostId":1191245053,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":4805099,"gmtCreate":1623828337689,"gmtModify":1663229002340,"authorId":3570186020309805,"author":{"id":3570186020309805,"authorId":3570186020309805,"name":"GoG","avatar":"https://static.tigerbbs.com/1c9fbe31d027bcf439a17955df60352f","vip":1,"currentWearingBadge":{"badgeId":"972123088c9646f7b6091ae0662215be-3","templateUuid":"972123088c9646f7b6091ae0662215be","name":"Legendary Trader","description":"Total number of securities or futures transactions reached 300","bigImgUrl":"https://static.tigerbbs.com/656db16598a0b8f21429e10d6c1cb033","smallImgUrl":"https://static.tigerbbs.com/03f10910d4dd9234f9b5702a3342193a","grayImgUrl":"https://static.tigerbbs.com/0c767e35268feb729d50d3fa9a386c5a","redirectLinkEnabled":0,"hasAllocated":1,"isWearing":1,"stampPosition":0,"hasStamp":0,"allocationCount":1,"allocatedDate":"2021.12.28","exceedPercentage":"93.78%","individualDisplayEnabled":0,"individualDisplaySort":0,"categoryType":1100},"crmLevel":6,"crmLevelSwitch":1,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":169862826,"type":1,"supId":0,"prevId":0,"content":"I hate quad witching. Time wasting","text":"I hate quad witching. Time wasting","html":"I hate quad witching. Time wasting"}],"langContent":"EN"},{"id":169177356,"gmtCreate":1623824913075,"gmtModify":1703820611708,"author":{"id":"3586813194130782","authorId":"3586813194130782","name":"32b78f82","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"crmLevel":1,"crmLevelSwitch":0},"htmlText":"Gme","listText":"Gme","text":"Gme","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/169177356","repostId":1191245053,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":169174750,"gmtCreate":1623824907070,"gmtModify":1703820611382,"author":{"id":"3586813194130782","authorId":"3586813194130782","name":"32b78f82","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"crmLevel":1,"crmLevelSwitch":0},"htmlText":"Huat ah","listText":"Huat ah","text":"Huat ah","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/169174750","repostId":1191245053,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":996,"commentSize":676,"repostSize":0,"favoriteSize":3,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.24.0","shortVersion":"4.24.0","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/1191245053"}