Macro Shifts & The Vol/Gamma Dynamics
What’s up everyone,
Its been a big last couple of weeks for markets. I like these moves we have seen in equities, oil, the dollar, and in the Vol space.
Tuesday alone in US equities we saw the biggest squeeze and amount of net buying for the past 6 months as most traders sold the lows into the bottom of cycle - the typical wrong move and bad timing for the majority.
Here’s is a video update on these macro moves and the way I like playing it into month end/year end.
As referenced in the video here below is the S&P/Gamma Exposure chart I was mentioning…
Gamma exposure (GEX); refers to the sensitivity of existing option contracts to changes in the underlying price. Substantial imbalances can occur between market-makers' call- and put-option exposures, and when those imbalances occur, the effect of their hedges can either accelerate price swings (like a squeeze) or stifle movement entirely.
The GEX (Gama Exposure) is a dollar-denominated measure of option market-makers’ hedging obligations. When GEX is high, the option market is implying that volatility will be low. When GEX is low, volatility is high, and while the market will be choppy with the higher vol, further losses are UNLIKELY until a deeper break in the underlying indices trend. I teach my traders how and when to capitalize on these correct trend breaks and technical/cyclical market shifts.
Here’s a 2 year look at the correlated relationship between S&P (in green) and the GEX…notice when the GEX is high the S&P tops out, and the reverse is true…
Here’s the most recent 6 month look….
Notice last week’s lows in the GEX, coincided with lows in the S&P - that was the setup for the squeeze Tuesday I was referring to in the video.
Learning and following the Volatitly indices but also these option metrics are just more tools to measure and reference for confirming indicators of when and where our edges are.
I hope this helps, and here is the link for those wanting to take advantage of the 50% Cycber Week/Holiday Discount on the - Total Trading Package and Prop Desk opportunity.
Again this deal is good through this Sunday Dec 12th and I only have 3-4 spots on the desk for the start of the year - so lets get you in and trained and ready to go for the new year!!
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Have a great rest of your trading week - talk soon.
In your trading corner,