S&P 500 gamma update EOD
Today's price action was a continuation of the impulse that started yesterday around noon (see our last EOD update) and driven by the belief that the US will not blow Omicron out of context (like parts as Europe), as Biden reassured markets that the US is "absolutely not" going back to March 2020 in terms of lockdowns.
The S&P 500 was certainly boosted today by market makers, who had to unwind lots of hedges as the needle crossed 4600, were lots of puts that moved out of the money on the way higher got smoked. Also helpful was the vol smash that caused put options to loose value and caused additional unwinds.
Mega caps were bid today after three days of hefty losses in the neighborhood of five percent, and closed over two percent higher, but also the equal weight basket rose about two percent.
Tomorrow is going to be a little bit more exciting from an fundamental perspective and investors will receive the Conference Board's Consumer Confidence Index for December, Existing Home Sales for November, the third estimate for Q3 GDP, and the weekly MBA Mortgage Applications Index on Wednesday.
Total net gamma stands at about 190M and should support a smooth ride higher - well, theoretically.
Three good reads caught my eye today (via 0hedge): 1) Saxo estimates that the global credit impulse is already negative and is expecting a significantly below-consensus growth in the coming quarters and 2) Goldman seems to be a little puzzled about high implied vol, despite low realized vol, which seems not justified even considered the known macro headwinds that are about to hit markets in 2022 (for example taper/mid terms). Last but not least 3): Nomura sees a good set up for a squeeze like Santa rally given the current gamma mechanics, which I mentioned in my own analysis above.
Have fun!
The S&P 500 was certainly boosted today by market makers, who had to unwind lots of hedges as the needle crossed 4600, were lots of puts that moved out of the money on the way higher got smoked. Also helpful was the vol smash that caused put options to loose value and caused additional unwinds.
Mega caps were bid today after three days of hefty losses in the neighborhood of five percent, and closed over two percent higher, but also the equal weight basket rose about two percent.
Tomorrow is going to be a little bit more exciting from an fundamental perspective and investors will receive the Conference Board's Consumer Confidence Index for December, Existing Home Sales for November, the third estimate for Q3 GDP, and the weekly MBA Mortgage Applications Index on Wednesday.
Total net gamma stands at about 190M and should support a smooth ride higher - well, theoretically.
Three good reads caught my eye today (via 0hedge): 1) Saxo estimates that the global credit impulse is already negative and is expecting a significantly below-consensus growth in the coming quarters and 2) Goldman seems to be a little puzzled about high implied vol, despite low realized vol, which seems not justified even considered the known macro headwinds that are about to hit markets in 2022 (for example taper/mid terms). Last but not least 3): Nomura sees a good set up for a squeeze like Santa rally given the current gamma mechanics, which I mentioned in my own analysis above.
Have fun!
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