Hey everybody, starting a thread about market gamma. Does anyone use market gamma for trading levels, with volatility adjusted flows in and out of the indexes and delta neutral hedging this has become a big deal. I've been watching it for a few months now and it's very very compelling. Interested to see how other people are using it. It's offered free at a website called Tier 1 Alpha if anyone wants to reference it. I'm just learning how to use it but goodness it's been a revelation. Some pretty simple options strategies available around large call strikes in positive gamma. Any input would be helpful I will include a screenshot for today. Been trading a million years but this is relatively new to me.
My basic understanding thus far is Gamma pins the SPX spot price which crushes realized volatility. rVol is what triggers equity exposure rebalancing in almost all VaR, Vol controlled portfolios. When realized vol goes up, those funds sell off equity and rebalance to less risky assets. When rVol goes down it triggers those funds to add exposure and buy equities. So when gamma is positive it lowers realized volatility which triggers funds to buy more stocks and slowly pushes the market up with low volatility. It's the link between delta hedging, gamma, and portfolio rebalancing. It's quite literally the entire market mechanics. Obviously get equities right, you get EM right you get currencies right.
Happy trading.
David
My basic understanding thus far is Gamma pins the SPX spot price which crushes realized volatility. rVol is what triggers equity exposure rebalancing in almost all VaR, Vol controlled portfolios. When realized vol goes up, those funds sell off equity and rebalance to less risky assets. When rVol goes down it triggers those funds to add exposure and buy equities. So when gamma is positive it lowers realized volatility which triggers funds to buy more stocks and slowly pushes the market up with low volatility. It's the link between delta hedging, gamma, and portfolio rebalancing. It's quite literally the entire market mechanics. Obviously get equities right, you get EM right you get currencies right.
Happy trading.
David