Cycle Trading

[spdpro]

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Thursday night > see what the Futs do Into "Trap" cash settlement

The UNwinds today and Friday are massive


before the "all clear" sign is given, markets still need to clear the index and ETF “short Gamma” dynamic, which remains considerable due to the enormous S&P “Put Wing” flows. They also need to get through Friday's "Quad Witch" expiry where Nomura calculates there is now the potential "for nearly 47% of the $Gamma to drop-off."


If a large part of the gamma drop-off were to materialize, Nomura expects that this "large decline in the gamma post-expiration" should allow markets to pivot back to a much more “neutral”/less extreme hedging stance for Dealers, "meaning incrementally less sensitivity to changes in underlying Delta and thus, forced hedging “momentum” (selling into selloffs, buying into rallies)—and could even ultimately move us closer to a place where “rich vol” may in-fact be sold again to Dealers, which could then mean a partial return to standard “long Gamma” insulating flows (hedging flows which buy dips, sell strength)—although CLEARLY still, all of this is subject to the progression of the Virus and the impact it will have on global growth and risk-sentiment."