Gamma Drop-Off Offers Hope, But Now We Know: The Babadook Is Real

Gamma Drop-Off Offers Hope, But Now We Know: The Babadook Is Real

There may be a light at the end of the tunnel when it comes to the liquidity-volatility-flows "doom loop" in equities. Over the past couple of weeks, market participants off all stripes were suddenly forced to come to terms with the fact that the pernicious, self-feeding loop between systematic flows, volatility and market depth is not just some ghost story that only "seems" real episodically during fleeting bouts of technical tumult (e.g., the VIX ETN "extinction event" during the week of Febr
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5 thoughts on “Gamma Drop-Off Offers Hope, But Now We Know: The Babadook Is Real

  1. How much of this boom-bust can be laid at the feet of taxable dividends and tax-free buybacks? We have designed our markets to act this way because each CEO will keep running the same game.

    1. You know, reading your comment it struck me that the reason “we” let this BB crap go on — airlines spent 90% of their cash on buybacks for years and now they want a $60bil bailout — is because we have all been riding along. It seems like we’re just a bunch of gnarly street kids on skate boards grabbing the back of the garbage truck for the speed thrill. Just sayin’

  2. In an article today entitled “Harried Traders Gird for a Frantic Friday,” the WSJ speculates that “If many options expire Friday and new positions aren’t established, some traders said that could help push volatility lower.” I hate to say it, but, considering what we pay for the WSJ, Heisenberg would be justified in charging more for the extra insight that he provides.

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