"Way" back on February 24, Nomura's Charlie McElligott warned that following that month's expiry, the vaunted gamma "pin" lost a good bit of its influence when it comes to keeping equities well-behaved and tamping down volatility.
Colloquially speaking, the force that had helped keep spot “sticky” despite mounting concerns around what, at the time, was only a "burgeoning" crisis (as opposed to the five-alarm blaze the pandemic would quickly become) was significantly diminished, setting the stage for sloppy price action, especially if the news flow around the virus got worse, which it did.
"Following the end of last week’s Feb Op-Ex, we have seen this $Gamma profile in US equities index and ETF options collapse lower, which in turn is allowing for [a] long-awaited ‘big move’ in stocks", McElligott said that Monday.
"Big move" turned out to be an understatement.
Eventually, after lots of pain and the most harrowing stretch for markets most living humans have ever witnessed, some of the vol-dampening dynamics were restored, as dealers' gamma profile found its way back from the "dark side" (as it were), vol.-control funds gingerly re-leveraged, and CTAs covered and flippe
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