Markets stocks volatility

Nomura’s McElligott: ‘You Cannot Overstate The Gamma Impact Of Single-Name, Mega-Cap Tech Options’

The flagging fiscal stimulus push in the US and escalating virus lockdowns in Europe are a "double-whammy" for the reflationary impulse inspired recently by rising odds of a Democratic sweep in next month's elections, but Nomura's Charlie McElligott said the talking point on the desk was more "simple" Thursday. "You cannot overstate the Gamma impact on the overall market of those single-name, mega-cap Tech options expiring tomorrow," he wrote, reiterating points from earlier this week, when evidence of knock-on hedging flows at the index level suggested the dynamics that helped push the Nasdaq into the stratosphere in August (only for big-tech to subsequently correct in September) are back in play. Charlie continued. "The 'negative Gamma' in these monster positions... has them chasing the market to remain Delta hedged, accelerating the swings in both directions this week," he wrote, in an early Thursday morning note. Read more: Nomura’s McElligott: It’s ‘Déjà Vu All Over Again’ As August Comes Calling In October The (potential/unfolding) problem here is relatively straightforward. Dealers may be overhedged after struggling to keep up as tech's scramble higher into thi
Subscribe or log in to read the rest of this content.

2 comments on “Nomura’s McElligott: ‘You Cannot Overstate The Gamma Impact Of Single-Name, Mega-Cap Tech Options’

  1. Canuck says:

    I admit I don’t understand the dynamic here. I would have assumed that a lot of the hedging was by large institutional investors and that as expiries approached they would “roll” their hedges into longer dated options. It seems implausible they would leave themselves “naked” even for a short period of time. Even triple (quadruple) “witching Fridays” don’t inspire the sort of awe they used to. Does this imply the options market is swaying more towards traders and the market makers catering to them?

Speak your mind

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Skip to toolbar