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Charlie McElligott Returns: ‘This Is How Overpositioning Tips Over’
Stability breeds instability. All you need is the proverbial skier's scream for an avalanche.
By the beginning of July, short vol flows "had stuffed Dealers on market-insulating Gamma," Nomura's Charlie McElligott wrote Wednesday, after returning from summer holiday.
On July 2, the bank's estimates showed SPX $Gamma in the 96th%ile and QQQ in the 97th, which served to "pin" equities in a narrow range, thereby compressing realized vol (figure below).
As realized collapsed, the systematic uni
This article is very informative. Thank you.
Gamma, leverage, and positioning of different participants, determines the outcome more so than news events. News events really are just an excuse.
The so-called recent “sell-off”, was over before it started. It’s amazing to me how much ingrained bullishness there is right now. In a three-day sell-off, traders on message boards, we’re crying that they couldn’t buy the dip just after one day. I saw one active trader say he would have to take a couple days off to “reflect and reset” because he got burned buying the dip after just one day. The bullishness is almost a religion right now. They can’t conceive of a world in which stocks might go down.
whatever he said I agree with
Today’s price is tomorrow’s headline