Last week, one of the most recognizable names on the sell-side weighed in on the 0DTE options frenzy, suggesting that in a worst-case scenario, the proliferation of very short-dated contracts could set the stage for a “Volmageddon” redux.

In essence, JPMorgan’s Marko Kolanovic asked if directional investors were selling these options, thereby creating a conceptually similar dynamic to that witnessed in the run-up to the implosion of the VIX ETN complex on February 5, 2018.

“If there is a big move when these options get in the money, and sellers cannot support these positions, forced covering would result in very large directional flows,” Kolanovic said, sketching the contours of a risk scenario.

One particularly astute reader said that while the thesis made sense, the phenomenon as it’s currently manifesting doesn’t yet look especially perilous. That reader mentioned Nomura’s assessment, to which I responded that Nomura’s data did indeed suggest a net customer buy imbalance on most days, indicative of weaponized gamma (which feeds intraday reversals that are monetized same-day, with the effect of close-to-close vol suppression that “masks” intraday chop).

While the weaponized gamma dynamic can be criticized in its own right, in this context it’s perhaps less worrying, and on Thursday, Nomura’s Charlie McElligott explained why.

“The vast majority of our 0DTE options data in recent months has shown those options typically being net BOT by ‘customer’ flows (as defined by official CBOE tags) on a daily basis and confirmed by our tick-data bid-ask ‘buy / sell pressure’ analysis,” he wrote, calling that indicative of gamblers seeking to engineer gamma squeezes consistent with what’s “tended to be a profitable intraday strategy.”

By contrast (and by extension) the selling of 0DTEs “has originated almost entirely out of the hands of official CBOE-tagged market makers, i.e. the largest electronic options shops / HFT-algorithmic ninjas,” McElligott went on. (As an interesting aside, he noted that traditional bank desks are a mixed bag. He attributed that to the possible use of 0DTEs as a hedging tool.)

Why is this comforting? Well, maybe “comforting” isn’t exactly the right word, but suffice to say the concentration of selling on the market maker side means the short vol risk isn’t being managed from someone’s living room, à la the infamous 2017 New York Times profile of a stay-at-home VIX ETN trader.

“This dynamic is a ‘good’ thing because, in my eyes, you want the ‘short gamma’ being managed by MMs with a more robust / disciplined risk-management process, and not by the same-day / intraday scalpers who are ‘shorting tails for income,’ which would be a far more ominous market dynamic, and potentially lead to the return of a dangerous and destabilizing regime which could create a ‘short vol’ supply we haven’t seen since Volmageddon,” McElligott said.

For now anyway, the bottom line is that, as Charlie put it, “the gamma hedging risk [is] in the preferred hands,” even as he did note that “some” market participants are surely engaged in premium-harvesting, given the inherently steep time decay.