Why Next Monday Could be wild - Record $10BN in Gamma (Patreon)

The Goldman Sachs derivatives desk reports that dealers are long $10 billion of #gamma across US #equities, the highest reading on record.

$10 billion of gamma refers to the total "dollar gamma exposure" across the U.S. equities market. In simple terms, it means that for every 1% change in the stock market's price (up or down), market makers have to buy or sell about $10 billion worth of stocks to rebalance their books and stay neutral. That's an enormous amount of trading triggered by even a small wiggle in prices – think of it as a massive snowball effect where a tiny push leads to billions in buys or sells.

Put another way, the $10 billion figure is positive gamma (or "long gamma"), which means the market makers' hedging actually helps calm things down ie High positive gamma acts like a magnet or pin, keeping stock prices stuck in a narrow range with very low volatility.

As options expire Friday, so do the shock absorbers, allowing markets to run free. Monday could be bumpy esp after the market absorbs what JP says at Jackson Hole.