Is gamma-hedging overhyped?
Personally, I think the consequences on price action is widely misunderstood and broadly misused... [thread]
bit.ly/2UW7xGJ
Personally, I think the consequences on price action is widely misunderstood and broadly misused... [thread]
bit.ly/2UW7xGJ
At the very least, we should take into consideration a few limiting factors when trying to use estimates of gamma-hedging to predict or explain price action:
1) Implications of gamma-hedging are model estimates, rife w/assumptions; Precision needs to be treated w/skepticism.
1) Implications of gamma-hedging are model estimates, rife w/assumptions; Precision needs to be treated w/skepticism.
2) Not all option expiration periods are of equal or even material significance.
3) Without knowing the holders, intent, or how participants manage their option risks, we are left somewhat in the dark.
4) Concentrated aggregate risk is often more significant than mere exposure.
3) Without knowing the holders, intent, or how participants manage their option risks, we are left somewhat in the dark.
4) Concentrated aggregate risk is often more significant than mere exposure.
(5) Financial markets are dynamic nonlinear complex systems & defaulting to simple causal-effect modes of thinking rarely do them adequate justice.
Just a high-level overview, but if you're interested in a deeper (non-mathematical) dive, pls check out my piece.
#ES_F $SPX $VIX
Just a high-level overview, but if you're interested in a deeper (non-mathematical) dive, pls check out my piece.
#ES_F $SPX $VIX
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