Ok, I see people started running my code on all kinds of things now - single-stocks, Bitcoin, their neighbours' mortgage...
VERY IMPORTANT:
Remember, we're trying to predict option dealers' delta hedging actions based on dealers' positions!
"DEALERS' POSITIONS" is the key! 👇
VERY IMPORTANT:
Remember, we're trying to predict option dealers' delta hedging actions based on dealers' positions!
"DEALERS' POSITIONS" is the key! 👇
We need to know how many options they hold and hedge.
Only then we can translate that into gamma.
If we don't know their positions, all of this is meaningless.
For US indices, we're making an assumption that investors sell calls and buy puts, with dealers taking the other side
Only then we can translate that into gamma.
If we don't know their positions, all of this is meaningless.
For US indices, we're making an assumption that investors sell calls and buy puts, with dealers taking the other side
This is based on index skew, strong call overwriting flow, put protection buying etc...
It's a crude approximation, but allows us to calculate 'naive gamma'.
For single stocks and Bitcoin this assumption does not hold.
It's a crude approximation, but allows us to calculate 'naive gamma'.
For single stocks and Bitcoin this assumption does not hold.
Investors do all kind of trades and we don't have these pronounced, one directional flows.
Hence, no visibility on how options dealers' book looks like.
Hence, no visibility on how options dealers' book looks like.
It's only when you have a good approximation for Bitcoin options' dealers positions, you can apply the above methodology and calculate gamma exposure.
Otherwise, I wouldn't run this code on anything else, apart from major stock indices.
Otherwise, I wouldn't run this code on anything else, apart from major stock indices.
• • •
Missing some Tweet in this thread? You can try to
force a refresh
