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Menthor Q

@MenthorQpro

Apr 21

🚨Positive vs Negative Gamma 🧵

1/ The SPX is going to open in negative gamma, as you can see from the Option Matrix below. As such for our weekly education thread let's focus on the distinction between what a positive vs negative environment is and what it means for you

2/ It is very important for Traders and Investors to understand the difference between Positive and Negative Gamma when trading any asset, because these gamma conditions can significantly impact their investment strategies and risk exposure. Gamma is one of the Greeks used in options pricing and risk management, and it measures how the delta of an options position changes in response to movements in the underlying asset’s price.

3/ Positive gamma is generally linked with long options positions, such as long calls or puts, and also with multi-leg strategies like Long Straddles, Strangles, and Long Options spreads.

The presence of positive gamma means that the delta of an option becomes more positive as the underlying asset's price increases. For call options, this translates to the delta moving closer to 1, and for put options, closer to -1. As a result, if the price of the underlying asset rises, a positive gamma position will increase in delta, and if the price falls, it will decrease in delta.

Traders with long gamma strategies benefit from movements in the spot price. Gamma scalping is one such strategy that capitalizes on positive gamma conditions.

Overall, positive gamma positions are typically used by traders who have a directional bias in the market, enabling them to leverage expected movements in the underlying asset to their advantage.

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Menthor Q

@MenthorQpro

Apr 7

1/ Oil Thread 🧵

There was some Vol bid since last week, as you can see on the 25 Delta Put Skew. While fundamental were looking strong for a while, tensions in the middle east have played a role in driving price 🧵

Source: Bloomberg

2/ Oil tends to be the place to be for Market participants "Escalating Events". During these news CL Futures alone jumped nearly 3% to the highs. With OPEC+ Members keeping Oil Supply tight, and oil demand from US and China steady, a brewing middle East Conflict, will make next week a volatile oil market

3/ As always until futures are ready, best proxy is XLE to asses sentiment via option positioning. NetGex across different maturities here

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Menthor Q

@MenthorQpro

Apr 7

1/ 🚨Geopolitical update. Let's see what news is coming out of Middle Easter before the week starts. Source is Bloomberg. We just copied it in a thread. Please comment, all👀 on oil 🛢️

2/ For the First Time in over 4 Months, there were No Israeli Troops in the City of Khan Yunis as well as the rest of the Southern Gaza Strip with the 98th “Ha-Esh” Paratroopers Division having Withdrawn from the Strip last night leaving only the 933rd “Nahal” Brigade as to Protect the Netzer Corridor between Central Gaza and the Sea; the Israel Defense Force has stated that this Withdrawal marks the Total Shift into “Phase 3” of the Gaza Operation meaning the End of any Major Ground Operations and the Establishment of a “Buffer Zone” between Gaza and Israel.

3/ The likelihood that Iranian non-state proxies, particularly the entities associated with the Islamic Resistance in Iraq (IRI), will participate in the expected Iranian strikes high. There has been a recent shift in IRI targeting from U.S. bases and infrastructure in the local region to Israeli targets since the strike in Damascus. This could be interpreted as these non-state actors contributing to the wider Iranian response. Iranian President Ebrahim Raisi has commented that “resistance” elements will be part of Iran’s response. This statement further supports the assessment that non-state proxies will likely be involved in the retaliation.

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Menthor Q

@MenthorQpro

Mar 24

1/ In this thread, we are giving you some great visualizations of option Greeks -the way they are linked is not always clear. But it is essential because it affects the value of your options as well as risk management.

Linkage 👇

2/ Grid visualization here 👇

3/ Another nice cheat sheet 👇

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Menthor Q

@MenthorQpro

Mar 19

🚨 What are the Effects of Volatility on Delta Hedging? Let's make this the education topic of our daily thread 🧵

1/ The effects that an increase or a decrease in volatility have on positioning may be less counterintuitive than when we are simply looking at spot movements – and ignoring time and volatility. This is why before we look at how a market maker hedges, we really need to understand how the delta profile of an option changes as volatility changes. For the purpose of this exercise we are going to look at an ITM and an OTM Call option. The assumption here is that everything is staying equal apart from changes in volatility.

2/ Let’s start from an OTM call. As you can see on the left hand side the red dot is the strike of our call, which in this example is Out of the Money (OTM).

As volatility increases, the delta of that call option will change. In a low volatility environment, our OTM call will move deeper OTM. The opposite happens if volatility increases. All of a sudden the OTM call starts moving closer towards the at money. Why? Because higher volatility means that the probabilities of the call moving ATM are higher. Higher volatility means that there is more movement in the market, and more action. In a low volatility environment our OTM call has very low probabilities of being able to get to the ATM strike – there is no gas in the tank.

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Menthor Q

@MenthorQpro

Feb 10

1/ For this Saturday educational thread, let's look at some case studies, and answer some of questions we received in the Trading rooms. More specifically, we want to answer how we can use the option screeners to create set ups. Let's go 🧵

2/ First of all, it's important to understand that when you trade options, the movement of spot isn't the only way to profit from a position. You can trade spot movement, but also volatility and time. Option trading is multidimensional, those can be positively traded but it also ads a level of risk that you need to understand. Here we wrote about why options move market, it is a good start menthorq.com/guide/options-…

3/ We know risks and opportunities in options come from our understanding of greeks. Understanding greeks allows you to value your option, premium and the option structure you are putting on. For the purpose of this thread let's assume you are up to speed there. If you are not follow this link and get started menthorq.com/academy/

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