Thread by @GammaEdges

1/ While there is a lot of speculation about "what happened" as we moved into the late afternoon session, we think it's pretty clear.

There was a tremendous amount of ITM call delta in the #SPX that was vaporizing, either through monetization or through the expiry...

2/ Here is the #SPX delta structure at 2:20 pm ET, with a link for you to interact with:

charts.gammaedge.us/delta_oi_3d_SP…

3/ There is a significant amount of ITM call delta that is on the edge of that surface -- that's today's expiry.

Note the imbalance - little exists over on the put side of the graphic.

As many of you know, as we march through time, the ITM components grow...

4/ As we enter the end of the day, that delta, limiting towards +100 / contract, now goes away as dealers must prepare for the AM settlement.

Deltas will close, and this will force the dealers to have to sell to hedge to prior flat positions.

5/ At 3:55 pm ET, with price hovering around 4100, which was a dominant level to begin with, we had an enormous delta level to content with:

6/ We believe that this was the final nail in the day... the adjustments from 3 pm on had been to absorb the EOD estimates of what was remaining, and hence, the downward pressure.

7/ All things considered, we were well within the estimated transition range for today (4080 - 4140), so there were no major surprises.

We discussed this before the open here:

8/ Morning data will confirm our view that we didn't sustain structural damage to the #SPX, as we think there is plenty of call dominance up and down the chain.

Here's a preview for Friday, without the morning data, of the structure:

charts.gammaedge.us/delta_oi_3d_SP…

9/ ... and here is #SPX charm, within an interactive link so that you can see what is in play:

charts.gammaedge.us/charm_oi_3d_SP…