Gamma is a simple concept that starts with knowing that market makers want to make money trading options (not gamble on market direction)

So *delta* is the greek that tells us how much money we make or lose

when the market moves...
(1/n)

https://twitter.com/GodOfVega1/status/2018045808743186844

If our delta is 100 and the SPX goes up $1, we make 100
if it goes down $1 we lose 100

but options are more complicated because that "delta" changes, too.

SPX DEALER GAMMA
[How to understand it and use it in your trading]

Last week, average dealer gamma was +$7.9bn, according to Bank of America

Let's break down what this means, bring the number down to earth- and explore how to use it in your own trading approach >> First, that figure is Notional Gamma

it represents the dollar change in the option portfolio's delta given a 1% move in the index, expressed in notional terms.

A "delta" figure in this context is a way to understand your position's exposure to the underlying >>

Long gamma or short gamma?

Most of the time, the market is in a "long gamma" position

Technically, this means that flows are absorbed by the hedging behavior of market makers- stabilizing the market overall and compressing ranges over time. But compare today to yesterday?

If you're zoned in, this probably "feels" like negative gamma

Everyone's talking about the iron condor martingale,
let's look at actual trades.

What follows is the series of trades leading up to Captain Condor's Christmas Eve blow-up.

They add context & teach two lessons:

1. The price isn't always "right"
2. Don't sell them blindly First, let's define some things up front:

1. I have no interest in grave-dancing or judging David

2. Nothing I have is confidential. I was a market maker, accustomed to trading and warehousing flows from 0dte to several years.

3. All positioning data is official. No guesses

SPX MORNING PREP (Thurs Dec 18 2025)
Daily Morning Meeting Slides

KEY LEVELS
as discussed on the 9am call...

UPSIDE TEST / LEVEL TO HOLD = 6790
Lose 6790 and risk a waterslide move back towards 6750-60 before you find any stability.

BALANCE = 6750 (MODERATE)
Opening positions have slight bias to long dealer gamma between 6740 and 6750, which will help flatten out any retracement from the AM spike towards 6790

DOWNSIDE TEST = 6740 >> 6700
Positioning gets very sparse to the downside. If we breakaway from the little bit of stability near 6750, then we look for price to hold above 6740.

IF we lose 6740 to the downside, it's another clean waterslide down to 6720 and a high probability the index will test 6 77777777777 before resolving directionally for the close. VS3D GAMMA PROFILE
Thursday Dec 18 2025

Premarket gamma profile after the CPI release was already reflecting serious risk across the 67XX handle today.

Why?

Combination of 0DTE positions heavily biased towards customer hedges (dealer short options) as well as finding ourselves entrenched among large dealer shorts expiring tomorrow.

🧵1/19
Just dropped the most important thread of Q4.
You’re not ready for this level of alpha 🔥🚨 2/19
Quick backstory: back in 2023 I was literally shaking and crying in a Wendy’s parking lot when I discovered this one weird trick 📈😭

Doctors hate it.
Market makers fear it.
Your wife's boyfriend is already using it. 😬

FOMC: THE DAY AFTER
Dec11 '25 SPX Positions & Greeks

What do MMs hold?
- - and why does it matter?

UP FIRST
POSITIONS

This is THE SUBSET of 0DTE OPEN INTEREST HELD BY DESKS THAT HEDGE.

Stare at the position.
Burn it into your retinas: especially orange levels.

Why? >> THE OVERNIGHT PRICE ACTION

We lost 6860
RAN THROUGH ALL THAT ORANGE INVENTORY

we tapped the long at 6815

WE ARE TRADING 6860

Coincidence?
(lol) >>

SYNTHETIC NEGATIVE GAMMA

Short gamma markets can trend more than mean revert

We talk about literal gamma (positive and negative) daily when it comes to hedging actual options books

CTAs impact markets in a similar way on wider timeframes

Here's BofA on potential selling flow What's GAMMA when it comes to option hedging?

As a market maker (or "dealer" - nobody calls themselves this), if I'm long gamma then I buy futures when the market sells off.

I don't do this because I "think" anything about the market

I just got short delta on the way down.

I like to assume the best of people,
so here's a directional call that "worked out" -

I'll explain it and recap it... but first, here's the moment I thought it was a "layup" as I like to call them.

https://twitter.com/Tom___Banks/status/1981329315770819029

I had to go way back on this one to find a winner.

this 200%+ trade is from today.
Note the timestamps in the screenshot.

What happened?

The market cleared an important hurdle in the inventory.

Getting ABOVE certain levels would have the eventual effect of producing supportive charm flows.

This is important.

Intraday volumes tail off into the midday period before ramping up again into the close.

Gamma defines how markets behave,
not which direction they'll move

When dealers are net short options that creates 'negative Gamma'

instead of providing liquidity we have to buy into rising markets and sell into declines When dealers are net long options that creates 'positive Gamma'

we sell rallies and buy dips-
this is the norm for modern markets

You're About to Realize
What Options Have Been Implying this Whole Time

What if the glue holding markets together just expired?

[full newsletter] October OPEX is behind us.

We must be out of the woods, right?

Not so fast. Positions create hedging requirements.

These are literal, to a degree.

OPEX Week Price Action Review x.com/i/spaces/1mnGe…

Yesterday we saw a very unlikely pin scenario at a massive dealer short position

the chart below via Spotgamma shows 0DTE net inventory (sum of put & call held by dealers) going into the close

Why is pinning a dealer short unlikely?

...it has to do with our hedging

(thread) We are hedging Delta.

More specifically though, we are hedging CHANGES in our Delta.

To understand where these changes come from,
focus on 3 core Greeks:

✓ Gamma
✓ Charm
✓ Vanna

When it comes to 0DTE options, the first two-
Gamma & Charm-
are in the driver's seat.

Shallow month-end dip,
but risk perking up (thread)

NOTABLE FLOWS
IB WHALE

Oct-31 6200-6400 PS
>> Buys 35k ES, 9k SPX

Nov 6200-6400 PS
>> Buys 25k ES, 5k SPX

( = 26.5k & 17.5k SPX respectively)

...then buys ES 10/31 6100-6200 PS 35k
to convert ES Oct-31 into 6100-6400 PS JPM Collar rebalance for end of Nov

Nov-28 5150-6115 Put Spread
vs. 6755 Call

Customer Buys 4,350x Put Spread Collars

*trades with Aug29th 6210 Call 2k (0DTE hedge)

Pays $50,871,000 — no rebalance necessary

Will it strike again?
Feb 29 2024 May 31 2024

Welcome to VIXPIRY

pin prediction from Monday looking prescient thus far

image 1 - screenshot from VS Pro intraday commentary
image 2 - UXQ5 overnight price action (expiring future)

what's in store today?

(a thread)
VIX options pin, too.

More complicated, and the knock-on effects are harder to understand

but the process here is fundamentally the same

What happens this morning?

>> the AUGUST VIX future expires

settlement value is based on the opening prices of SEPTEMBER SPX OPTIONS

JPM says a call overwriting surge keeps a lid on volatility

...they should know, they have a single fund that represents most of that S&P 500 component.

Some structural notes and points of curiosity

(short thread) How does this keep a lid on volatility?

The answer is obvious (but nuanced)

When positions are established, they usually target options with ~30 days til expiry.

This helps keep the term structure steep between 1M and 3M tenors.

Friday was fascinating...

But for anyone who gets confused by the action arising out of these hedging flows—
I totally get it.

How can short gamma be both accelerant (bullish) but also create a fade?

I will not say too much on feed,
but those 6400s were concentrated...

1/4

https://twitter.com/phlegminglib/status/1948922138846507288

They were mostly held long by one customer

and they were mostly held short by one dealer.

Without pushing you down rabbit-holes fit for ZH comments sections, you can think through some important consequences of concentrated positions.

2/4

WELCOME TO THE UNCLENCH

(really?)

Well, not so fast.

SPX 0DTE straddle pricing only 18.50 (29 bps) today!!!

...is it a buy?

(1/n) It sure looks like the market may be overpricing a repeat of Friday's price action...

All OPEX sensationalism aside...
we barely moved at all on Friday—
(trigger warning if long gamma)

Welcome to OPEX

Should you trust the rally?

Let's take a look

(1/n) First, why was yesterday so boring compared to Wednesday?

Well putting aside VIX expiration- we had less headline noise (market already digested Trump's Powell noise)

and we also had a far more supportive (and sticky) profile around 6300

If these look mechanical- they are.

Welcome to OPEX Week

This marks the seasonal inflection.
Last year it was the 17th, a seasonal peak that coincided with VIX expiration.

The move preceded a series of events that culminated with an epic vol spike and vanna fueled crash.

History can't repeat, right?

(1 / n) Customers are confused today...
inventory is scattered across the range without the type of clear patterning we are often used to seeing.

Relatively large hedging at 6300 should be respected but properly understood in terms of tradable influence.

An array of tests and ranges within 2x straddle distance around the implied open 6240 with a clear "level to hold" for the bulls on any weakness

Will talk more about tests and ranges and these two important levels in today's meeting