A Whale of a Short Gamma Position

The Nasdaq whale, fiscal cliff that wasn't and a week of mostly charts

We have our explanation for the unusual reversal of the correlation between index option implied volatility and the direction of the index; exceptionally strong demand for calls on the strongest momentum stocks led to market makers hedging their short gamma (call options) exposure in the VIX (S&P 500) and VXN (Nasdaq) futures markets. We knew generally …

This post is for paying subscribers