EVERYTHING A “GAMMA SQUEEZE”

 

“Squeeze me!!”

Every market, every day … up /down, it makes no difference … everything a

“Gamma Squeeze” … gamma being the change in delta, where delta is the

change in value of an option relative to the change in price of the underlying

instrument … and with the explosive growth of short dated options, both puts

& calls, “squeeze me” becomes the battle cry in every market when the freight

train of price starts moving, cuz on the other side there is pain … much pain

… and that pain is forced into the market and they become their own

worst enemy.

Of course, Wall Street loves it, cuz they control order flow, thus knowing when

trend is most likely to change, especially at the institutional level … then there’s

the fact that increased trading means increased commissions, which means

fatter profits … what’s not to like? … never mind the entire world is turned into a

gigantic casino … the only thing missing are the Indians wanting a piece of the

action from the reservation … just wait, some day they’ll try it!

USDJPY “to the moon Alice” yesterday … today it’s getting monkey hammered

through the Asian session … freight train up, now freight train down so far … and

when they’re done, mot likely it’s rinse & repeat  … no “fun-durr-mental” news

change in anything really, only the fact that tiny moves in short dated options

wreak havoc on first deltas, then the “gamma squeeze” hits, and all Hell breaks

loose … welcome to the casino!

Don’t get me wrong, I’m not sayin’ every single market move is the sole result of

a “gamma squeeze”, as there are plenty of market moving news items that hit

constantly … however, with EVERY SINGLE MOVE, there is a “gamma squeeze”

that goes on and somebody is getting their cashews crushed … some days it’s

smaller than others, and other days it’s “bigly & yuge” … but inside the casino,

where banks have the capital and the backing of scumbag central bankers, and

know order flow, they wreak havoc upon markets by knowing what small moves

can cause … and what they cause IS THE CATALYST of a lot of the bigger moves

that make ZERO sense are all about … like straight up, then straight down, or

vice versa on NADA news … it ain’t anything remotely close to a “free market”,

it’s a casino slot machine market run by immoral & depraved scumbags in

silk suits.

And again today, like almost all others, the Asian session sees the best trading

conditions and moves, and the rest of the world sees shit … I can just imagine

Mrs. Watanabe & gal pals, or the Chuckleheads, on a yo-yo string, getting

jacked around on very short dated put and call options, and as range is

extended the moves get larger … when they get tired of losing, or run out of

money for the day, it’s time to turn things over to Europe, where most days they

have nothing to say about anything … which then runs into the U.S. session

for some wrap up bullshit … yup, sometimes there are moves, but far too often,

there ain’t anything left of the day but crumbs from the table … welcome to

the casino!

Into the New York afternoon, and since I got to my screens about 7 hours ago,

USDJPY has been in a pathetic 35 - 40 PIP range, and that’s from the tips

… mostly the session is about 25 - 30 PIPS wandering around a “Flying Wedge

of Death [FWD] that traps plenty of traders looking for that extension of the

range, which so far we ain’t getting … current 20 Day Range MA = ~213 PIPS, so

today’s POS of about 116 PIPS well below that … New York session 20 Day

Range MA so far = ~ 39 PIPS, and its 20 Day Range MA = ~ 115 PIPS … to say

the least, this is embarrassing … could expand later in the day as we move

towards the close, but so far it’s a non event looking for an event.

I’m cutting the day short, cuz I have a checkup with my doctor … this is the 30

day anniversary of me getting released from the hospital, where I had a kidney

infection & pneumonia … some combo right? … I had so many drugs pumped

into me, my blood could have been used as a pharmacy! … feel great now, but I

have to go back and get checked out to make sure nothing is hiding in my toes

… so, most of the mid to late afternoon I’ll be busy giving blood, urine, and

some heart tests … I studied real hard, so I should pass!

No trades today for obvious reasons, there just isn’t anything here … granted,

it’s Thanksgiving week, but still it’s only Monday … 30 some PIPS over multiple

hours ain’t gonna get it done, and the real crusher is the fact that the “Trading

Ratio” [TR] is sitting right at 3.0 … most of the day it’s been right there,

threatening to move lower than 3.0, but hasn’t done so … still, not very good

at all … meanwhile, GBPJPY can’t even put in a 100 PIP range today … I’d call

that “ugly”. Hopefully tomorrow’s action is better … I don’t see how it can get

any worse.

… OUTTA HERE … “The future’s so bright I need 2 pairs of sunglasses 😎😎,

and my own Brinks armored truck” 💓!! … Onward & Upward!! 

-vegas

MARKETS RULED BY SHORT GAMMA

 

“The motto of every institutional hedge fund!”

Getting “squeezed” by being “short gamma”, happens either by being short 

more OTM [Out of The Money] calls than ITM [In The Money], or more than 

what you got positioned long in the underlying … ditto with puts. The problem 

is, when you “Christmas Tree” or leverage back spread your position, to take 

advantage of what you consider high time premiums in high delta OTM 

options, when the market quickly moves in the undesired direction of the 

short premium, you get caught in what is known as a “gamma squeeze”.

Remember, gamma is the change in the delta … and big moves produce rapid 

percentage changes in delta, thus causing gamma to expand quickly as well 

… the only solutions are twofold: 1) pay up & liquidate for even more 

overpriced options that you’re short, or 2) buy the underlying if caught short 

in the calls, or sell the underlying if short the puts … “and over the last several 

years, this explains many of the large moves financial markets have seen, 

especially in NDX100, DOW30, & SP500, as well as gold”.

And all it takes to get the “gamma squeeze” going is about a ± 3 % - 4% move 

[or even less in some cases] in the asset class in question, and somebody is going 

to be puking very quickly, thus extending either the “Thelma & Louise” 

waterfall down, or the “to the moon Alice” melt up … it’s what drives index 

futures and gold as well … and I’m not talking about small amounts of money 

… cuz via leverage, we’re looking at many billions of dollars. “This is what 

moves markets these days … out of the blue, somebody unloads their short 

gamma … a market, or group of markets move violently … and when they’re 

done? … “crickets” … there isn’t any follow through, as other market 

participants look around and ask themselves, “WTF just happened?”, and 

everybody acts the part of deer in headlights before moving forward, while the 

market in question now just sits and waits for the next casualty of war coming 

down the pike”. 

Turning to today’s gold market … “why even bother? … elections tomorrow, 

and FED interest rate decision on Thursday … and the G20 after that” … right 

before the New York 7AM start, out of the blue somebody pukes gold lower, 

no doubt longs frustrated with zero follow from last Thursday’s big up move. 

And, in case you’re wondering, all of this gold action can be summed rather 

well, by Craig Hemke @ Sprott Metals, via his ZH article from Halloween 

linked directly below.

https://www.zerohedge.com/news/2018-10-31/same-old-comex-games 

In short, it’s the same old “Comex game” between metals dealers and specs 

… in other words, the “dealer yo-yo” that sees the public buy tops in price 

from the dealers … the dealers erect the “Great Bullion Wall of Selling” and 

force price lower … the dealers then buy from the public when the sell stops 

get hit off for spec losses at lower prices … and of course, rinse & repeat, and 

you get the general idea of how this game is played, and has been played for 

generations.

Backing up my thesis rather nicely, as I write I see this post on ZH, link 

directly below.

https://www.zerohedge.com/news/2018-11-05/worlds-smartest-investors-cant-

figure-out-markets-and-thats-really-bad-thing

The author laments the ability of “the smartest people in the room”, to be able 

to make any sense out of today’s markets … “well John, they create their own 

volatility when they pursue strategies that can get them into trouble … and when 

said trouble comes calling, they’re the ones pouring gas on the fire to make the 

situation worse”. … in other words, they listen to the “quants”, who assure 

them the “sigma” needed to hurt them has a very low probability … bingo, 

bango, Boom!, the black swan appears, and its butthurt time … the problem 

is twofold; 1) they’ll do the same “Hoover Dam” thing all over again soon, 

and 2) markets move too fast to cooperate with their plans. 

“Today’s Asian session trade a complete joke … ditto with Europe … and the 

U.S. isn’t starting out any better … can we just get these damn elections over 

with? … ranges just simply pathetic, with almost no volumes clearing and very 

little liquidity”.

Today simply an absolute bucket of hog slop … another subpar range day in 

New York, with Asia & Europe dead. A few trades today in the PAMM 

… PAMM down about $175.

Every fill today a complete “shitshow circus”, with the “slippage meter” set to 

double max … every fill ripped at least 10 cents from the scumbag LP’s, 

adding to the problems of no volume & no liquidity. It is what it is, and there 

isn’t anything I can do when ranges are shit, and the market gaps lower in an 

instant when I’m long … there just isn’t anything here.

Over on the C2 options advisory signals service, I put on a Long GLD 

calendar spread … this should work out well for “Subs”, as front month 

premium is high relative to back … when the election & Fed are done with, all 

that premium goes “buh bye”, hopefully by Friday … if you’re not signed up, 

you’ll have to wait until the position is closed to see the trade, and that’s when 

I’ll comment on it further.

Onto tomorrow’s election … won’t this be fun. Until tomorrow mi amigos 

… Onward & Upward!!

I got an issue with the spreadsheet, that needs to be fixed. I’ll have it up either 

later tonight or tomorrow, directly below.

Have a great day everybody!!

-vegas

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