macrocephalopod

overnight/weekend liquidity in futures. Don’t know much about it but my impression is that it goes down quite a bit... seems like futures quite often open one way Sunday night and then reverse when stock market opens for instance

the open one way and reverse when over market come on light globally overnight. i don't understand why that would mean SPY MM's wouldn't hedge using /ES though

well if you’re short options you would probably want to hedge with the instrument that has the lower volatility... but long options holders def would trade that

do they care what /es does when the spy market isn't open if they're using them as a substitute for SPY shares?

yeah that’s the question... if I were short options and I didn’t think /es was an accurate indicator (in off hours) of where spy would open then I wouldn’t trade... If I were long options then I’d hammer it. just my opinion

why not just rebalance for the realized /ES delta without worrying about where SPY will open

because ultimately the delivery obligation is spy... if spy close to close vol is 20 but /es vol measured at 3am every day is 25 then I’ll make more money by hedging at spy close

right but Lily's whole supposition is that they can't hedge in SPY and thus the high NOPE reading.