I’m waiting for someone to comment on this talking about a “gamma squeeze” without knowing what an authorized participant is 
https://twitter.com/iv_technicals/status/1360359579876528128 …
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Few things, the share creation process doesn’t make this as reflexive, the APs soaking to move it to the value kinda stops that dynamic + APs aren’t forced to keep that matched book the same way MMs are. It’s a completely different dynamic.
Just think about what happens when 1 unit of UVXY is bought and you go through an AP share creation cycle. The original purchase of UVXY nets out because the AP sells a share, so no impact there. You are left with a purchase of 1.5x VIX futures, that is what causes px to go up.
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The APs don’t have to necessarily keep a matched book so that VX future being bought isn’t a guarantee... ya know. On top of that the APs are going against the prevailing price (if demand is high they are coming to force this down).... + share creation dilutes the reflexivity
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This process isn’t really a cascading gamma effect the way how a supply & demand driven asset that needs to be hedged by MMs generally operate, ya know. That IV price is really the goal of the AP, which isn’t bound to the strongholds or keeping a pure “matched book”
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Came here to say this. It’s not linked as directly as most ETF’s/ETN’s, but there is still a connection between the overall inflows to UVXY and the price of options. The marginal bid is spread across many strikes so it’s less pronounced, but it is there in theory.
Thanks. Twitter will use this to make your timeline better. UndoUndo
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