macrocephalopod

This looks straightforward and appealing -- generally periods when charm flows are positive coincide with the market going up, and periods when charm flows are negative coincide with the market is going down. Simple!

Institutions generally sell OTM calls and buy OTM puts which means a dealer's options book is normally long gamma (short charm) at high strikes and short gamma (also short charm) at low strikes. This means they are normally buying some stocks to maintain their deltas every day,

i.e. the normal state of affairs is that charm flows are positive. But when prices fall a lot, the short puts become ITM (negative charm) and the long calls become irrelevant, so the dealer is net positive charm in their options book, and charm flows become negative.

So a big market crash mechanically causes charm flows to become negative -- the causation is the opposite to what you might conclude from looking at the chart in the first tweet!

Of course it's still possible that dealer selling exacerbates the drop, but that's much less obvious, and requires careful data analysis -- you certainly can't conclude anything by looking at the chart.

Main point here was that despite all the complicated options flow, dealer hedging, second order greeks fluff, this essentially comes down to stocks up => positive signal, stocks down => negative signal — like so many other indicators that just reflect recent market moves.

So, hypothetically, and without naming names, these two are almost equivalent: [1] "vanna will be supportive of the market this week, but if we close -1sd of the 20ma then sell." [2] "I buy stocks when they go up and sell them when they stop going up."