.@macrocephalopod Loved your thread about how MMs hedge w/ES. Question, how do MMs hedge large ES price movements when regular market is closed?
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Sorry, stock market (NYSE/Nasdaq/etc.)
You can hedge your delta with ES futures outside regular market hours. The futures continue trading for 15 minutes after the cash market close to allow traders to finalise eod positions and exposures, and hedge if necessary.
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Right. Specifically wondering if MMs hedge gamma exposure with futures all night long, how can they guarantee the future prices will stay in sync with what SPX/SPY opens to the next days and therefore they are properly hedged?
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The futures are the market’s best guess if where the cash will open the next morning. Can’t guarantee it but since many of the same people are trading cash and futures it is very rare for cash to open far from the futures price.
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