.@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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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?
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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I see, thank you! So it's a risk they take on but historically it rarely proves to be much of one.
Thanks. Twitter will use this to make your timeline better. UndoUndo
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