1/n A few weeks ago, my friends at Convexitas (convexitas.com) went on The Derivative podcast with bit.ly/3L3nzUk A great listen, especially for family offices with concentrated equity positions. They had some "controversial" gamma observations
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2/n that gamma was overblown as a directional indicator. I agree with them 100%. The latest snapshot from highlights what they meant. Gamma negative means dealers hedging is SKEWED towards the direction of the market and raises REALIZED vols vs a gamma positive
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3/n Note how closely this most recent event mirrored the historical distribution of negative gamma days -- and due to market direction (IMHO driven by active rotation, initially likely tied to delayed selling of 2021 leaders twitter.com/profplum99/sta) skewed negative.
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4/4 Gamma is not a magic bullet. It's simply a tool to understand the likely realized vol regime. Higher vol means some holders (e.g. vol targeting strategies) may have to derisk and therefore bias is always downward in these events, but it's not always so. Check out the podcast
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I think it wasn’t what they said but how / tone
Definitely a minor subtweet 👀
*me watching from the sidelines
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