Dealer long gamma suppresses market volatility
Market makers holding net positive gamma positions are actively suppressing equity volatility by buying dips and selling rallies.
The argument
The guest argued that despite significant geopolitical risks and rising interest rates, systematic options flows and dealer positioning in major tech names and the S&P 500 create a supportive buffer that prevents a broader market sell-off.
The thesis, stress-tested
✓ What validates it
- ✓VIX remains suppressed despite geopolitical escalations
- ✓Market quickly recovers from intraday earnings-driven sell-offs
▸ Risks discussed
- ▸An abrupt shift in dealer positioning during major options expirations
- ▸A massive macro shock that overrides dealer hedging capacity
Hear it yourself
"That breaking up of the bad news with reasons for optimism seems like that's what makes us so hard to bet against right now. What do you think? Yeah. And I I was trying to write down some reasons, I think. You know? One, I think there is this anticipation of buy the dip that's kinda come in. Like, these dips have all been so small, and they've been bought so quickly. Like, people are trying to get ahead of it now. Probably the anticipation of some sort of resolution slash taco, whatever you wanna call it. That's probably part of it too."
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