A recent phenomenon that has been making waves is the peculiar performance of the S&P 500 on Triple Witching days. Over the last 15 occurrences, the S&P 500 has experienced declines in a staggering 13 instances. This raises questions and piques the curiosity of market participants and analysts alike. What could be driving this pattern, and how does it intertwine with the surging volumes in the world of options trading?
Gamma & Gamma Exposure - What Traders Need to Know
“gamma is one of the larger sources of non-fundamental economic activity in global markets. Market makers who delta-hedge their option positions are economically driven to trade substantial amounts of underlying shares or futures, strictly as a result of the price of the underlying itself changing, not as a result of fundamental news and without regard to the liquidity available. As a result, gamma can cause markets to overreact to fundamental news (short gamma) or too under-react to fundamental news (long gamma).”