The gamma number at the open isn’t the one that counts

Something I’ve noticed.

You look at S&P gamma in the morning and there’s a billion or two. Then by noon or 1 o’clock there’s like $10 billion.

I think that’s often because we’re on a long strike that suddenly built up out of nowhere. Also, the gamma gets bigger as you get closer to expiry.

And I think there are quite a lot of strategies out there selling 0DTE later in the session. People with algos are coming in and doing it, and we’re seeing the positioning on the back of it.

So the number can look irrelevant at the open and be big enough to matter by lunchtime. It’s the same idea as the gamma vs average daily volume check I wrote about a while back. A wall only matters if it’s big relative to what trades, and on 0DTE that ratio can change a lot within a few hours.

If I’m around at my desk, I’ll just monitor it and see what the number looks like.

Charm’s the same sort of thing. Charm is how an option’s delta shifts as time passes, so as the day goes on, dealers have to adjust their hedges even if the market doesn’t move. That number often gets bigger as you get closer to the expiry of that day, so it has more impact later in the session. It can give you a clue which way the market might drift.

None of it stops some random headline hitting, mind you. On a day like today, with the midterms, I’d keep that very much in mind.

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