Trust the tape, not the number

If dealers were really short $10 billion of gamma here, a bad day in the S&P would be down 1.5% or more. We're getting 50 or 60 basis points.

That's how I sanity-check any gamma data. Does the market actually behave the way the number says it should?

Here's what I'm looking at right now.

Realised vol has been under 10 for ages. That's what a long-gamma market looks like. The positioning data I use has had us showing long the whole time.

A couple of weeks ago it was around $10 billion most days. This week it's more like 3 to 5. So it's come down, but it hasn't flipped.

Fixed-strike vol moves have been saying the same thing.

Which is the actual point I want to leave you with.

The number and the price action are supposed to be telling you the same story. When they agree, the trade in front of you has two factors backing it up. When they disagree, you're getting mixed signals.

If someone's telling you the street is deeply short gamma and the tape's doing absolutely nothing, they might be missing something. I'd trust the tape.

Live signal for the week.

OPEX is Friday. With this week's positioning already off its highs, we could see a flip through OPEX. I'll keep you posted once the data shakes out.

The habit of checking whether the tape confirms what the vol positioning data is part of my framework.

Two data sources agreeing raises my conviction. Two disagreeing pauses the trade.

Want to know more about my approach? 60 minutes, linked below.

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