Dealer Gamma (Institutional Options Market Making)

[Real Money]

Have you found something similar with gamma/ delta hedging in individual stocks and etfs?

I'm a market structure guy. I focus on rates, indexes and spreads. I don't trade single names, and I don't even really trade vol instruments.

But, as the indexes rally higher and higher, vol trading is growing a lot. It is changing how these markets trade. This thread is about how this is happening, and potential ways to monitor it.

Basically, the institutions are selling covered calls and buying puts (in larger and larger quantity).

Since the options MM's delta hedging is via index futures, it's really important to understand this stuff.

 

[John Cullinane]

I find that with the break neck speed tech is growing and learning we need think way outside the box.
I used to trade with a pad and a pen... Now I trade with Deep Learning, neural networks and game theory. It's fucking nuts

 

[minmike]

I find that with the break neck speed tech is growing and learning we need think way outside the box.
I used to trade with a pad and a pen... Now I trade with Deep Learning, neural networks and game theory. It's fucking nuts

Does all that stuff help? I have tried all the new age regression procedures. In my experience, nothing beats the original.

 

[gaussian]

I find that with the break neck speed tech is growing and learning we need think way outside the box.
I used to trade with a pad and a pen... Now I trade with Deep Learning, neural networks and game theory. It's fucking nuts

It sounds like you just got through your first semester of computer science.

 

[John Cullinane]

Does all that stuff help? I have tried all the new age regression procedures. In my experience, nothing beats the original.

Yes, it beats the original day in and day out.

 

[minmike]

I'm a market structure guy. I focus on rates, indexes and spreads. I don't trade single names, and I don't even really trade vol instruments.

But, as the indexes rally higher and higher, vol trading is growing a lot. It is changing how these markets trade. This thread is about how this is happening, and potential ways to monitor it.

Basically, the institutions are selling covered calls and buying puts (in larger and larger quantity).

Since the options MM's delta hedging is via index futures, it's really important to understand this stuff.

I agree. I'm probably much less sophisticated at analysing it, but I have been noticing as well. I only really focus on 1 portion of what you described. I hadn't proved/ decided if I believe it is more portfolio rebalancing or gamma scalping or a combo of each. But it is more pronounced.

 

[John Cullinane]

It sounds like you just got through your first semester of computer science.

LOL, I only wanted to use words you might have heard of. I taught myself all this stuff and keep learning. I wasn't kidding when I said I was trading with a pen and pad on the NYSE when I started. I adapted.

 

[John Cullinane]

I agree. I'm probably much less sophisticated at analysing it, but I have been noticing as well. I only really focus on 1 portion of what you described. I hadn't proved/ decided if I believe it is more portfolio rebalancing or gamma scalping or a combo of each. But it is more pronounced.

Everyday their is some new crazy discovery in computers, it's insane. I just try stay one guy ahead of the bear.

 

[John Cullinane]

I do think it will come a little full circle for us. This crazy tech is becoming push button easy to use making it a possibility for us with more experience to use, but they will never learn what was learned on the floor and in the pits. That's an edge

 

[Overnight]

...I have learned that there is a group of players in the index futures game that is constantly, and I mean constantly adjusting their exposure whenever the price changes...

It is called spoofing, and is illegal. There's no master math behind it. Open your eyes on this, and watch the order book. You'll see it. Illegal activity couched behind fantastical quadratic equations so they seem "smart". It is all BS.