Russell Calls Drive A Crazy Day In The Market

Matt_ORATS

Matt_ORATS

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It was the second highest volume day today in options behind February 28th, 2020.

The Russell outperformed the Nasdaq more than any other day on record.

A massive move in the far out of the money calls in the Russell ETF and component stocks fueled a morning spike in volatility as market makers who were short gamma covered.

Here's a chart of the 5 delta IV vs 75 delta IV in the Russell component stocks. At 97% this is the highest on record.

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Since November 2nd, the 5/75 delta skew has jumped and left market makers short out of the money calls.

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The Pfizer announcement this morning saying the COVID-19 vaccine is looking 90% effective, caught many off-guard and running to the futures to cover. The Russell 2000 future was up 7%, the most allowed premarket. Source Gunjan Banjeri of the Wall St Journal.

The Russell ended up 3.7% to the NDX - 1.5% or a difference of 5.2%, that is a record.

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The funny thing is that there is a lot of money in the Dow/Russell spread.

The futures guys buy DJX, and sell RUT on globex using the front month contracts. The vaccine news caused a "rotation into value" and so RTY went limit up. The spread traders must have had a fun day.

I remember looking at the quote and I was thinking, why the fuck isn't RTY trading? What is going on with my quote stream? RTY was at some stupid level I had never seen before and the Dow was making a run at 30,000 again.

The move up was so fast and with such heavy short covering I was really surprised. When bonds went into free fall I was dumb enough to try to buy the ten year after the move. Was too much risk for me and I had to scratch the trade after the break.
 
.sigma said:
The second highest volume today in IWM? Or the options market in general?
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Correction: Yesterday was the highest total options volume on record.
 
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