The 'Index Gamma Buffer' Is Back

The equity option markets have been volatile (no pun intended) in recent weeks but the last few days (since Powell's dovish re-pivot) have seen a dramatic shift in two key factors - plunging vol-of-vol, and soaring gamma (both providing a buffer for any downside threats).

As we detailed here, heading into last week's FOMC meeting, markets were poised to flip short gamma on a big selloff, catalyzed by expectations of a hawkish Fed driven by re-inflation spoiling there narrative. The knife-edge was balanced against expectations of a flat gamma position post-OpEx.

And so from that 'balanced' position, equities have been broadly higher in the last three days (thanks to Powell), which means, for the Indexes, more positive gamma...