After the selloff, competing theories on dealer gamma

Tier1 Alpha sees $74 billion short gamma catalyst; SG says rapid return to positive territory had calming effect

Whenever stocks drop violently, dealers’ gamma positioning is often at the top of any investigation into potential culprits.

The equity market selloff in 2018, dubbed ‘volmageddon’, and the Covid-related rout of 2020 offer prime examples of the havoc banks’ options hedging activities can wreak in jittery markets. Last week’s meltdown may be different, however, with market strategists offering competing theories on the role gamma positioning played when the S&P 500 shed 6% in three days.

Analysts