Harvey 🇺🇸

Fascinating data from GS: “On March 27, dealer gamma positioning hit -$7.24bn – the 2nd most negative GEX print on record. Six weeks later, dealer gamma closed Friday at +$21.3bn, now the 8th highest positive GEX reading ever recorded. To put that in perspective, 7 of the top 10 highest GEX readings in history came during 2021.” “That was peak post-stimulus melt-up – retail call buying was everywhere, realized vol was suppressed, upside chasing was aggressive, and dealers were structurally long gamma… importantly, those 2021 episodes (ex-November) were not bearish omens – they were periods where the market continued grinding materially higher.” Will be interesting to see how this develops…

VIX up stocks up while S&P 500 hits a new record

As de-grossing has replaced hiding in “havens”, where the tactical stance has been raising cash as VRP getting pinched with realized vol jumping towards parity with ivol We now have signals to watch for crash up risk Nobody owns the right tail, VIX isn’t jumping, everything is 0dte smash and grab Until tax refunds start landing for retail ever in the market for a dip to buy. Important piece of future concern in negative wealth effect. Check back in September for “dovish cut” April seasonally a great month for inflows but nearer middle month before things feel better. Far from an all is well. More like return of systematic flows

i think more people should start making open source, freely available trading tools specifically for us retail folks. analytical and backtesting frameworks, automation, etc. i'm going to start working on exactly that. i welcome others to join me. this is the time for it.

Go slow with an eye on opportunity. We will get a downside test into May. But not yet.

Using 0DTE calls to manufacture exit liquidity: The current tape increasingly reflects a liquidity-constrained, derivatives-driven regime in which large institutional players may be able to influence the marginal liquidity environment itself. While the typical framework of 0DTE call buying forces dealers into short gamma hedging, the present setup characterized by suppressed volumes, structurally long aggregate dealer gamma, and weak breadth, suggests a more opportunistic strategy is at play. In particular, the role of 0DTE options may be less about outright directional exposure and more about engineering transient liquidity that facilitates discreet inventory reduction. In a tape where trading volume has remained persistently depressed for weeks (eg SPY volume running ~40-50% below its 60-day average), relatively modest notional flows can have an outsized effect on index pricing via ES futures. Under these conditions, even within a broadly long-gamma regime, localized pushes can occur into key strikes, especially when large flows concentrate near-the-money. When these pockets emerge, dealer hedging can become temporarily procyclical, generating short bursts of mechanical upside. This creates an exploitable structure for large funds. Rather than signaling a defensive intent through overt put buying or index selling, a fund can deploy concentrated 0DTE call flow to induce or amplify these short-lived hedging flows, effectively lifting the index at the margin. Crucially, because the impact is expressed primarily through index futures rather than broad cash equity demand, it creates a divergence between index performance and underlying participation. This allows the fund to systematically exit or reduce individual equity exposures into strength, using the derivatives-induced bid effectively as camouflage. The key insight is that the options market, in a thin regime, has become a tool for shaping execution, instead of portfolio insurance. By initiating temporary demand via dealer hedging, funds can manufacture exit liquidity that does not originate from natural buyers of the underlying equities. This helps explain the current market bifurcation: rapid index appreciation toward all-time highs alongside deteriorating breadth, with a significant share of stocks failing to confirm the move. The index is likely being supported by flow-induced futures demand, while underneath, distribution persists largely unchecked. The broader implication is that the market has been increasingly defined by a reflexive loop between derivatives flows and liquidity conditions, where price action has diverged significantly from underlying fundamentals or breadth. While this allows for controlled index levitation in the near term, it also introduces fragility. This is not a stable or continuously scalable strategy. If positioning shifts and dealer gamma flips more persistently negative in a still-thin tape, the same mechanics that currently support the market could rapidly reverse. Notably, there are early signs that the regime may already be evolving, as evidenced by the recent emergence of a spot-up / vol-up dynamic, alongside a tentative rise in implied correlation from depressed levels. At sufficient scale, particularly in 0DTE tenors, continuous call demand can begin to lift implied volatility mechanically, as dealers are forced to reprice optionality higher to accommodate one-sided flow. The shift to a spot-up / vol-up regime suggests that incremental upside is no longer benign, but rather must contend with an increasing demand for convexity. Rising convexity demand itself can become self-fulfilling. Concurrently, the rise in implied correlation indicates that dispersion is compressing. This has typically been a precursor to more directional and less stable index behavior.

$NDX up vs. down day realized volatility looks almost ridiculous! Source: Nomura

If you weren't trading in 1999-2000, then you're in luck. This is what it was like. Now you can experience it.

Since March 30th.. 10 Stocks Drove 69% of the $SPX 16% Rally via McElligott (Nomura)

$20M Call Spike on $SPX minutes before close... This activity is insane!

You’re looking for Charlie to push out a note but you already know what it will say. You get the sharpe table showing how sold calls were cheeks and now sold puts are wowo and this of course because the AUM in leveraged ETFs is back to growing. Soon we stop for VIX call spreads before we pull up to hotel theta

Dealers have accumulated long gamma. Realized vol smushed, vol control bid easing in. Not long now before Hotel Theta