VOLATILITY ALERT 🚨
Yesterday the election premium came out. ATM implied vol dropped from 18.3% to 14.6%, gamma flipped positive for the first time in a week.
Today it all reversed in hours.
SPX is down 4% at 7,381, led by a broad selloff in AI and data-center names. At Wednesday's implied vol, a normal day was ±70 points. We're down over 300.
This is how volatility regimes break. Low implied vol invites hedges to be sold and positions to grow. When a shock hits, it meets thinner protection and dealers who are short gamma. Their hedging amplifies the move, and the move feeds itself.
On the map, every strike from here down to 7,200 sits in negative gamma. There's no structural floor nearby.
Watch the snapback potential too. In negative gamma, dealers chase rebounds as hard as they chase selloffs. Days like this don't usually end where they look like they will at 1pm.
Yesterday the election premium came out. ATM implied vol dropped from 18.3% to 14.6%, gamma flipped positive for the first time in a week.
Today it all reversed in hours.
SPX is down 4% at 7,381, led by a broad selloff in AI and data-center names. At Wednesday's implied vol, a normal day was ±70 points. We're down over 300.
This is how volatility regimes break. Low implied vol invites hedges to be sold and positions to grow. When a shock hits, it meets thinner protection and dealers who are short gamma. Their hedging amplifies the move, and the move feeds itself.
On the map, every strike from here down to 7,200 sits in negative gamma. There's no structural floor nearby.
Watch the snapback potential too. In negative gamma, dealers chase rebounds as hard as they chase selloffs. Days like this don't usually end where they look like they will at 1pm.