key factors in today's markets
Machine Trading is Primary
Machine Trading is Primary
Machine Trading is Primary
The majority of financial market trading is performed by machines. These computer algorithms are designed to maximize profit along many different timeframes.
Machines Hedge Delta
Machine Trading is Primary
Machine Trading is Primary
As market makers and large traders create positions, they will often hedge with a delta-neutral strategy. These portfolios can be dynamically adjusted in micro-seconds.
Option Activity Creates Order Flow
Option Activity Creates Order Flow
Option Activity Creates Order Flow
As option expiration approaches, machine traders will unwind, close or roll their hedges. This and other options order flow has a measurable impact on the underlying markets. "Gamma" is the primary risk that delta hedgers must manage, and this becomes more important near expiration.
Gamma Effects
Option Activity Creates Order Flow
Option Activity Creates Order Flow
In November 2018, Bloomberg published an article which described how "negative gamma" was a catalyst in the large decline in crude oil prices in Q4. While Bloomberg highlights the importance of this information, it cannot be found on the $25,000+ per year Bloomberg terminal.