One of the reasons behind the market's violent eruption higher was the recent spike in dealer gamma which we discussed last week as a key factor that precipitated the blow off top in the S&P once the all time high was breached. However, as Goldman trader Brian Garrett writes today, this may be about to reverse.
According to the Goldman derivatives guru, there are several notable observations to discuss on SPX option gamma dynamics heading into Feb expiry this week (VIX Feb is Wednesday / index Feb is Friday).
- First, at current, Goldman calculates that dealers are long ~$7BN, which is the largest all year, and one of the highest in the past year (the 2023 late-year meltup saw the only consistently higher gamma prints).
