So we spoke a little bit about the forced buying going on in the Nasdaq and we touched the other day about a post from The Bear Traps Report and we will continue this discussion about option volatility and Gamma related buying today.
As you know we have a diverse readership and we like to break things down in as simple a format as we can, not as a knock on anyone’s intellect, but rather because we like to always use KISS methodology and Occams Razor. The former being Keep it Simple Stupid and the later a simplification principle of methodology by which in theory, the simplest answer is more preferable than a more complex one!
Anyway we touched on Gamma and you can research more, but in option land when investors buy calls for instance and dealers sell the calls to them (short Gamma), they are theoretically short the underlying, with that is the inherent risk of the underlying rising in price eating their profits from “writing” the short call option. (Not only a rise, but the speed of t…
