They are giving gamma away

It was a barn burner of a day today with stocks notching a barely green close.  The reality is that vol is dead right now.  We have a potentially market shaking rate rise and VIX cash is 11.35.  Dutch elections and French elections are coming and the vol markets are shrugging their shoulders.  I did not think VIX Apr futures would close below 14 before Mar expiration but that is where we find ourselves today.

In the Option Pit Chat Room we priced several types of trades.  SPX put time spreads were not bad.  The really surprising idea was a ratio double calendar in QQQ.  We could generate a positon with 100 long gamma and short 6 theta only.  That's right, 100 QQQ gammas for only $6 per day until the end of the week.  Your Venti Double Frappachino habit costs more than that.

Charts by VIX Central

In the end I could not do it.  As much of a gamma hog as I am i just dont see anything happening even with the FOMC talk on Wednesday.  Mostly because the upside looks dead.  That does not mean we can't rally just not in a gamma friendly way.  I might change my mind tomorrow but for now things are eeriely quiet.

The trade

I like the gamma idea in QQQ but would have to buy some VXX Apr puts against it.  That might be the ticket for tomorrow.

Disclosure:  long QQQ and multiple VIX/SPX positions in the fund I manage risk for, Karman Line Capital, LLC

Follow Mark@optionpit

Follow Andrew@optionvol


Blog Image: