As we have been pointing out for some time, dealers are stuck with SPX long gamma but market is basically not moving. Frustrated by theta bleed, dealers are hedging long gamma (buying when market dips, selling when it moves higher) creating opposing flows and acting as a shock absorber, both ways, at an increasing pace.
SPX has moved some 1.6% max low to max high in December. This is basically no moves and long gamma dealers are seriously questioning their logic of being long gamma in the SPX. More Chinese water torture as theta stays huge as we are very close to max long gamma exposure (chart 2).
Meanwhile we are seeing huge call options mania in names like TSLA, PLTR etc leaving dealers short gamma, resulting in losses as underlying moves have been huge.
Let's see if frustrated dealers start puking index protection at cheap(er) levels soon…