Gamma surges at record speed amid US options speculation

Options-market gamma rose to near-record positive levels at an unprecedented pace, driven by concentrated options speculation in a small group of U.S. equities. Dealer hedges flipped from positions that amplify declines to ones that require buying as prices rise, increasing market momentum.

Gamma measures how much an option’s delta changes when the underlying stock moves. Positive, rising gamma forces dealers to buy as prices climb and sell as they fall.

Of 3,807 option-listed stocks tracked in a recent session, 3,262 closed higher, equal to about 86%. Among the 500 most liquid names, 69 reached peak implied volatility on April 30 while 379 hit recent lows.

Unusual options activity concentrated in DKNG, RKT, EPD, TGT and FTCH across sports betting, mortgage lending, energy infrastructure, retail and fashion. That clustering pushed gamma toward extreme levels as dealers rebalanced hedges.

Simon White, a macro strategist, observed: “Stock market gamma has jumped higher in one of the most rapid moves seen.” Analysts reported unprecedented moves in correlation and dispersion tied to concentrated bets.

Similar concentrated options episodes occurred during the 2021 meme-stock rallies and the 2023 regional banking stress, when rapid gamma shifts produced large moves in specific shares.

Positive gamma and heavy options positioning can suppress measured volatility gauges such as the VIX even while underlying risk rises. Lower measured volatility can draw speculative capital into risk assets, including cryptocurrencies, when exposure is elevated.

Traders and risk managers caution that a rapid gamma swing can overwhelm normal liquidity and trading patterns and produce abrupt price moves as hedges are adjusted. Market participants are monitoring gamma levels and options concentrations.