Inferring Dealer Gamma from Fund Option Flows

Summary

This brief flow commentary infers a shift in dealer gamma from reported fund activity around BTC options. It says that after geopolitical risk eased and spot rallied, funds were left short calls at higher strikes; as the rally continued, puts near and below 100k were sold and short calls were bought back. The June short positions expired without a major event, and further fund selling of calls and puts transferred options inventory to market makers.

From these flows and the expiration of June short dealer gamma, the author concludes that market makers had become net long gamma based on the data observed. Long dealer gamma can influence hedging behavior and potentially dampen price moves, but the note gives no quantitative estimation method or independent position data. It explicitly leaves room for offsetting bilateral purchases, so the positioning conclusion is tentative and depends on incomplete flow observations.

Key ideas

• Fund put selling and call buybacks after a spot rally altered the observed options inventory.
• The expiration of June short dealer gamma and continued fund option selling were interpreted as leaving market makers net long gamma.
• Dealer positioning was inferred from observed flows rather than directly measured, so other transactions could change the estimate.
• The commentary describes a positioning snapshot, not a general predictive model or tested trading strategy.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.