See chart for up to date gamma levels. Overnight open interest data is suggesting that puts were added below 4550 and rolled deeper. The strikes that saw most put contracts added was 4000 and 3500.
The message stays the same, namely that markets are inherently unstable and depend on:
a) The path of implied volatility: If volatility moves further up option dealers have to sell more futures. If volatility comes down option dealers need to buy back futures fast.
b) Repositioning of big investors after their put protections have expired this morning: If they feel the need to keep their hedges in place or roll them down the lower strikes, then option dealers will not be able to act as buyers in the market. If investors let their puts expire however, option dealers would need to buy back futures.
Personally I doubt that investors will just waive their put protection before the FOMC meeting, so even though massive counter rallies are very possible given the circumstances I would not necessarily bet on it.
The message stays the same, namely that markets are inherently unstable and depend on:
a) The path of implied volatility: If volatility moves further up option dealers have to sell more futures. If volatility comes down option dealers need to buy back futures fast.
b) Repositioning of big investors after their put protections have expired this morning: If they feel the need to keep their hedges in place or roll them down the lower strikes, then option dealers will not be able to act as buyers in the market. If investors let their puts expire however, option dealers would need to buy back futures.
Personally I doubt that investors will just waive their put protection before the FOMC meeting, so even though massive counter rallies are very possible given the circumstances I would not necessarily bet on it.