[OP Ed. Note: This Editorial Was Drafted Without AI]

Yo Pit Crazies,

Early Friday morning, all things were looking ok in the S&P 500 Trust (ETF).

The Invesco QQQ Trust didn’t look so good.

Then everything went downright bad.

SPY 2-Day Chart

QQQ 2-Day Chart

VIX took off like a shot and is still suffering from whiplash as I write this.

VIX 2-Day Chart

VIX is all over the place and probably the result of some fund blowing up.

The up and down nature of the VIX move is pretty severe covering and then the pressure goes away. This type of activity is usually linked to a fund that is short gamma. We will not know for sure until Monday but short gamma can be a problem.

Gamma the Unfriendly Greek

Gamma is defined as the change in an option delta with a $1.00 move in the underlying price. The practical explanation is how fast I make money or lose money on an option position depending on how much the stock moves.

Lots of short gamma: I lose a lot and lose even more in the same direction.

The problem with short gamma is that it might not appear all that dangerous. It is known as far-out-of-the-money gamma. The stock is $100 and I’m short the $80 put.

It’s not a problem at $100 but it’s a big problem at $50.00.

Short gamma can accumulate.

It can be in bonds, bond insurance and just about anything that trades. It is the sudden move to the strike that causes problems.

Then… the problems get worse.

The sharp VIX moves are usually a gamma problem somewhere else. It could be in the credit protection for the hyperscalers and AI Cloud companies.

We’ll know more later.

Boring stocks are doing ok as of Friday. That’s why SPY is down 1.2% and QQQs 2.4%.

Money is moving into boring names.

In the meantime, if you want to see all those stocks cued up for a launch in 2027, click here.

I hope this was helpful,

AG