An Interpretation of Long Gamma Positioning in Friday’s $SPX Options Market

GEX showed a relatively small contraction Thursday and Friday, commensurate with November’s expiration.  Dark pools exhibited little evidence of selling.

Risk appetite among directional investors remains high and is, at the same time,  linked to high demand for downside protection (index puts).

The rally appears to have forced buybacks of short calls, overwritten because of pressure for income generation.

Put buys exceed sells by only 10% and are focused on OTM strikes.

The GJR-GARCH volatility forecast for Monday, November 18 is 8.31%, only slightly down from 9% at the start of the week.

The divergence between rising price and declining breadth is impressive.