Alert Gamma/Convexity Trade condition developing

Posted: June 27, 2014 in Uncategorized

This is a very complex option position on the US SP500.

With the volatility so low and tight volatility conditions make it very cheap and easy for institutions to build a gamma trade (I will not bore you with details).

It works like a spring…..there is a lot of crowded trade on the upside and with a gamma trade you can unleash hell and make really a lot of money with tiny risk. It is a perfect trap.

It can be used up or down – but as the market and crowded trades are up – it will be most likely down.

In two words: a trap! You have to watch out Vix level 12.5 and 14. The worst case scenario is Vix 28 (I do not think so and hopefully I am right!)

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