Summary
This thesis outlines a practical way to think about US equity gamma exposure around key macro dates, focusing on how liquidity conditions, volatility risk premia, and systematic hedging flows interact. The core idea is that option markets often reprice risk in a stepwise fashion around CPI and FOMC windows, creating repeatable patterns in intraday volatility and gap risk.
Key Claims
- The distribution of intraday returns is meaningfully different in the 1–2 sessions before and after major macro prints.
- Dealer gamma positioning amplifies or dampens these dynamics, especially when open interest is concentrated in short-dated strikes near the money.
- A systematic rotation of gamma exposure around these windows can improve risk-adjusted returns relative to static exposure.
Assumptions
- Market participants continue to use options as the primary tool for hedging macro event risk.
- Structural demand for short-dated optionality remains elevated due to macro uncertainty and systematic strategies.
- Transaction costs and slippage can be managed via disciplined execution windows and sizing rules.
Scenario Analysis
The framework distinguishes between three broad environments: benign macro surprises, one-sided shocks, and regime-changing prints. In each case, the thesis specifies how much gamma to carry, where along the curve to position, and how quickly to mean-revert exposure once realized volatility normalizes.
Risks & Disconfirming Evidence
The main risk to this thesis is a structural shift in how macro risk is expressed – for example, if flows migrate from options to structured notes or if regulatory changes alter dealer balance sheet constraints. A second risk is that crowding erodes the premium associated with these patterns, making realized outcomes more path dependent.
What Would Change My Mind?
Sustained evidence that realized volatility around key macro dates no longer differs meaningfully from surrounding periods would call this thesis into question. So would a structural decline in short-dated open interest or a regime where macro outcomes are both well-telegraphed and quickly absorbed without dislocations.