Market Events
Monday, November 9th 2020
Russell Calls Drive A Crazy Day In The Options Market
Russell 2000 way out of the money calls have been bought up the last week and exploded higher today.
Summary
Russell 2000 way out of the money calls have been bought up and exploded higher, leading to a morning spike in volatility as market makers who were short gamma covered. The Pfizer announcement about the COVID-19 vaccine being 90% effective caught many off-guard and running to the futures to cover. The Russell ended up 3.7% to the NDX - 1.5% or a difference of 5.2%, which is a record.
It was the second highest volume day today in options behind February 28th, 2020.
The Russell outperformed the Nasdaq more than any other day on record.
A massive move in the far out of the money calls in the Russell ETF and component stocks fueled a morning spike in volatility as market makers who were short gamma covered.
Here's a chart of the 5 delta IV vs 75 delta IV in the Russell component stocks. At 97% this is the highest on record.
Since November 2nd, the 5/75 delta skew has jumped and left market makers short out of the money calls.
The Pfizer announcement this morning saying the COVID-19 vaccine is looking 90% effective, caught many off-guard and running to the futures to cover. The Russell 2000 future was up 7%, the most allowed premarket. Source Gunjan Banjeri of the Wall St Journal.
The Russell ended up 3.7% to the NDX - 1.5% or a difference of 5.2%, that is a record.
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