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Talk Your Book: I Need To Do Some Hedging Trades

Animal Spirits Podcast

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What Is Gamma Hedging?

Gamma hedging is a real thing. Liquidity suppliers, whether they be market makers or banks, are selling those call options to the people that are buying them and they hedge it. So when they sell a call option, they buy stock. And if the stock keeps rallying, they have to buy more stock. That's what gamma hedging is. As far as the meme stocks go, like Bed Bath and Beyond in recent months and GameStop for the last 18 months or so, how much of those moves can you ascribe to options trading them? It's hard to put an exact figure on it. But if you had to guess how much are options responsible for some of the

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