Teach Me Like I'm Five: Investing Concepts Made Simple Gamma, Vanna, Charm and the Basics of Options Dealer Flows
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Jul 10, 2025 
Brent Kochuba, Founder of SpotGamma, specializes in options market analysis and dealer hedging flows. He reveals how hidden options flows can reshape stock prices. The discussion covers gamma squeezes, Vanna, and Charm, explaining their impacts on market behavior. Brent illustrates how implied volatility triggers powerful market moves, especially around expiration dates. Real-world examples like GameStop and Tesla highlight these dynamics, emphasizing why understanding options is crucial for both traders and investors.
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Market Makers Hedge to Stay Neutral
- Option market makers do not hold directional views; they aim to remain delta neutral to avoid risk from stock price movements.
- They hedge by trading the underlying stock, which links options flows directly to stock price impacts.
Options Volume Growth Impacts Stocks
- Options trading volume has surged over 150% since 2020, far outpacing stock volume growth of 30%.
- This rising options activity significantly influences stock market prices through related hedging flows.
Understanding Delta and Hedging
- Delta measures how much an option's price changes with a $1 stock move and guides how market makers hedge with shares.
- Delta changes dynamically as stock prices move, requiring continuous hedge adjustments.