How Options Gamma, Vanna and Charm Flows Move the Markets

[@PerfilievFinancialTraining]

Hello friends! Thank you so much for watching! I’ve only recently started on KZbin, and this is one of my first videos. I really hope you’ll find it interesting and somewhat entertaining. Please, please do subscribe to the channel - at this early stage, your support has a HUGE impact, and absolutely every person counts. I am doing this full-time now, and if you want to see how it goes, it would be great to have you on board! As always, feel free to reach out for any feedback, questions and suggestions. You can ping me on Twitter or via email in the channel description. Thank you for your help and support!

[@nan1222009]

Love your video. Thank you for clarifying the fundamental. Keep doing the videos.

[@PerfilievFinancialTraining]

@@nan1222009 Hey Swann, thank you so much for watching! Glad you liked the video! :)

[@hume1234561]

I saw you in my twitter timeline as someone I follow replied to one of your posts. The post was so good I followed you there and then. Then I forgot about you until I typed in gamma and delta and up came this video. Mr Perfiliev you'll have a hundred thousand subscribers in no time. A million plus when you find your rhythm. Thank you for explaining what options are and the different dynamics at play.

[@wheelsnipecelly8586]

thanks, this was great!

[@jody6851]

Great video but you need a Part II: What is happening when the dealer is short options especially puts, price levels repel instead of serve as magnets, and the craziness of selling frenzies

[@spotgamma]

nice explanation - clearly took a lot of effort!

[@PerfilievFinancialTraining]

Hi Brent, thank you so much! Means a lot coming from you :)

[@Dance_of_a_tree_called_life]

@@PerfilievFinancialTraining oh smack ... SpotGamma's a faN ! PFT going big time ... congrats !

[@laurencesmith9306]

Hilarious but informative

[@TwinkleTrebleClef]

I have watched a lot of Options related videos in the past few years….this is the only one that unique and interesting I ever watched. Thank you for being really creative to make this video. I’m still confused and probably need to watch again to truly understand the concept but I like the way you presenting it. Going to watch more of your videos, want to support you and you’re doing such a great job!

[@PerfilievFinancialTraining]

Hi Luksarah, thank you so much for your kind words! It's really great to hear that you found the video useful! In case anything is still unclear or confusing - feel free to let me know and I would be happy to clarify :) Thanks again for taking the the time to watch this. All the best!

[@my_tradingcoach]

@@PerfilievFinancialTraining Thank YOU for taking the time to even MAKE such an incredibly valuable & entertaining video! 😉👍

[@BluejacketGO]

This is an amazing explainer on cem's model for vol. Great job Sergei!

[@PerfilievFinancialTraining]

Thank you so much for watching it! Glad you found it useful :)

[@redpillpharmacist]

Excellent video! I'm happy to have found your YT channel!

[@jody6851]

Best explanation of Vanna and Charm effects I've found so far on the Internet. The rest tend to be confusing and often sound contradictory. I would have liked a Part II follow-up in which this time the dealers are short OTM options and short gamma rather than long with negative delta, Vanna, etc. creating repelling price levels rather than magnet levels. And also conditions when the dealers are long or short with ITM options.

[@JM-ci9bm]

Great video thank you. I listen to Cem a lot, but have found him cryptic and vague on details. This helped clarify a lot of points.

[@ricardomillan3419]

Sergei, you are a fantastic teacher. Thanks for taking the time to make these videos to help people like me. Keep up the good work!

[@PerfilievFinancialTraining]

Hey Ricardo! Thanks so much for your kind words. Appreciate it!

[@giovanniberardi4134]

Best financial video I ever watched. Seriously. I have a few questions: 1- Is there a specialized dealer in the Sp500 futures market? 2- There are many expirations, the weeklies have much volume. Why vanna and charm effects are considered only for the monthly expirations? 3- In my understanding in a quietly rising market the dealers' position is net long gamma. It means that the purchased calls are more than the sold puts. That’s because there’s less need for protection?

[@Crypto.Vantage]

00:03 Demystifying option greeks and dealer option positioning 02:01 Gary is a market maker in S&P 500 index options. 03:41 Market liquidity impacts implied volatility 05:10 Portfolio managers experience fear and greed simultaneously 06:47 Understanding Gamma, Vanna, and Charm in Options Trading 08:13 Options gamma impacts market stability. 09:49 Changes in implied volatility impact delta, influenced by vana and charm. 11:22 Understanding Vanna and Charm flows impact on the market Crafted by Merlin AI.

[@marksebastian3264]

Good explanation of risk reversals. We used to call this trade a zeta trade because it produces gamma for a low theta, you clearly understand mm book mgmt.

[@PerfilievFinancialTraining]

Hi Mark, thank you so much for watching the video and for your comments :) I'm very glad it overlapped with your experience as a mm.

[@howards83]

Super clear explanation - and also entertaining. Thank you!

[@lachlan1310x]

This is awesome! Please keep posting content here and on Twitter. I’m trying to soak up as much info as I can before my internships, and your content stands out in its digestibility and novel (at least to me) ideas.

[@PerfilievFinancialTraining]

Hi Lachlan, thank you - I'm trying to post as much as I can, but time is a big factor :) Thank you for watching this! Good luck with your internship!

[@Misksound]

Wow... WOW! thank you so much for explaining all of this. For the first time I feel like it has ALL come together-and then you come out of nowhere to relate it to those dips on the 19th of every month i've been curious about. just incredible stuff!

[@PerfilievFinancialTraining]

Thank you Aaron! Really glad it was useful and you found it valuable! Thank you so much for watching!

[@DeadLetterOpener]

Fantastic explanation - my mind is both blown and put at ease with sudden realisations. Thank you.

[@DeadLetterOpener]

Also great setup in your trading room, beautiful and clean. And great production on your content too :D congratulations ! You certainly hit the ground running :D

[@PerfilievFinancialTraining]

@@DeadLetterOpener Thank you for watching the video and for your comments! :) Glad you like the studio design :D All the best to you!

[@Hunter-zi3mg]

Awesome explanation of gamma, vanna and charm. Subscribed!

[@PerfilievFinancialTraining]

Welcome aboard! Thank you! :)

[@monicaikeda2]

Thanks for the video. I am a big fan of Cem's tweets.

[@PerfilievFinancialTraining]

Thank you so much for watching it! I'm a big fan of Cem's tweets myself :)

[@wh8257]

Quality. Prob the best youtube video I could find on this subject. I hope you are massively successful with you channel. Smile🙂

[@PerfilievFinancialTraining]

Thank you for your support, William! Much appreciated :)

[@liquidus]

ahahahah ну ти джазу дав добре) Пояснив доволі комплікейтед концептс дуже чітко. 10 круасанів із 10

[@PerfilievFinancialTraining]

Хахаха, 10 круасанів із 10 :) Дяка! :) радий що сподобалось.

[@TheRageRob]

Thank you for this entertaining and clear description of Cem Karsan's emojis. I've been following him and watching his talks but I've felt like I've missed some of his points by not having a clear understanding of what you set out. You really could have an excellent niche here to better explain to the "retail" options trader what some of this valuable language means. Please keep it up! I subscribed based on this video, so good luck in the future.

[@PerfilievFinancialTraining]

Thank you so much for subscribing! Much appreciated and welcome aboard!

[@jaycee5676]

Brilliant video!! I've seen the pattern in the prices but never understood why this happens. Watching this filled the knowledge gap! Alot more to quants than meets the eye LOL.

[@PerfilievFinancialTraining]

Hi Jay, thanks so much - I'm really glad you found the video useful! All the best!

[@sherylsauder5579]

Found you on a link from Twitter. Fantastic video for my expanding knowledge of the option world. Keep up the great work. subscribed!!

[@KaRtHiK19002]

Had to come back to watch this again! Thank you for taking the time to explain this!

[@ilid3331]

ABSOLUTELY BRILLIANT Clip! T'was entertaining and fun as it was educational and informative. Magnificent! Well done sir!

[@PerfilievFinancialTraining]

Thanks so much! Really appreciate it!

[@QUANTUMTRADER_69]

🤯you are dropping knowledge in a big way!! Thank you !

[@PerfilievFinancialTraining]

My pleasure!! Thanks for watching!

[@Caminovic]

Awesome video Sergei, thanks for it. Keep it up!!

[@PerfilievFinancialTraining]

Thanks for watching! :) Will do!

[@mindingthedata4218]

Such a great explanation! Please never stop making videos 😄

[@PerfilievFinancialTraining]

Hahaha, thank you! Will try my best :) Thanks for watching too - glad you found the explanations helpful!

[@aaronpopovich8278]

Was the lemons line a hint at you tackling gamma exposure from squeeze metrics?

[@PerfilievFinancialTraining]

Yeah, pretty much :) I think it would make an interesting video. Although, I do need to make a few simpler videos first and then I'll come back to lemons :)

[@pablof3120]

Thank you for the detailed explanation! I have a question: if MMs sell the underlying index to hedge long call positioning when OPEX is coming, why is it said that the index typically raises when OPEX approaches? Is it because MMs already start to buy back the shorts BEFORE OPEX?

[@sharonmlynch]

Subscribed for all of the content - the awesome explainer plus Pretty Lights! Doesn’t get much better! Thank you!

[@ro5han1971]

Awesome video ! Please do keep them coming.

[@PerfilievFinancialTraining]

Hi Roshan, thank you for watching! :) Will do my best!

[@corbinhicks9669]

Love the video so much. only suggestion i'd like to make is to have the volume down a bit. i just found it a bit difficult to hear you at parts. thank you for the material i greatly appreciate it!

[@PerfilievFinancialTraining]

Thanks Corbin, got it. Will try with no music or with lower volume in the next videos. All the best!

[@zkkrhfhska]

really interesting stuff my guy, even for those of us with years of experience in the financial sector

[@PerfilievFinancialTraining]

Thank you for watching!

[@TheFedosso]

I'm curious to know what you're looking at that IB screen behind you 👀

[@PerfilievFinancialTraining]

Hi Federico, just some volatility + skew charts... Nothing too fancy :)

[@jaisonavirah4371]

this is absolutely incredible! what a great and simple presentation of something so complex, great job!

[@WiReDApe]

I still love this video haha 🥰 the selfish side of me misses your videos, but I know you are on to bigger things right now.

[@Leshic2]

Just clicked your Twitter link to your page, and found I'm already following you! I recognize the the volatility smile in the profile picture from when you were a guest on The Market Huddle!!

[@sarymsakovevgeny9850]

Great video, waiting for a video dedicated to squeezemetrics aka 🍋 and don't forget volatility sellers when they step in buying the dip 😀

[@PerfilievFinancialTraining]

Thank you, Evgeny! Very glad that you found the video helpful! I'll need to do a couple of other videos first, and then I'll come back to lemons :)

[@Jay_on_youtube_today]

Great video. Well done, Sergei.

[@PerfilievFinancialTraining]

Hi Jay, thank you so much for watching - really glad you enjoyed it! :)

[@Leshic2]

4:05 "Here remarks the entire wall surface lower" Did I hear that right? I'm confused if I did. It doesn't make sense.

[@bingbong6692]

This is great, finally I may have a chance to decipher his tweets (after months of confusion and disbelief)!

[@PerfilievFinancialTraining]

Thank you! Glad it helped :)

[@dankozel3613]

Such a great piece explaining the new FinMeme jargon - thanks for this

[@PerfilievFinancialTraining]

Thanks, Dan! Glad you liked it :)

[@nikcname]

Super informative to explain the complex greeks in practice! probably the best lecture I ever had. looking forward for the Lemon but I concern you're not making new vid anymore, pls!

[@nfo2527]

Effin awesome mate, great effort 🙌🏼🙌🏼🙌🏼👑

[@PerfilievFinancialTraining]

Thank you - glad you liked it! :)

[@anindadatta164]

The video explains the situation if market participants r gamma positive but in real world the market makers are generally option sellers, so gamma negative. Therefore, if price surges,their position delta decreases , they need to long shares to delta hedge, thus further increasing volatility

[@gauravtiwari5872]

Hey great video...It would be awesome to have a video on skew adjusted gamma exposure...

[@PerfilievFinancialTraining]

Hi Gaurav, thank you for watching! Yes! Gamma, in general, would make a great video! :) Just need to find the time to get to that :)

[@WiReDApe]

Why does it seem IV drops on $AMC when the liquidity drops? Almost or actually to the point of a liquidity crunch.

[@nikolaykogut7546]

Thanks Sergei... I really liked the video

[@PerfilievFinancialTraining]

Hi Nikolay! Thank you for watching this - glad that you enjoyed it! :)

[@edgarsmartinez]

Fantastic 🎉

[@alexjoiningclub]

spasibo! klassniy video! Thanks!

[@PerfilievFinancialTraining]

Пожалуйста! Рад что понравилось! :)

[@SwinzerTV]

hey sergie i love your work so much i wana just ask you to more expalin "when buying option he wouldn't pay for them more than he can recover from delta hedging" beacause i get hard to understand this

[@PerfilievFinancialTraining]

Hey, thanks so much for watching! Sure. When a market-makers buys an option, they delta hedge it. The process of delta hedging a long option means that they "buy low, sell high", so the process generates profits. Ideally, these profits should offset the premium the MM paid for the option. If there's lots of liquidity, realised vol is likely to be low and delta hedging might not be as profitable, and won't offset the option's premium.

[@SwinzerTV]

@@PerfilievFinancialTraining thank you so much, now i get the point after about 1 hour of thinking

[@applepie8058]

Enjoyable video to watch as always! Easy to understand the concepts

[@PerfilievFinancialTraining]

Thank you so much - that's really great to hear! Very happy you found the video useful.

[@scentilatingone2148]

Great presentation! We'll done sir!

[@PerfilievFinancialTraining]

Thank you for watching!

[@ricardoalmeida6350]

Great video man, Cheers!

[@PerfilievFinancialTraining]

Thanks so much for watching! I'm really glad you liked it :)

[@Terra_Cognita]

At the 6:13 mark, you mention there is a lot of demand for out of the money puts and a lot of supply for out of the money calls. I understand the need for downside protection via the put demand but what is creating the supply of calls? [edit] is it selling covered call strategies ?

[@Terra_Cognita]

Never mind, I think I get it. Dealers are short OTM puts because people want downside protection. But they are also long OTM calls because people are trying to make a little extra money wherever they can ie. Selling covered call strategies etc

[@InvestOrama]

Subscribed - loved your Grit capital articles

[@AllDayAllNightGRC]

Enjoyed this! Thanks for helping demystify months of emoji tweets for me

[@PerfilievFinancialTraining]

Hahaha, yeah, I know what you mean - initially I was also lost with Cem's tweets :) Hopefully, it's a bit clearer now - thanks so much for watching!

[@sergeyyatskevitch3617]

Thank you. Very nice explanation. On the other hand, I still have some questions. For example, your description implies that the positive gamma is associated with call options that Gary bought. At the same time, a positive gamma may also arise from put options that Gary bough. The origin of those sold puts could be some straddle strategies. To hedge the negative delta from put options Gary also needs to buy delta1 instruments (index or futures). Therefore the hedging flows will be different in the case of positive gamma from put options, as Gary will need to sell delta1 instrument as gamma rises, not buy it. My question is: how to distinguish positive call and put gamma flows? Thank you.

[@PerfilievFinancialTraining]

Hi Sergey, yes, you're right - if we look just at Gamma in isolation, then the dealers' short put has different gamma dynamics than the dealers' long call. However, the distinction here is the volatility level - as index drops, volatility rises, and higher volatility makes gamma less relevant. Hence for puts, it's usually that Vanna has a higher impact, than Gamma - something that I haven't discussed in the video.

[@matthiasjorns4933]

Awesome explanation! Thank you very much! Appreciate the time you put into this! Outstanding valueable.

[@MrGrdth1]

is the assumption really holds good that dealers are always short put and long calls in estimating gamma exposure. to put it in different way, is it really wise to estimate the dealers gamma exposure based on open interest?

[@PerfilievFinancialTraining]

Yeah, it's not an exact science - even for open interest, you have to estimate/approximate the direction and exposure.

[@ytsg10]

That is the part I was confused too: why are dealers' clients only long puts and short calls? is it because your example is for a bull market? In a bear market they would be Long calls and Short Puts right?

[@BoersenCrashKurs]

I know you worked for GS. It's hard for me to get an overview of the quant world in other companies therefore I have a question. When a fund says they are using quant strategies. What do they mean by this? I have the feeling that 80% of these guys are using simple ratios and promote themselves as "quant"-funds. What is your opinion? Are there a lot of funds/banks which use Deep Learning within their strategies/daily work?

[@PerfilievFinancialTraining]

Hey, thanks for your question! Yeah, it's a very broad thing to say "we're using quant strategies". This can be anything from a manual investing approach based on some stats/quant analysis to a fully automated trading strategy. So without further specifics/clarifications, it's hard to say what exactly the fund does.

[@harryj1081]

what a great GAME OVER, haha love it!

[@PerfilievFinancialTraining]

Thank you! It's probably my favourite part in the video! :)

[@harryj1081]

@@PerfilievFinancialTraining I really appreciate your inputs on gamma vanna charm. Recently the meme style option OTM call option attack is happening again on EV stocks, especially today Tesla leap calls had a 100k volume while almost 0 Open interest (possibly partially are originated options by dealers too) totaled $500M in premiums. It would be really cool if you could analyze that, given there are rumors about how Elon musks might be using the gamma vanna mechanism by taking advantage of fat premiums to fund the mysterious funding source for spaceX!

[@Leshic2]

3:45 "Equally, when buying options...." and the rest I couldn't understand, even after replaying this part several times.. Can somebody help me?

[@giovanniberardi4134]

I try, sorry in advance if I'm wrong. With a tight spread and a thick book in the future market, Gary places limit orders if he has to hedge in the opposite direction of the market (i.d. when his overall gamma position is positive) and he's pretty sure to be filled at a good price for his hedge. In a thick book with tight spread it's very difficult that the price could "run away" from the point Gary has to hedge and so his risk decreases and he can afford to ask a smaller price for the options sold. Also in this case Gary is adding further liquidity to the market because he contributes to a thicker book. The opposite happens if Gary has to hedge in the same direction of the market (i.d. when his overall gamma position is negative) and so he places stop orders that, in this case, remove liquidity from the market and the more he removes the higher is the risk to get a worse price for his hedge 'cause the price "runs away"; for this reason he has to increase the option prices i.d. implied volatility to cover this risk. His directional hedging depends on the overall gamma position, as well as vanna and charm position.

[@bigal5413]

great video. very clear explanation. great editing.

[@PerfilievFinancialTraining]

Thank you - glad you liked it! Much appreciated!

[@dontrader1501]

Absolutely outstanding! Thank you for these videos!

[@PerfilievFinancialTraining]

Thank you so much - glad you liked it! :)

[@channel-so2st]

Thanks! Where can I track dealer positioning? How would you use Gamma / vanna / charm in day trading? Only go short after OPEX?

[@lilbob1463]

awesome explanation!

[@PerfilievFinancialTraining]

Thank you!

[@Abdelazizchoufa]

Thx , i like your explanation, hope we get more videos.

[@PerfilievFinancialTraining]

Thank you! I'll try to do my best to make more! :)

[@miquelmalaga]

are dealers concerned also about hedging gamma ang vega ?

[@PerfilievFinancialTraining]

It also represents risk on their books and it's up to them how they'd like to address it - ie. be over- or under- hedged.

[@tradergrindlive]

This was great! Thank you 😊

[@PerfilievFinancialTraining]

You're so welcome! Thank you!

[@edwindesouza6783]

Any explanation for the references to Prince by Cem ?

[@PerfilievFinancialTraining]

I think it was a reference to a song 1999 by Prince.

[@alexkassebaumgolf]

that light bar is sick

[@PerfilievFinancialTraining]

Hahaha, thank you! I agree, it's pretty lit! :D

[@HectorYague]

Content is fantastic. The cartoonish style, not so much. You are not talking to teenagers so you dont need the typical KZbinr silliness. Let your content speak for itself because it is real good.

[@PerfilievFinancialTraining]

Thank you! The cartoonish style is borrowed from @jam_croissant which is what I'm commenting on in the video.

[@olgahristolyubova9471]

Thank you ❤️ I'm happy to learn with you ☺️

[@PerfilievFinancialTraining]

Thank you so much for watching! Glad you liked it :)

[@sukhmandersingh1242]

Sergei, can you demonstrate how the dealers control price action of precious metals.

[@PerfilievFinancialTraining]

Hi Sukhmander, thank you for this suggestion! I'd have to research this topic a bit, to be honest. But I've added this to my list of video ideas and hopefully will get to it, if time permits.

[@sukhmandersingh1242]

@@PerfilievFinancialTraining that'd be deeply appreciated, thank you.

[@bigal5413]

as long as you're doing such great videos, i might as well try to think of possible topics! how about contango-backwardation-carry, or bond duration-convexity, or how has GS done so well over the last few years?

[@PerfilievFinancialTraining]

Thank you for your support, all great suggestions!

[@Nightmare-iw1zr]

Thanks so much for dumbing it down for us - I think I am starting to get it - we’ll sort of 😂

[@PerfilievFinancialTraining]

Thank you for watching - I really appreciate it :) Glad it's starting to make a bit of sense now :) Hopefully, I'll make a few more vids around the topic and it'll be clearer.

[@Nightmare-iw1zr]

@@PerfilievFinancialTraining would love that! You are a star 🤩

[@warlordie2972]

Excellent Video

[@PerfilievFinancialTraining]

Thank you very much!

[@khanhtunghoang4623]

Thanks you

[@RinatMenyashev]

great video, thanks!

[@PerfilievFinancialTraining]

Hi Rinat, thank you! Really glad you liked the video! All the best!

[@mrathos]

So great video. Thank you!!!

[@mesenchymalstemcells]

thanks for your valuable insights

[@PerfilievFinancialTraining]

Thank you for watching!

[@Ralphes1212]

Well done!!

[@PerfilievFinancialTraining]

Thank you, and thank you for watching! Glad you liked it :)

[@LondonReps]

Very good video, thanks

[@PerfilievFinancialTraining]

Thank you for watching!

[@hellotrading3245]

How can anyone remember so much content to take trade ? I am confused how to use this information. Can anyone share?

[@Martin-t3o3k]

Awesome video!!!!!!!

[@PerfilievFinancialTraining]

Thanks so much for watching! Glad you liked it :)

[@Eddie.The.Trader]

12:24 Nice summary Lol

[@hoopprofile1764]

Hey Brother, I can see current phase of your life as jim simons stage of harvard uni. I will surely someday look forward to built decentralised quant formula with you, Highly grateful for this insights. Thank you,

[@PerfilievFinancialTraining]

Thank you for watching the video - much appreciated! :)

[@Edlck]

Great video. Would you make one explaining how to predict dealers' position on stock such as TSLA?

[@journeykeen5471]

Great video!

[@PerfilievFinancialTraining]

Thanks so much for watching! Glad you liked it :)

[@michalpankiewicz1489]

Well done!

[@PerfilievFinancialTraining]

Thank you!

[@Absallaboutstocks]

Great video, can we judge any big players activity from using change in open interest and volumes

[@thirupathisalveru5411]

Thank you for your video 🙏

[@PerfilievFinancialTraining]

Hi Thirupathi, thank you for watching!

[@IsaacWendt]

Love this video truely amazing. The thing I dont understand with the window of weakness is won't the market put the hedges or calls or prior positions back on that same day? I guess the gamma effects are alot weaker also because time and vol has been pushed out?

[@gammavannabae]

Great teacher! Thank you.

[@jsn7929]

Awesome video

[@PerfilievFinancialTraining]

Thank you for watching! Glad you liked it :)

[@vvvc8528]

Спасибо и поддержать при взлете. Отличного полета!

[@PerfilievFinancialTraining]

Большое спасибо! И вам успехов! :)

[@brendon2706]

when are you coming out with a class for something more in depth and quantitative analysis on this?

[@zakariam11]

More videos like this thank u

[@PerfilievFinancialTraining]

Thank you so much for watching! Will do my best! :)