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The Gamma Pins

17 February 2014 by HCM

With the US closed for President’s day, today was never expected to be a standout session. Indeed, all indices traded within a very tight range, most of them actually hardly moving at all. In fact, one should not hold his breath expecting much more volatility over the next two sessions either. In the credit space, clients have been selling February volatility on options, with 75 on iTraxx Main and 275 on iTraxx Xover being 2 of the most popular strikes. It has created a big gamma positive position among the dealer community around the current levels. Barring any extraordinary event, these 2 gamma pins should be enough to keep European indices within their recent tight range until the February option expiry date, which falls on Wednesday 19th.