options

Alex Thorn, director of research at Galaxy Research, posted on , spot buybacks will be needed to maintain delta neutrality, which should amplify the explosiveness of any recent short-term gains. According to its analysis of Amberdata data, market makers shorted Gamma at a starting price of about $28,500. If the price of Bitcoin rose to $32,500, market makers would need to buy $20 million in Delta for every subsequent 1% increase. This means that as spot prices move higher, market makers will need to buy back more and more Bitcoin, which should increase the size of the move if there is any move higher in the short term. Additionally, as traders are long Gamma in the $26,750-$28,250 range. When it is long Gamma but the spot falls, it must buy back the spot to remain delta neutral. Therefore, any near-term price downside will face resistance as options traders buy back Delta. This is a great thing for the bulls because if the spot price moves moderately higher, covering by short gamma could cause its price to rise sharply soon, but if the price moves lower, covering by long gamma may provide some support to Limit the short-term decline.​