Everyone talks about Gamma as if it's the only greek that matters...
VolSignals@VolSignals
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Aug 04, 2026
~2 min read
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1
Everyone talks about Gamma
as if it's the only greek that matters for the market
the real edge is often in other greeks
greeks that are "harder to cover"
greeks that persist across days, weeks, months
that create feedback loops that move or reinforce already moving markets
as if it's the only greek that matters for the market
the real edge is often in other greeks
greeks that are "harder to cover"
greeks that persist across days, weeks, months
that create feedback loops that move or reinforce already moving markets
2
Vanna is the literal transmission mechanism that causes buying or selling of index futures when implied volatility reprices.
If the market maker position is in between a strangle- it's muted. Drop the vol and deltas of calls and puts drop- but balance
If the market maker position is in between a strangle- it's muted. Drop the vol and deltas of calls and puts drop- but balance
3
but start throwing in customer hedging and overwriting and a strong condition emerges:
raise vol, sell futures
drop vol, buy futures
In this 'regime' we get sharp selloffs but they recover just as quickly
..and then flatline as the index approaches the long call position
raise vol, sell futures
drop vol, buy futures
In this 'regime' we get sharp selloffs but they recover just as quickly
..and then flatline as the index approaches the long call position
4
That prior post captured the entire position's vanna
Proper analysis (private) involves normalizing/transforming and breaking down the position into tenors in order to really understand what happens when vol moves
this is what underpins my track record on market analysis
Proper analysis (private) involves normalizing/transforming and breaking down the position into tenors in order to really understand what happens when vol moves
this is what underpins my track record on market analysis
5
go just a little bit deeper and you get Volga
Vol-atility Ga-mma... "volga"
Imagine the market maker's predicament, trying to run a flat Vega book (they're short vega right now)
Vol-atility Ga-mma... "volga"
Imagine the market maker's predicament, trying to run a flat Vega book (they're short vega right now)
6
customers think a move is coming but different PMs are hedging different directions
some buying 20k puts at a time throughout August tenors
others accumulating tens of thousands of September 8200 Calls
"wings vs ats"
unstable vega..
some buying 20k puts at a time throughout August tenors
others accumulating tens of thousands of September 8200 Calls
"wings vs ats"
unstable vega..
7
drop vol and you get longer vega
raise vol and you get shorter vega
you're always racing out of a position that's moving against you
(just like short gamma.. but short "volatility gamma")
raise vol and you get shorter vega
you're always racing out of a position that's moving against you
(just like short gamma.. but short "volatility gamma")
8
Volga is the greek that quantifies how stressful it is to manage a dealer book to a flat vega target
the more negative the number, the less you sleep
(we express it here as vega per vol point)
Just like the others, really sharp analysis requires drilling down
the more negative the number, the less you sleep
(we express it here as vega per vol point)
Just like the others, really sharp analysis requires drilling down
9
- but you get the picture
From gamma through Volga, everything about the market maker position is telling you the same story
"this cannot be trusted"
All the "glue" that holds the market together is increasingly concentrated right here in a narrow upside range
From gamma through Volga, everything about the market maker position is telling you the same story
"this cannot be trusted"
All the "glue" that holds the market together is increasingly concentrated right here in a narrow upside range
10
and in my experience, the other greeks evolving the way they are- these are the "glue-breakers"
if you ever wondered how I seem to anticipate market strain ahead of time with a surprisingly good hit rate
it's not me- it's the greeks
the probabilities are embedded
if you ever wondered how I seem to anticipate market strain ahead of time with a surprisingly good hit rate
it's not me- it's the greeks
the probabilities are embedded
11
but you'll never find edge in analyzing a static vol curve
or looking at local gamma numbers- even if modeled correctly
you need to understand deeply how the system's pieces interact- and for this you need to break down the inputs to the system according to how they work
or looking at local gamma numbers- even if modeled correctly
you need to understand deeply how the system's pieces interact- and for this you need to break down the inputs to the system according to how they work
12
the edge is in spotting where one is on a collision course with another in a way that can shake loose the index or implied vol
because, I promise you
the market does not price the outcome's probability
because, I promise you
the market does not price the outcome's probability