Can someone please give me an explanation as to what put-call gamma imbalance specifically refers to (imbalance of what?), and why they may exacerbate volatility from a market perspective, and why the risk increases on option expiry day?

My guess is it that these imbalances force option sellers/dealers to more aggressively delta-hedge their positions, but I would like to have a better grasp on what is really going on.

Some confustion is coming from the fact that I thought put and call gamma must be equal else put/call parity would be violated based on put delta + call delta = 1 for a given option strike.


I do not think the term put-call gamma imbalance refers to the imbalance between "a put" and "a call" at the same strike. . .so put call parity lives on.

As for the exacerbated volatility, my experience has shown that there is pressure to "pin" at a strike which would decrease volatility near expiry.


Strike = 100
Stock =100
expiry in 10 minutes
all else equal

Those traders long the 100 straddle will scalp their gamma aggressively in the final moments. As the stock trades below 100, the 100 straddle will generate short stock for the long holder. The long option holder buys stock as it drops and sells it as it rallies butting pressure on the stock to stay at 100.

The short option holder locks in losses every time he hedges so is more incline to not take such energetic hedging action as that of the longs.

Now, if the market makes a surprise move of substance. . .all bets are off, there may exist a very large delta imbalance (short option holders) and they might be forced (pain of large loses changes everything) to sell their long deltas on the downside or buy in their short delta on the upside. In either case this will increase volatility . . .until the next trike is reached and the "pinning" battle can begin again.

this article gives a better explanation than mine :-)


  • $\begingroup$ Thanks John - that was great. After digging a bit deeper, it appears as though gamma imbalance, which is in $ units, refers to some aggregate measure of call or put gamma multiplied by some value (possibly open interest). Thoughts? - see page 14: ieor.columbia.edu/files/seasieor/… and page 4: cboermcus.com/uploads/3/1/3/4/31349817/50344_day_2_session_1b_-kolanovic-_final.pdf $\endgroup$ – RA334 Sep 8 '15 at 13:28
  • $\begingroup$ if the second link doesn't work - google "Marko Kolanovic Presentation - RMC US" $\endgroup$ – RA334 Sep 8 '15 at 13:31
  • $\begingroup$ Yes, $Gamma=(open int)x(share multiplier)x(price of stock) but your question more around expiry than "in general". What I can say is this. On the downside, long put holders are typically portfolio hedgers that have very little incentive to cover when the marked drops. The other side of the trade are usually professional market makers and until Dodd-Frank messed everything up . . .investment banks. These "short" put holders are forced to sell shares that accumulate from the negative gamma held. This can increase volatility. The volatility driver is not expiry but the move itself. Cool? $\endgroup$ – John Sep 9 '15 at 15:19
  • $\begingroup$ Glad I could help :-) $\endgroup$ – John Sep 10 '15 at 18:51

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