Odd Lots · Friday, July 10, 2026
Alex Altman explains that leveraged ETFs, particularly triple-leveraged ones, create daily mechanical adjustments to maintain their leveraged exposure. This rebalancing leads to 'short gamma' dynamics in the market, which can be exacerbated by the increasing size of these products.
“And that's what's creating these mechanical adjustments on a daily basis, whether it's down obviously on down days and then up on updates, so effectively you're creating a new short gamma dimension in the market that was relatively small only a couple of years ago.”
“And I think really importantly is that there's a lot of dynamics that are moving non discretionary flows in the market. So obviously in the ETF world, you've got a lot of overwriting ETFs that are doing the opposite. They're effectively selling volunt in the market, which is creating a long gamma process and that would typically have netted off against a lot of these levit ETFs. But because these levit ETFs have become so large and they're rebalancing that now net gamma profile is effectively becoming more.”