Love your answer - you’d love listening to Joe Pestrichelli - math background turned money manager with $2B AUM. You can find him at zegafinancial.com if you’re curious.

I follow Brent Kochuba over at SpotGamma and these guys used to be money managers and option broker.

Their platform posits that hedging levels are known in advance of the market day. Crossing such a level triggers buying underlying stock or futures from Market Maker hedging, and accelerates momentum, which can be capitalized. I’ve managed to pull this off trading S&P Futures, but price is not always near such a level. This burst of market maker hedging to offset or neutralize losses is termed a Gamma squeeze and, just like a short squeeze, it can often be anticipated.

Their platform also measures total open interest for options, and those strike levels represent levels of support or resistance. Combining levels of known momentum triggers with rebound points can be useful to traders.

For longer term investors, I use this knowledge to hedge my own income and retirement portfolio to known levels of downside risk. Imagine knowing the most likely price the S&P Index could fall down to on pullbacks. While never guaranteed, it allows hedging risk to known levels, either with each position or as a whole for the portfolio.

As an example, the proverbial line in the sand to the downside of a large market index is $5200. I purchased a put butterfly for $120 that would make $4,700 if the market fell to this level. The $4,700 gain would reduce the portfolio loss, while others scramble watching their portfolio lose value.

If you don’t already, you’ll see that Joe manages the option trades for several ETFs, some of which have 50-100%+ dividend yields. But since each ETF has risk exposure to the underlying, that it makes sense to use option-based protection to hedge the ETF risk, but still enjoy the distribution cash flow.

So yeah, totally enjoyed your comment and your interest. I write for the beginner and intermediate traders. Trading and investing is my hobby, not my profession (I’m a dentist). So, I enjoy bringing along some of my readers along my learning journey in the hobby that I love!

Kind regards,
Ryan @ BlockStoxx.com