Mechanical Buying and the Hidden Pressure (EP. 14)

Joe and Smiddy are back. Vol is crushed and dealers are pinned, leaving markets calm on the surface — but underneath, the pressure is quietly building. Levered ETF rebalancing, synthetic gamma exposure, and short gamma from retail and institutions are creating a potentially explosive mix. As these flows start to collide, dealer hedging could flip from passive to aggressive, forcing movement into thin summer tape.

They break down McElligott’s latest note, walk through how gamma traps and vol control are setting the stage, and explain the structural flows fueling what could be the next leg higher. This isn’t about macro headlines — it’s about positioning mechanics that might kick the market into gear.

 

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