Gamma Briefing
S&P 500 is trading sharply lower, off roughly 0.9%, as an overnight widening of the US-Iran conflict into Kuwait, Bahrain, Qatar, and Jordan swamps an otherwise busy overnight earnings slate and turns the multi-front military engagement into a direct threat to regional energy infrastructure and shipping lanes.
The escalation has pushed crude sharply higher, with WTI now above $80 a barrel, and it has driven a clear defensive rotation across the tape, leaving Consumer Staples and Energy as the only sectors holding gains while risk appetite drains elsewhere.
The chip complex is the second drag, with the group extending its recent slide even after TSMC posted record Q2 results and lifted its 2026 capex outlook, as investors refocus on the timing of returns from AI infrastructure spend; Nvidia is down 2.6% and Micron is off 3.1%.
Among single-stock movers, Netflix is down about 9% after guiding Q3 revenue and EPS below consensus and trimming its full-year revenue range despite a narrow Q2 EPS beat.
Gamma Situation
Option traders are going into this new regime from a record-bullish positioning (see gamma flip evolution per chart below), as they did not take the geopolitical escalation seriously enough and are forced to re-think their bullish stance, which pushes the SPX the gamma flip down to 7,475 from yesterday's 7,512.
The gamma distribution over the SPX strike spectrum offers no support (chart below).
Vol-control funds have added significant length over the last weeks, and will be forced to deleverage quickly in a negative scenario (chart below). According to our model, this cohort could shed up to 22 bln next week on a moderate downtrend alone.
Stay safe.
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