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Short Gamma: The Market-Maker Spiral

In my last article I described the margin spiral — leverage feeding on itself until a correction becomes a crash. This one is the same loop, one level down, in the plumbing of the market.

  • Market makers' hedging contributes to market crashes.
  • Short gamma positions amplify market declines.
  • Interventions at -6% can mitigate market shocks.

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