> Fun fact, the Bloomberg options value calculator tells me that the delta of that $800-strike call option expiring tomorrow is zero. That is, the right theoretical hedge for a market maker who sells that option is to do nothing, to buy zero shares to hedge against the minuscule risk of the stock going to $800. Standard options math, and also frankly common sense, tells you that if the stock is trading at $40 or $90 or whatever, and someone comes to you and asks to buy a two-day option struck at $800, the proper reaction is to say “lol okay sure pal,” take their money and never think about it again. But I’m sure people bought other options that market makers did hedge, why not. We’ve discussed some recent research finding that options positioning predicts late-in-the-day trading moves, and I suppose the shape of yesterday’s late-afternoon rally could be partially explained by options.
I hope if anything, this Gamestop saga has turned a lot of people onto Matt Levine's writing. He consistently puts out some of the most laugh-out-loud hilarious things I will read every day, in a way that is actually able to concisely explain really complex subjects. And he cranks out one of these every single day. I am simply in awe of him.