Bloomberg strategist Simon White warns that the "ultra-low correlation" in US stocks faces a risk of severe shocks, and anomalous gamma fluctuations could become the "switch" for market volatility.
White pointed out that the current abnormal fluctuations in Gamma are weakening option traders' ability to suppress market volatility. Once Gamma rapidly turns negative, option traders' hedging behavior could amplify market movements in reverse, leading to a sudden increase in stock correlation and pushing the market into a higher volatility state. He warned that if the market experiences a 3% to 4% pullback, a rapid negative turn in Gamma could further amplify hedging pressure, turning a mild adjustment into a more severe fluctuation.
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