The conceptual link between short sales and investor buying activity—the key to understanding what "short volume" really means—has never been clearly drawn before [now].
– Short is Long
Trades marked with the seller "short" comprise about 49% of equity share volume [...] it's no coincidence.
– Short is Long
Very high relative percentages (≥45% [DIX]) of dollar-weighted short volume are associated with mean 60-market-day returns of 5.3%, as compared to a mean of 2.8% across the whole dataset.
– Short is Long
Since few have even acknowledged the pervasive impact of existing options on their underlying stocks, none have put forward a pragmatic model for predicting the day-to-day impact of those options. Gamma Exposure (GEX) is the first attempt at such a model.
– Gamma Exposure
[...] a GEX figure that is positive implies that option market-makers will hedge their positions in a fashion that stifles volatility (buying into lows, selling into highs). A GEX figure that is negative implies the opposite (selling into lows, buying into highs), thus magnifying market volatility.
– Gamma Exposure
Note the exponential increase in volatility as GEX trends below zero, and the gradual tightening of the distribution as GEX rises. It would be difficult to come up with an alternate explanation for this behavior.
– Gamma Exposure
This means that we can build a uniquely information-rich "implied order book" simply by knowing how existing options must be hedged. From this, we will be able to see where option-originated liquidity is abundant, and where it is scarce.
– The Implied Order Book
But now you'd have to explain how high IV actually causes liquidity to be taken from the market. [...] The answer is vanna.
– The Implied Order Book
When put-selling becomes the norm, crashes happen.