The Gamma Powder Keg

March 20, 2025 | Read Online

Don Kaufman here.

If you caught this morning's session, you know the drill: volatility is alive, well, and ready to mess with everyone.

We're sitting on what I like to call a gamma powder keg, where the market is packed tight with risk, and all it takes is a little spark for things to explode.

This is the kind of market that makes retail traders sweat and seasoned pros sharpen their pencils.

So, let's break it down: what is gamma risk, why does it matter, and how do you approach a trading day like today without getting run over?

What the Heck Is Gamma Risk?

Gamma risk is what happens when the forces of options positioning and market momentum combine into a deliciously dangerous cocktail. Think of it like this: market makers and big-money traders hedge their books based on the options they've sold.

But as prices move, they're forced to adjust their hedges—buying or selling stock to stay neutral. That's where the gamma comes in.

If the market starts to move fast in one direction, this hedging activity amplifies the move. It's like rolling a snowball down a hill—it starts small, but before you know it, you've got an avalanche.

Whether the market rips higher or craters lower, gamma risk means you've got a one-way ticket to volatility town.

Here's the kicker: the longer we sit in a tight range, the bigger the eventual move.

Why?

Because all that pent-up gamma risk doesn't just disappear—it builds pressure until something gives.

The Setup: Why Today Is a Powder Keg

Let's look at where we are right now. The S&P hasn't done squat since last Friday. We've been ping-ponging around the same levels with no real direction. But here's the thing: the expected move for the week is still sitting at $140.

That's a huge range.

And guess what?

We haven't even come close to touching it yet.

Statistically, there's a high probability that the market hits either the upper or lower edge of the expected move by the end of the week. But right now, we're dead in the middle.

That's like sitting on a seesaw with a sumo wrestler on one side and a feather on the other—you KNOW something's about to tip.

And then there's the post-Fed volatility factor. Normally, after a Fed meeting, you'd see volatility calm down as traders reassess. Not this time. Instead of the usual vol crush, we're getting a vol pump.

That's like adding gasoline to an already smoldering fire.

So, What's the Plan?

If you're trading today, you've got to be ready for two-sided action. This is not the day to go all-in on one side of the market and hope for the best. Hope doesn't pay the bills—discipline does.

1. Don't Chase the Rally

At the open, we saw a massive rip higher in the Nasdaq—220 points in 30 minutes. That's not a market you chase. Sure, it might feel like the bulls are back in charge, but let me tell you something: this rally has a pullback written all over it.

2. Watch the Bonds

The bond market is your canary in the coal mine. If you see bonds rallying hard, that's a sign money is moving to safety. This morning, we saw a big bid in bonds before the market opened. That's a red flag. It means someone out there is betting on a storm.

3. Respect the Gamma

The gamma risk is real today, people. If we start to break higher or lower, it's going to accelerate fast. This market isn't going to tiptoe—it's going to sprint. So, keep your trades small, keep your stops tight, and don't be a hero.

Embrace the Chaos

Look, days like today are why we trade. This is the kind of market that separates amateurs from the pros. If you know how to manage risk and stay disciplined, there are huge opportunities out there. But if you're undisciplined, the market will eat you alive.

So, stay sharp—keep those hands off the keyboard unless you've got a plan, and above all, don't forget to have fun.

Trading is a game, and the best players know how to stay calm when the stakes are high.

And here's the deal—volatility is back, baby. The markets are moving fast, and the opportunities are huge—but only if you're ready to act. That's why I'm so fired up about tomorrow.

The first Vomma Zone Masterclass kicks off tomorrow, and this is your chance to prepare for the most explosive market conditions we've seen in years.

I'm going to walk you through exactly how to trade this hidden volatility trigger—one that has consistently led to some of the biggest moves in market history.

When the Vomma Zone is breached, everything changes. That's when volatility explodes, and if you know what to look for, you can position yourself for massive profit potential.

I'll show you the strategies the pros use to navigate these conditions and how to capitalize on volatility like never before.

But time is running out to sign up.

If you're serious about thriving in these markets, don't wait. This is your opportunity to gain an edge in one of the most volatile trading environments we've seen all year.

👉 Secure your spot here and join me tomorrow!

To your success,

Don Kaufman