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Nasdaq Explodes Higher Amid Unprecedented Gamma/Futures Double-Squeeze

Heading into the weekend, we observed that despite the recent drift higher in the Nasdaq last week after its September correction, institutional investors remained skeptical with a near-record number of non-commercial spec shorts in the Nasdaq 100 mini according to the latest CFTC Commitment of Traders report, and after spiking to a historic level just two weeks earlier, the negative bets on the Nasdaq stubbornly persisted…

… perhaps in response to the recent surprisingly bearish note from Morgan Stanley which warned that the tech plunge would accelerate, and which forced many institutions into bearish positions.

But it wasn’t just the painful short in NQ futures that set off today’s harrowing move higher in the Nasdaq: as Nomura’s Charlie McElligott wrote in his morning note when looking at today’s exponential “panic grab” price-action in Equities futures, “the buy flows are being driven by a legacy dynamic in SINGLE-STOCK VOL which you’re now well-familiar with, where we see massive upside call strikes suddenly back ‘in-play” on the meltup this week into their Friday’s expiration in some of those mega-cap Tech stocks (AMZN in particularly, but ADBE and NFLX as well) that traded back in August, forcing what looks to be “short Gamma” -type buying / hedging this morning from the Dealer short them in order to stay neutral.”

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