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Options Feedback Loop Revives Warnings in Soaring Stocks

  • Call-buying has pushed ‘gamma’ exposure to all-time highs
  • Friday’s index option expiry will bring a test: McElligott
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As stocks extend their relentless rally from last year’s bottom, one measure in the options market is flashing a warning signal.

Over the last 30 days, an average of more than 22 million calls traded across U.S. exchanges -- close to a record, data compiled by Bloomberg show. That’s forced the dealers selling those contracts to buy the underlying shares to offset any option price drift, boosting their potential selling pressure to an all-time high, according to at least one model.