Options Market Flip: Gamma and Skew Extremes

The options market has flipped from extreme negative to high positive gamma, signaling a shift from fear to AI-driven euphoria. While fundamentals like earnings remain strong, the extreme complacency in skew levels suggests increasing market fragility.

Key Takeaways

• 1.Dealer gamma positioning has undergone a massive reversal from -$7.24bn (one of the most negative on record) to +$21.3bn in just six weeks.
• 2.Single-stock put-call skew is at the bottom 3% of historical levels, indicating extreme sentiment reversal and complacency.
• 3.Corporate spending is shifting significantly toward AI-related capex, which is expected to reach $2tn for the S&P 500 in 2026.

Table of Contents

• Gamma Positioning Reversal
• Sentiment Shift and Put-Call Skew
• Fundamental Backdrop: Earnings and Multiples
• Corporate Cash Deployment: Capex vs Buybacks
• The AI Ecosystem and Hyperscalers
• Emerging Markets and Asia Focus
• China Tactical Upside and US-China Relations
• Monetary Policy and Market Fragility

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