How Does the “Greeks” in Options Trading Relate to Market Volatility during a Spiral?
Delta, Gamma, Vega, and Theta are key option Greeks. During a death spiral, implied volatility (Vega's input) spikes, making options more expensive, especially puts.
High volatility increases Gamma risk, meaning Delta changes rapidly, forcing market makers to frequently rebalance their hedges. This dynamic hedging activity, particularly selling the underlying asset as Delta approaches -1, further fuels the downward price pressure.
