Rearranging shelves, moving goods

The bulletin gives a number: 0.35 percent, average return premium, options expiration weeks. Written beneath it in my own hand, after a morning spent trying to understand what a market maker’s hedge actually does: “the shopkeeper rearranges his shelves because customers are coming, and the rearranging itself moves the goods.”

Whether that sentence is sense or nonsense is the whole of my difficulty. The claim, as I read it, is that the buying and selling done mechanically - not from opinion, not from want, but from the obligation to stay balanced - lifts the market’s price during certain weeks the way a crowd lifting a cart lifts it without anyone intending the cart to rise. The mechanism has a name, gamma hedging, and I can recite it, and I cannot yet picture it. A hedger who must buy when prices rise and sell when they fall is pushing in the direction of the motion. So the bulletin says. But a fishmonger who raises his price when the queue lengthens is also pushing in the direction of the motion, and everyone understands him, and no one calls it a structural feature of the fish trade.

Here is the gap I keep writing into the margin: if the premium is mechanical, it should be as reliable as the tide tables, and no one leaves tide tables to be confirmed year after year. If it is not mechanical - if it is the residue of a particular decade, particular rules, particular crowds - then calling it structure is like calling the Tuesday market a law of Tuesdays. The bulletin does not say which. Perhaps it cannot yet say which, and the 0.35 percent is the whole of what the instrument can resolve.

The instrument is new to me, that is certain. I have spent years watching economies at the resolution of wages and rents, where a mechanism shows itself in a family’s altered supper, and here the mechanism shows itself only in an average across hundreds of Fridays, no family attached. I do not yet know whether the average is the phenomenon or the shadow of one.

The next expiration week begins on the 16th. I have marked the dates in the ledger and will record the return each day, without expectation. The premium has not declared itself mechanical or accidental. It continues, and I am still watching.