The Options Market May Be Fueling the Turbulence in Tech Shares

Inflation, valuations, rising rates -- all are being suggested as causes for this week’s tech implosion, but a less-publicized catalyst may be the market for stock options.

This alternate theory has it that Wall Street derivatives dealers are exacerbating market swings through hedging their books to offset brisk demand for protection against a selloff, through what’s known as gamma hedging. That’s when options market makers buy or sell an underlying stock to manage their risk as the price of the shares moves.