Options on S&P 500 futures contain more notional volume than the entire stock market. Market makers hedge their positions by buying and selling futures, and those hedging trades drive most intraday price swings in ES and NASDAQ futures, not algorithms or toxic order flow.
Most retail traders don't know if when you read order flow, when you look at option market makers, dealer hedging flow, you're getting real depth of the sea. This is the volume, let's say, of futures contract in the stock market. This is the volume of the entire stock market. This is the notional volume of options. So there's way more notional volume. There's way more money technically on options than in any other derivative of the stock market or the stock market itself or these two combined. This is how big the option market is, especially for 0 DTE S&P 500 options. 50% of the volume in this. So half of this big bubble is market market makers. And the way they hedge their exposure to direction is through something called dynamic delta hedging or gamma exposure hedging. And when you start getting deep into that, you understand that a lot of the movement you see nowadays on the ES, on the S&P 500, or the NASDAQ futures, they don't come because of an algo. They don't become, you know, because of toxic order flow. Most of the flow comes from hedging this directional exposure they have from option markets. And you can have a very accurate prediction of how the volatility would unfold throughout the day with some specific tools that are very expensive.
