The idea and the mechanism
When dealers are long gamma around a heavily-traded strike, their hedging forces them to buy weakness and sell strength — which dampens the stock and tends to park it near that strike into Friday's close. In index options this is studied to death by big desks. In individual mid-caps it's far less arbitraged because the position you'd need is tiny and not worth a fund's attention.
A mechanical, microstructure cousin to the premium-selling book — same "collect from overpriced optionality" theme, completely different trigger. The trade is selling a defined-risk structure centred on the magnet strike, betting the stock stays pinned through Friday.
The frozen gate
Will be considered to have passed Stage 1 if:
- Mean per-trade EV ≥ +0.30% of notional [suggested, to freeze]
- Welch p<0.05 AND mean>0 [suggested, to freeze]
- Win rate ≥ 70% (pinning is high-frequency / small-magnitude; high win rate is what makes the math work) [suggested, to freeze]
- Sample size ≥ 400 opex weeks across the universe [suggested, to freeze]
- Effect present in both sample halves [suggested, to freeze]
- Sign-conditional check: edge must reverse or vanish when dealers are short-gamma at the strike (sanity that the mechanism is what we think it is) [suggested, to freeze]
What we expect to find
Pinning effect probably present in single-name mid-caps but smaller than the index analogue, because earnings/news shocks override gamma-hedging more often than for indices. Probability of clearing the gate is moderate (~50%) — the mechanism is real, but the noise floor in single names is high. Most likely failure mode is the sign-conditional check: if the dealer-gamma classifier is wrong (or the data is too coarse to estimate it), the headline gate could pass while the mechanism check exposes a spurious result.
Methodology appendix — gates, exact parameters, look-ahead audit — is visible to subscribers. See the plans →