On December 20th, 2023, the SPX experienced a significant intraday drop, driven by low liquidity and leveraged positions, especially in 0DTE options. The sell-off highlighted the challenges in predicting market moves based on pre-market data.
However, by analyzing market flows, delta positioning, and understanding the mechanics of delta hedging, traders could better manage risk and anticipate potential rebounds.
This guide discusses the event, its causes, and strategies to navigate such volatile scenarios, emphasizing the importance of risk management.
