---
title: "[Options Explained] Don't blame the fundamentals! The culprits behind last night's plunge were: the Vanna Crush and the negative Gamma death spiral"
type: "Topics"
locale: "en"
url: "https://longbridge.com/en/topics/36615285.md"
description: "Last night before going to bed, I was great. $NVIDIA(NVDA.US) had good earnings report, $Alphabet(GOOGL.US) launched a "Banana Pro", and the non-farm payroll data was decent. My account kept rising, so I slept peacefully. But when I woke up this morning, I was stunned—what happened? My account just did a "high-dive". Soaring up three thousand miles, then plummeting down three thousand feet in an instant! Here are some painful numbers: $NVIDIA(NVDA.US) earnings beat expectations..."
datetime: "2025-11-21T11:02:27.000Z"
locales:
  - [en](https://longbridge.com/en/topics/36615285.md)
  - [zh-CN](https://longbridge.com/zh-CN/topics/36615285.md)
  - [zh-HK](https://longbridge.com/zh-HK/topics/36615285.md)
author: "[期权君](https://longbridge.com/en/profiles/8874340.md)"
---

# [Options Explained] Don't blame the fundamentals! The culprits behind last night's plunge were: the Vanna Crush and the negative Gamma death spiral

Last night before going to bed, I was feeling great. $NVIDIA(NVDA.US) reported strong earnings, $Alphabet(GOOGL.US) launched "Banana Pro," and the non-farm payroll data was decent. My account kept rising, so I went to sleep peacefully.

But when I woke up this morning, I was stunned—what the hell happened? My account just performed a "high-dive plunge." Soaring to the sky in one moment, then plummeting straight down the next!

**Here are some painful numbers:**

$NVIDIA(NVDA.US) beat earnings expectations but still dropped 7%.

$Invesco QQQ Trust(QQQ.US) rose as much as 2.31% intraday but closed down 2.37%.

Meanwhile, $Cboe Volatility Index(.VIX.US) had a field day—it opened down 17% (market optimism) but closed up 11% (market panic), with an intraday swing of 35%.

_Note: The VIX Index is the S&P 500 Volatility Index, also known as the "fear gauge." A higher VIX means investors expect greater market volatility ahead. Typically, a sharp rise in the VIX accompanies market declines._

This kind of market action—where you're lifted to the sky only to be slammed back down—has only happened twice in history: April 7, 2020 (COVID crash) and April 8, 2025 (Trump tariff turmoil).

**Why did the market drop despite good news?**

Multiple factors were at play, but from a derivatives perspective, one key driver was last night's Vanna Crush and negative Gamma squeeze

**What is Vanna Crush?**

Vanna is a rare term. Though not among the basic Greek letters, it's a legitimate advanced Greek in options trading.

Simply put, Vanna measures how much an option's Delta changes when implied volatility (IV) shifts.

To understand better, think of it this way:

Delta = How much an option's price moves when the stock rises $1 (speed)

Gamma = How fast Delta changes when the stock rises $1 (acceleration)

Vanna = How fast Delta changes when IV rises 1% (also acceleration)

In short, Gamma tracks price impact on Delta, while Vanna tracks IV impact on Delta.

**How did Vanna Crush form?**

Rewind to a few days ago:

Everyone knew big events were coming—NVIDIA earnings and non-farm payrolls.

Good results could lift markets; bad ones might crash them.

Two groups emerged: institutional investors holding billions in stocks bought massive protective puts from market makers to hedge risks.

Meanwhile, optimists betting on a rally loaded up on calls.

Higher uncertainty meant sky-high IV pre-event.

**Then last night:**

$NVIDIA(NVDA.US) crushed earnings, $Alphabet(GOOGL.US)'s new product impressed, and payrolls were solid. Uncertainty vanished—IV collapsed.

With stocks surging, hedgers realized: "Worried for nothing!" Their puts became worthless.

**Enter market makers**

Market makers—who sold those options—don't bet on direction. Their only rule: Stay Delta-neutral.

Last night's simultaneous stock rally and IV plunge made calls' Vanna negative, reducing their aggregate Delta.

_(Why? In-the-money calls have negative Vanna. As IV fell, their Delta rose less than expected—e.g., from 0.6 to 0.65 vs. 0.7.)_

Suddenly, market makers held excess stock hedges. To rebalance, they dumped shares—triggering a mechanical selloff: Vanna Crush.

**Then puts joined the party**

Vanna Crush alone might've been brief. But markets entered a negative Gamma death spiral.

As the S&P 500 broke key levels (e.g., 6650, 6600), those near-worthless protective puts gained value.

Market makers—who'd sold puts and shorted stock to hedge—now faced exploding Delta risk as puts went in-the-money (e.g., Delta from -0.1 to -0.8).

To stay neutral, they sold more stock, fueling a loop:

Vanna Crush sales → Price drops → More puts in-the-money → More forced selling → Deeper drops.

  
  
That's the anatomy of last night's "freak crash." Let this be a risk-management lesson.

Now the burning question: When will this selloff end? Share your thoughts below.

P.S. Goldman notes $3.1T in options expire today. Once these puts roll off, negative Gamma pressure may ease.

_Further reading: Gamma squeeze explainer_

[\[Explainer\] Meme Stock Beyond Meat Soars 1500% in 4 Days! How Retail Traders Used Gamma Squeeze to Crush Shorts!](https://longportapp.cn/zh-CN/topics/35525413)

### Related Stocks

- [.VIX.US](https://longbridge.com/en/quote/.VIX.US.md)
- [NVDA.US](https://longbridge.com/en/quote/NVDA.US.md)
- [GOOGL.US](https://longbridge.com/en/quote/GOOGL.US.md)
- [GOOG.US](https://longbridge.com/en/quote/GOOG.US.md)
- [QQQ.US](https://longbridge.com/en/quote/QQQ.US.md)
- [.IXIC.US](https://longbridge.com/en/quote/.IXIC.US.md)
- [SQQQ.US](https://longbridge.com/en/quote/SQQQ.US.md)
- [PSQ.US](https://longbridge.com/en/quote/PSQ.US.md)
- [QQQE.US](https://longbridge.com/en/quote/QQQE.US.md)
- [TQQQ.US](https://longbridge.com/en/quote/TQQQ.US.md)

## Comments (53)

- **~～ · 2025-11-22T00:44:07.000Z**: Quantitative trading captured market sentiment and went short accordingly. NVIDIA's chips may have significantly accelerated quantitative trading capabilities again.
- **两江总督 · 2025-11-21T15:24:49.000Z**: It should be sold out by now, crying
- **AI大牛猫 · 2025-11-21T14:00:17.000Z · 👍 1**: Is this iv crushed? 😂
  - **momoM** (2025-11-21T14:03:05.000Z): What they said about the situation from the market opening to before the crash—after such a collapse, the IV must have gone back.
  - **AI大牛猫** (2025-11-21T14:08:33.000Z): So why isn't it affected by the crush one hour before the market opens? 🤔 The non-farm payroll and Dazi's earnings report were released pre-market.
  - **AI大牛猫** (2025-11-21T14:11:54.000Z): One hour after market opening (typo)
- **AI大牛猫 · 2025-11-21T13:55:38.000Z**: iv where was it crushed? Overgeneralization🌚
- **Jeremy_Lee · 2025-11-21T13:43:36.000Z**: Playing warrants is destined to be played by big players, be careful of going bankrupt overnight if you want to get rich overnight
- **IASUY · 2025-11-21T13:14:25.000Z · 👍 1**: So overall, is it a mini storm caused by the systemic defense mechanism of institutions before opening the blind box and the surprise collision after opening it?
- **Dreamweaver · 2025-11-21T13:07:54.000Z · 👍 6**: According to the above content, AI wrote a short explanatory story.Simple story version: Wall Street's "Insurance Chain Reaction"Imagine a small town about to face a major storm (NVIDIA earnings + economic data).Act 1: Buying InsuranceA few days before the storm, the wealthy in town were ner
- **新用戶_pc1B · 2025-11-21T13:04:20.000Z**: Nonsense. A simple thing made unnecessarily complicated. It's all smoke and mirrors.
- **一枪穿云 · 2025-11-21T13:03:37.000Z**: I thought the decline had stopped... but the result was disastrous
- **月上西楼 · 2025-11-21T12:51:59.000Z**: Only partially understood, saved for further study
- **Chumchinyeung · 2025-11-21T12:48:51.000Z · 👍 3**: Plain talk: After the expiration of 3.1 trillion options released negative Gamma in the past few days, positive Gamma began to dominate, short-selling forces weakened, and the market will soon enter a bull market.
  - **Don't starve Together** (2025-11-21T12:58:45.000Z): Really? 🥹
  - **Chumchinyeung** (2025-11-21T12:59:41.000Z): See if he means this
  - **Don't starve Together** (2025-11-21T13:01:25.000Z): Pre-market v already🥹 how many days has it been rising😭 This month has been really tough
- **romdom · 2025-11-21T12:47:28.000Z · 👍 4**: Well said, is this also the reason for the BTC crash?
- **乐邦詹士 · 2025-11-21T12:34:09.000Z · 👍 1**: Learn from altcoins
- **告别缅A · 2025-11-21T12:20:43.000Z · 👍 4**: Simply put, the institutions wanted to kill both longs and shorts, but lost control, leading to a stampede of retail investors collectively selling off.
- **成都八面佛 · 2025-11-21T12:19:28.000Z · 👍 5**: I roughly understand a little, but can these factors really cause an epic market crash? It doesn't seem like the main reason.
- **Z zzzz · 2025-11-21T12:03:20.000Z · 👍 2**: Still talking about the S&P? What a joke
- **浙江忧郁二代 · 2025-11-21T11:59:50.000Z · 👍 2**: Learned
- **cloud185 · 2025-11-21T11:53:36.000Z · 👍 3**: Thanks, I understand some principles now. Derivatives squeeze: the US stock market faces dual technical selling pressure from Vanna Crush and Gamma Squeeze, forming a "sell more as it falls" negative feedback loop.
- **请多多指教 · 2025-11-21T11:48:13.000Z**: What goes around comes around, that's what it means.
- **Chumchinyeung · 2025-11-21T11:43:26.000Z · 👍 1**: 👍Like, need to learn the basics of options