1/x Post OpEx week thoughts:
What we know: -Price action shows structural, technical weakness, with movement below the 50 day -Through Fri, the drop has been predictable, & only shown signs of a ‘refresh’ & ‘rebalancing’ of metrics that were historically dramatically offsides
2/x -Short interest, despite still low has seen a meaningful uptick -NDX Non-commercial shorts have dramatically increased -sentiment has shifted meaningfully - implied correlation has dramatically normalized -& for the first day in weeks NDX outperformed SPX Beta Adjust on Fri
3/x -Despite continued seasonal & Ivol cycle weakness this week, calendar starts to turn more favorable for structural reasons next week. -elec Ivol has compressed meaningfully -Maybe most importantly, IVol’s continue to be dramatically compressed, providing meaningful support.
4/x -The inversion of the Sep OpEx curve allowed dealers to take on long Ivol post OpEx in SPX for very cheap levels given market action last week, & the move away from shorts in NDX names has only reduced short vol exposure elsewhere exaggerating oversupply.
5/x So what does this all mean to me:-market has every structural reason, after a bit more of potential decline (3225-50?)or correction in time (EOW) to find support for a few weeks starting 9/25-10/12 -stepping in front of IVol supply despite being inexpensive is likely bad idea
6/x -To be clear.This does not mean I expect a rally yet. Actually, quite the contrary, in the face of current technical weakness & poor calendar this week, the correct trade is to wait & watch w/ short pre elec calls. A break of 3240 on a closing basis, paired with an unpinning
7/xof SPX index fixed strike vols would point to the potential for significant continuation down to 3120 & potentially below, as low Ivols are providing essential support & short gamma would meaningfully unravel the market w/ low fixed strike vol & skew levels low now
8/8 -watch NDX rel strength. W/out NDX weakness(like Fri), it‘ll be hard for market to break SPX IVol oversupply -Lastly, watch impl corr, continued Vol compression should lead to decline here, if not it‘ll speak to continued stress in tech & a buy signal for Ivol. Good luck! 🍀

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More from @jam_croissant

25 Nov
1/x Holiday weeks are notoriously squirrelly...Time can be decidedly difficult to partition out correctly, & can often be dramatically accelerated. That was the case today...Aided by an overwhelming retail equity call buying wave & Its commensurate gamma, today’s call squeeze led
2/x to an earlier than expected unpinning of the market & end of the correction in time & price of the last week. Fixed strike straddles were, understandably, higher on the day $5-$10, given the size of the move relative to IVol & strong gamma effects took over in what was an
3/x otherwise illiquid tape... Ultimately, we received our correction in time & price, as expected. It was a healthy one, as we had as our base case. Unfortunately, we weren’t aggressive enough in buying into it, as it was decidedly more accelerated than our models had expected..
Read 10 tweets
24 Nov
1/x As expected, a shortened Thanksgiving week this week has made it hard for neg flows to take hold & IVol compression has continued to dominate all other forces... What was not expected was the degree to which this IVol compression would overtake all other factors so quickly.
2/x A veritable Ivol EXPLOSIÓN occurred under the surface of markets today. It started much like all the other days of IVol compression of the last 1.5 weeks, but after a failed morning breakout in the market & decline back to unchanged, it accelerated into forced selling by EOD.
3/xThe standard $10-$4 declines in straddles of the last few days ended the day w/ $20-$15 declines. In fact, the vol contraction in the back was so significant it forced the acceleration of Vanna flows, calling our fair lady back from holiday for a begrudging appearance & a late
Read 9 tweets
23 Nov
1/x Thanksgiving week is upon us...The correction in time & price has played out exactly as predicted. On Fri, fixed strike straddles were once again down another $10-$4. Tactical shorts @ our levels once again paid off, as we got the predicted 2pm CST air pocket, right on time,
2/x as called for...For the 3rd day in a row this followed the playbook to a T. Vanna should be noticeably absent through Wed, but the IVol compression should dominate all other forces until 11/25. The 11/25 to 11/30 pre holiday-post holiday IVol spread continues to be 1 of the
3/x most extreme we’ve seen. This is a critical factor @ work & should continue to drive the price action, w/morning stability, RTH steps down, & significant continued Vol compression until 11/25. It is still unclear whether there will be any real drama to be had in this critical
Read 11 tweets
20 Nov
1/x The predicted correction in time & price continues. Fixed strike straddles once again we’re down $11-$5 today, & although the tape did recover late w/ some remaining OpEx Vanna flows, Tactical shorts @ our levels once again paid off after hours w/ some last minute gymnastics
2/x dropping from 3578.5 to 3544. These trades are rarely easy & obvious when right, but for the 2nd day in a row this was textbook. Tomorrow morning is OpEx. Vanna’ll be gone for a week after the morning print, but the IVol compression should remain until 11/25. The 11/25-11/30
3/x pre holiday-post holiday IVol spread is 1 of the most extreme I’ve ever seen. This should reinforce the script of morning stability w/ RTH stairsteps down w/continued IVol down. As mentioned, a sell off of any import should accelerate tomorrow by 2pm CST
Read 11 tweets
19 Nov
1/x The playbook remains the same. Fixed strike straddles were down $10-$4 across the board today, into a very weak tape, as predicted. Vanna support is gone...but the IVol compression remains. The script should continue, as expected, w/ morning stability and RTH digestion &
2/x stair steps down w/continued IVol down through the Fri morning AM OpEx print. As mentioned, be attentive to this Fri post OpEx price action. A sell off of any import should accelerate by 1pm-2pm CST going into the weekend, if there is any there ->there...If the market is well
3/x under control by Mon morning, it would make sense to start eying dips to buy tactically based on other factors between 11/25-11/27. Don’t be a hero, trying to buy into the dip too soon, as there are no guarantees it’ll be buyable, given the abundance of unsettled political &
Read 5 tweets
18 Nov
1/x Here we are on 11/18... Vanna is up late packing her bags for her trip. As stated for over a week now, UNPINNING THIS MARKET UNTIL 11/18 MORNING was not in the cards as near-term SPX was well oversupplied and vanna/charm flows have been simply too strong.Vanna will be all but
2/x gone by tomorrow afternoon and Vol oversupply should be gone by 11/25.... My base case is that a buyable dip in time and/or price is coming. & IMO short calls continues to be the play until 11/25. Watch for the last of the AM vanna flows to try and counteract some of these
3/x overseas negative flows in the AM. That will likely be a short sometime between the open & midday. From there expect more stair steps down w/ Vol, just as forecasted today. The action Thursday should be similar. Watch this Fri very carefully, a sell off of any import should
Read 9 tweets

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