1/x Have gotten a couple of questions re the GEX spike today. My thoughts: this is the free GEX & only looks @ names so it over emphasizes just a couple heavy-hitters like AMZN, AAPL, etc. AMZN Prime Day & AAPL Event probably had some effect on retail enthusiasm. Image
2/x That said, as I mentioned early today, that P/C equity was a retail euphoria warning sign from the get go today. I think it is legit to add this to your list of warning signs for the next couple weeks. Anytime rising u get rising Vol, particularly in the leading names, this
3/x has multiple bearish feedback loops. 1) it makes dealers short gamma. 2) it provides a floor under volatility into an up market, across the equity complex, encouraging Vol buyers to buy as well, b/c it is likely a winning trade in the short term in both market directions.
3) w/the passage of time, dealers will be positioned w/ negative charm that will lead to the selling of deltas. We should continue to keep an eye on this & see if this is a temporary phenomenon, but this seems to be a hallmark of the new retail driven Vol market,& should continue
5/5 to lead to the same effects we saw in Sep 1)upside down Vol market that declines into drops & rises on rallies 2) sizable realized declines that are driven by Vol unpinning, & lower realized post decline caused by compression 3) Rotations out of growth & into value on drops

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More from @jam_croissant

16 Oct
1/x Today was an important test for the Market. As I pointed out at the recent top, it has had every reason to go down: it was overbought, poor seasonality, poor vol centric support in indices, overextended retail buying, forced delta liquidation from unwind in equity call buying
2/x , upcoming election certainty, & rising IVol, not to mention the illiquidity of OpEx, just to name a few....But the market action in the face of breaking an import gamma inflection point in Dec fut 3455-3460 was tepid at best... As I‘ve mentioned this underlying strength is
3/x is to be ignored at ur own peril when this strong. $ is truth.There‘s still time for bears to take control, but I’ve been clear, that this must begin in earnest by this Mon & show weakness through mid next week, otherwise bulls are firmly in control & reinforcements will soon
Read 9 tweets
11 Oct
1/x I’ve had a few questions about the VVIX/VIX divergence...In brief, the recent divergence‘s been driven by 2 major factors 1) SPX IVol curve from 11/6 to 11/27 is flat due to the election premium in 11/6, so there‘s no longer been any contango support for the VIX as of 10/6 &
2/x in the face of broadly declining IVols, the VIX has declined. Whereas the VVIX represents 30 day fwd Vol of the VIX, which ties it to 60 day Vol. 11/30 to 12/18 contango is very steep, due to the event premium built into the 12/14 electoral college vote. 2) broad measures of
3/x Market skew have jumped in Dec/Jan period, with the drop in IVol. This is quite common, in the face of declining IVols & a rallying market, but even in this context, the increase‘s been fairly dramatic.This is likely a fxn of participants wanting to maintain convexity for the
Read 4 tweets
9 Oct
1/x Alright. Time to spin the wheel....I probably sound like a broken record at this point, but vanna/charm flows are at their peak this week into 10/12. If you haven’t seen the overwhelming market support that comes with them, you’ve got your head in the sand.
2/x-today was an important day technically. Closing just over 1.5 stddev up yesterday & then following through meaningfully today/ holding meaningfully above has opened the door for risk parity & Vol targeting flows to put new capital to work. -The seasonality is improving fast
3/x -& despite increasing retail call buying in the last couple days, the Vol bid is much more tentative then it was near the highs in August -sentiment is equally tepid -the market has come very far/very fast and is a bit overbought, & NDX continues to lag -But when market shows
Read 6 tweets
6 Oct
1/x A couple of important thoughts:
1) failure @ 1.5 std dev up of 20 day for last several days keeps the market technically broken & shows a lack of buying strength given where we are in the OpEx cycle, but we’re still above 20 day & stable 2) fixed Ivols came down on the drop,
2/x this was particularly the case in the post election ‘hump’ which came down $8, despite the sudden decline. This is important because this is where dealers were short 3) Vanna flows & Vol compression are @ their peak until 10/12-14.Stabilization here would give way to positive
3/x flows once again, particularly on the open & close of trading 4) after 10/12, flows become less supportive & post 10/14 in particular we could see the total disappearance of support, going into a 5 week OpEx cycle.
-I am slightly long right now from EOD entry.I Would sell on
Read 4 tweets
6 Oct
1/xWhat we know: -All If this has been very predictable we flowed versus 3200, all the sentiment and flow indicators turned bearish and with the seasonal and expiration calendar turning all that was left were poor technicals -with Vol tidily compressed and a move last week above
2/x the 20 day, it was just a matter of time before vanna, trend following,Vol targeting, & risk parity flows took the baton & pushed us to this point -2nd to last week of monthly OpEx is strongest week of the cycle -given Fri concerns, the size of the rally was a bit of catch up
3/x on what are predictable Mon vanna flows. -Even so, the move has been relatively big in a short period of time, especially given still relatively weak seasonality, weak NDX leadership, & still not fully repaired technicals... What does this all mean: the 200 pt SPX rally has
Read 7 tweets
20 Sep
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.
Read 8 tweets

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