1/x In my1st year in the pits of Chicago, I quickly learned a favorite pastime of idle traders on a Friday w/nothing trading was to create a humorously absurd challenge for someone on the floor to undertake & then coax the entire trading apparatus into action betting on outcomes.
2/x By the time the challenge had fully taken hold, there would be hedge funds in London & banks in Paris taking positions on whether or not ‘John’s’ Clerk ‘Gary’could eat 150 Chicken McNuggets in 60 min..Early on I would look at Gary, look at some online research & place a wager
3/x But after a few months, it became clear you always wanted to bet on ‘Gary.’ or ‘Mary’, regardless of how crazy or ridiculous the challenge, because, invariably, ‘Gary’ was offered some portion of the winnings of the bets for him to encourage him to compete in the 1st place.
4/x You see, the bets being placed weren’t like tornado insurance, where the outcome was completely independent of the security. They were like Options on the market...People like to refer to options as market ‘insurance,’ but the problem with this analogy is that it fails to
5/x contemplate the crucial fact that market ‘insurance’ itself is critically, reflexively involved in the probabilities of its own outcomes...& so it is that, when people are all hedged, market events tend not to realize, & when they are not they tend to. Hence Brexit Hence 2016
6/6 So, I ask you, this election season, are people hedged? Are people worried? Do you want to bet on ‘Gary’ or against him?? I’ve learned the hard way, you don’t bet against Gary, no matter how absurd the challenge may seem...

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More from @jam_croissant

22 Jan
1/x Going to keep it super short and sweet tonight...The window is still open. As laid out yesterday, today was an inside day where we were able to benefit from converting our short hard deltas to short calls and long downside calendars (soft deltas) and collect some theta. We
2/x also got a significant unwind of the reflation narrative, that we we called and were able to monetize. But it is important the market never made it to the 2std dev up of the 20 day, & stalled at our 3853 level all day. This lack of thrust paired w/ a potential overnight break
3/x of our ***3833.5 level, is a reason for potential concern on a Friday w/Vanna still at the beach. Pair that with the anecdotal evidence of risk off we’re seeing in BTC, & signs point to continued defensiveness until EOD. As stated yesterday, as long as Gary is able to hold
Read 6 tweets
21 Jan
1/x So, if you’ve been scratching your head about the recent countertrend DXY strength & wondering if it has legs,& it seems like the cyclical rotation hasn’t been trending as strong recently, & your Spidey-sense is telling you there’s a disturbance in the force, you’re not alone
2/x If you’re wondering what might cause this market to melt up & get us to a more Goldilocks scenario in the midterm w/out overheating, look no further than Ben & Randy’s spot on analysis here...It seems the reflation rotation, & all its trappings epsilontheory.com/uk-variant-sar…
3/x might be in for a hitting of the pause button. Unlike them I could see this ultimately being a bullish wall of worry to climb, likely after a brief initial pullback, as it could slowdown the climb in LT rates & help to alleviate ST inflation fears, ultimately pushing off the
Read 13 tweets
20 Jan
1/x The time is now...As I’ve said before, if there is 1 thing I stress it is that I don’t know everything. I understand several important inputs better than most. I understand well 50% of the daily flow equation, & can place reliable bands around another ~25%. This imperfect
2/x info still allows me to predict movement w/a high degree of accuracy. That said, when markets react counter to my data, that means factors outside if my viewfinder are having a very strong effect. So much so that the other 50-75% of flows that are known are being overwhelmed.
3/x When this is the case, the correct reaction to this deviation isn’t to stubbornly fight this new info, but to watch & track the divergence respectfully for confirmation of thrust. Broadly antithetical price strength @ that strength in these circumstances is meaningful & tells
Read 8 tweets
19 Jan
1/ Ch-ch-ch-ch-changes (Turn and face the strange)... as futures, sit pinned @ an odd elevated morning perch awaiting Janet Yellen’s confirmation hearing & her call for the new admin to ‘act big’...this narrative has markets on high. But the truth is that it’s actually just Gary
2/x behind the curtain, pulling the usual levers. Until Vixperation on Wed, it‘ll be nearly impossible to break the IVol oversupply. This pinning of IVol was so strong on Fri that despite a peak to trough drop of nearly -2% in SPX, fixed strike straddle were down across the board
3/x & particularly decimated in the very front of the curve. IVol particularly in the 30 day range is showing dramatic signs of oversupply relative to the rest of the IVol surface, giving a nod to the Vix strip driving the compression. Even during windows of vanna weakness as we
Read 11 tweets
15 Jan
1/x So 6 hours until Vanna’s departure... though she hasn’t been working full-time the last couple of days, Gary’s been putting in some extra work to keep things together. But I have to say, this was a poorly planned vacation all along. We saw it coming. A 5 week OpEx, post the
2/x seasonally slow period for the wheel of fortune. All of the contestants are going to be demanding bigger payouts. The show has become so popular. The ratings are through the roof, they can’t disappoint! Gary’s been doing this for a while. So he’s not to be doubted, but it’s a
3/x lot for a 🦍 to hold together on his own.Especially given the new rotation away from popular old growth contestants that always made for such a great story. Small cap value just doesn’t seem to get the same ratings.There’s a new FCC administration & they’ll be cranking up the
Read 7 tweets
14 Jan
1/ Maybe, I need to say less things... Maybe I AM Gary, reflexively helping to pin markets through this otherwise structurally perilous window. 🤔 The market will be higher again tomorrow. $2 Trillion + Moar fiscal stimulus will be announced. The market will cheer this & rally.
2/ rates will likely march higher, the rotation will likely continue. If we are lucky the exuberance will reach a fever pitch and stretch, forcing capitulation. Tho I see Vanna starting to pack her bags for her Friday trip, Gary 🦍is still sitting around the house eating nuggets
3/ And the lower IVol goes, the harder it will be to move him from in front of the 🪟. All the ingredients are there, the window is open. The vanna thrusts will be gone on Fri AM, the sentiment, the retail and HF positioning, the move higher in rates, the shooting of generals,
Read 5 tweets

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