1/x As noted on Thurs... 11/9 dealer positioning was very short & Vanna flows would clearly be supportive into Mon morning...That paired with more Vanna flows, on the back of greater election certainty are not a surprise here... Fri’s market action was very constructive. After
2/x Thurs when IVol moved significantly higher in the back of the curve, vol compression reappeared across the curve. NDX weakness on Thurs & Fri morning notably reversed in Fri afternoon & stabilized. The last missing positive sign, as I‘ve mentioned, was an underlying price
3/x thrust in the face of an approaching technical level in the 1.5 st dev up of 20 day of SPX. We seem to be receiving that overnight now... As tweeted, we initiated short Vol Fri late morning, upon Vol compression & NDX reversal, given these prospective coming positive vanna
4/x flows, & have been watching for confirmation to look for long delta entry as well... As mentioned, a close 1.5 std dev above the 20 day or a correction in time where we move safely into mid next week with lower vols, would be constructive for price for the next 1.5 weeks.
5/x Time is on the side of the bulls, as OpEx cycle driven vol compression & Vanna/Charm flows into 11/18th VIX expiry & improving seasonality, as well as likely positive Pfizer Stage 3 results could be coming soon. What’s more, the Dec/Jan election hump, which has expanded
6/x significantly, is building up potential energy, if election uncertainty can be resolved amidst significantly improving seasonality around Turkey Day, Santa Clause & the Jan effect...We’ll be watching our factors closely today for a confirm of trend.A healthy close will likely
7/x be a signal to begin buying into weakness. The market has come too far/too fast & ST risks of mean reversion continue to present themselves at these levels. Be careful particularly in the face of continued retail exuberance today. Even upon a healthy close today, I don’t
8/8 encourage chasing this market yet. Instead, the play continues to be short 11/20 Ivol w/an eye to add delta on a correction in price or time from these levels... keep a watchful eye on this close today. Today’s action will be very telling for the next 1.5 weeks. Good Luck!🍀

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More from @jam_croissant

10 Nov
1/x OUR ANTICIPATED PFIZER NEWS CAME SOON POST ELECTION, AS PREDICTED ... But, as is often the case, positive prospective news can serve the market better as a rumor then as actual news, as it now provides less potential future support from hopeful expectations. Despite a weak
2/x close, the market was still able to barely overtake our important level in the 1.5 st dev up of 20 day of SPX... WHERE, AS OFTEN HAPPENS W/ IMPORTANT TECH LEVELS, CLOSED DIRECTLY ABOVE IT...Today’s market action, though superficially constructive, had quite a # of concerning
3/x underlying factors beneath the surface. The dramatic NDX weakness, in the face of improving economic fundamentals is concerning, in that it continues to clearly signal that the duration trade will not likely respond well to a strong economic recovery paired w/fiscal policy
Read 9 tweets
6 Nov
1/x The outlook was indeed promising yesterday... As posted, we were able to monetize our long deltas & short Vega this morning at the 3508.5 level. Good thing, b/c, as highlighted midday, fives strike IVols bottomed & moved significantly higher in the back of the curve.
2/x This kind of move into a rally can serve to unpin the market, if it continues, & shows concern on the part of institutions, retail call buying exuberance, & is a sign of increasingly short dealer gamma positioning. Moreover, we had several other ST warning signs today.
3/x NDX weakness, low P/C equity reading all day, & maybe most importantly, a very poor price thrust to an approaching technical level in the 1.5 st dev up of 20 day of SPX. This weakness is particularly notable given the dealer gamma squeeze that should have helped the market
Read 9 tweets
5 Nov
1/x Post election Vol compression w/ massive Vanna flows ✅ Rally & hold above the 20 day on close ✅ Dec/Jan election hump flattening some, but still has room to continue to decline which could yield potential energy here. 11/9 dealer positioning is also still quite short &
2/x should be supportive into Fri/Mon w/more Vanna flows & a potential election resolution soon...The outlook looks promising here. We were able to jump back in long @ EOD & are still short Vega/long gamma.Time is on the side of supporting flows,as they should continue to gain
3/x secular strength into EOY. As mentioned, continue to look for flows most on close & overnight, as we’re seeing now... It’s important to play any long w/stop @ 20 day on close, as technical picture, though improving, is still potentially precarious until we get close 1.5 std
Read 7 tweets
4 Nov
1/x So, there you have it all those months of anticipation and speculation and what do we get? The most feared outcome a possible Biden/Red Senate + a contested outcome. & does it matter? NO.... what matters? Just like Brexit. Just like 2016.... THE REFLEXIVITY OF VOL.People will
2/x prognosticate & retroactively try & attribute fundamental reasons for the move in order to rationalize the market reaction, just like during Brexit & 2016, but they will all fall flat....Yet people will accept them anyway & move on, managing their money by speculating about
3/4 fundamentals. When we have said here all along, this move was inevitable..The answer is participants were largely hedged & with the curve in backwardation, dealers are decaying shorter deltas and longer Ivols. So they must sell Vol & buy deltas. It comes down to Supply/Demand
Read 4 tweets
3 Nov
1/x The election is here. I’m not going to belabor my previous points(which u can read below),but I do have some important nuances to add based on today’s action... Given the amount of vanna flows we clearly saw today, w/ the $20 move down in SPX straddles across the board, the
2/x price action was underwhelming. It’s important to keep in mind, that these markets are still technically broken, & despite these very positive flows, which will continue this week, if these markets can’t manage to repair their technical damage post election w/ a move above
3/ the 20 day, as I’ve mentioned before, this’d be an important sign of underlying weakness. A driving point of concern today was obviously the overwhelming NDX weakness. Despite my mention of 3/4 of scenarios being positive for fiscal stim & other bullish flows on the horizon
Read 10 tweets
2 Nov
1/x So 1st things first, Vanna/Charm flows will continue to be very supportive.11/4-9 to 11/20-11/23 Ivol backwardation is simply too steep.W/out meaningful stress(<3100 SPX) the path of least resistance is therefore higher this week, despite the technically broken picture.
2/x more likely even than an up market IMO for the next several weeks though is short-dated Ivol compression, again quite simply due to the fact that dealers will be decaying dramatically longer cheap vol & skew as short term 11/4-9 Ivol expires. Pair these overwhelming dynamics
3/x with the usual OpEx cycle driven vol compression & Vanna/Charm flows into 11/18th VIX expiry+ dramatically improving seasonality + an accommodative Fed meeting Thurs 11/5 + likely positive post election Pfizer Stage 3 results... all that remains to is of course...
Read 13 tweets

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