1/x I’m going to keep this short. If you haven’t already, read yesterday’s 👇. Not much has changed. As advertised, the Turkey Day digestion & correction in time & price ended on 11/30 @ our *** support of 3596-3600.5 & we were able to BTD as stated last night.Not surprisingly,
2/x we got a late EOM/BOM surge into the EOD & ETH as predicted for some time. Ivol oversupply is still the dominant force until 12/11, which will make it hard for any decline until 12/14 to catch any meaningful momentum. The narrowing of 20 day RVol as well as ATH’s close
3/x overhead should serve to mute rallies as well, pinning the market on days. That said Jan call’s on back are cheap & call calendars are still the best index trade in town.Especially as these LT Ivols begin to approach a floor. The best trade, though, should still be dispersion
4/x until 1/13 w/the prospects of continued Index IVol compression, but remaining elevated idiosyncratic risk still on the horizon for names. Come 1/11-1/13/21 it’ll be time to sell the vaccine, election, earnings news. Until then we’ll ride the market from the long side scalping
5/x tactically at our levels. Hop on board as the market chops w/seasonality-accelerated Charm/Vanna flows ahead.We should continue to get a steady release of expected ‘potential energy’ from these flow as we see increased election resolution, climbing of the covid wall of worry
6/6 w/ continued vaccine progress, as well as see likely positive holiday earnings surprises, increased clues of coming fiscal stimulus, govt shutdown resolution, & Fed support to tide the market until inauguration. Good luck! ! !🍀 🍀 🍀
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1/x There’s not much more that hasn’t been said the last 2 days. Not a surprise today for this thing to take a healthy pause midday in the face of absurd p/c equity readings & dramatically low DIX, showing unabashed retail overextension & the buy side unwillingness to chase into
2/x a rally, as stated midday. That paired w/relative weakness in growth, made it clear that it was time to take a quick scalp on our +2.2% rally in < 24 hours. As discussed, LT IVol compression has forced IVol to unconscionably low levels, given the risks out there surrounding
3/x admin change & all the uncertainty that entails. This will make it hard for this market to rally hard. That said there are forces @ work that’ll support the market until 12/11, like Vanna/charm, structural dealer positioning in Dec/Jan skew, systematic chase, Vol compression,
1/x The election has come & gone, & the grand negotiation we have discussed seems to be coming to an end. The expected post-election vaccine has also come. Vanna flows have driven the expected rally & commensurate Vol compression.The correction in time & price post Nov VIX expiry
2/x as expected, has been a healthy one, & the digestion continues overnight. Here we are near ATH amidst positive seasonality w/IVol compressed near it’s post March lows w/RVol largely pinned. Retail sentiment & positioning are stretched yet structural vanna/charm flows should
3/x continue to steadily increase, as we move towards 12/14-16, as should other systematic flows such as risk parity, Vol targeting, & trend following, making it dangerous to fade this structurally positive holiday period...As such, we continue to tactically eye opportunities
1/x I addressed this in my recent RVision Aftermath talk, but here’s a quick summary for noobs. Back in Sep, 2 things led to a massive hump in the curve post election (a very rare & odd occurrence for something as big as the election)...1/ the emergence of fear surrounding a
2/x contested election 2/ the dominance of VIX futures + etp’s (over SPX Vol) w/significant Naive flows into Nov & Dec Bix futures (representing 30day Dec &Jan underlying vols). These Dec &Jan Vol bids were massively overdone and allowed dealers to own massive amounts of cheap
3/x gamma through 11/30. When the election resolved, the entire Vol curve compressed, driving the market higher via Vanna/charm flows & sliding what were already cheap 11/4-11/30 vols to even lower levels (as dealers had these Ivols to sell versus getting back Dec/Jan vols they
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..
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
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