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Cem Karsan 🥐 Profile picture
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3 Dec, 4 tweets, 2 min read
1/4 no need to repeat myself. Until this Friday, IVol compression is dominant. This is compressing RVol, which continues to lead to some charm flows and of course continued expansion of our calendar spreads and dispersion trades...NTM, it is still allowing for Charm effects from
2/4 the vols through 12/11, causing continued EOD rallies. That said, retail yolo equity buying continues to cause morning negative Charm/Vanna flows in the growth names. This push & pull dynamic has this market chopping but should be pinned through 12/11. As mentioned, despite
3/4 many obvious signs of blatant retail & HF complacency, the overwhelming structural dynamics still point to digestion...we’ll continue to follow the trend from the long side at Charm/Vanna times & scalp @ our levels, collecting decay paired w/ some long Vega post 1/15 hedges.
4/4 But understand, when the tide goes out, don’t get caught swimming naked. Complacency is lurking... so, keep your tails hedged & your stops trailing at the quickly ascending 20 day on close, because when it finally turns... I intend to turn with it... Good luck!!!🍀 🍀 🍀

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Cem Karsan 🥐 Profile picture
2 Dec
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,
Read 7 tweets
Cem Karsan 🥐 Profile picture
1 Dec
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
Read 6 tweets
Cem Karsan 🥐 Profile picture
30 Nov
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
Read 10 tweets
Cem Karsan 🥐 Profile picture
29 Nov
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
Read 4 tweets
Cem Karsan 🥐 Profile picture
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
Cem Karsan 🥐 Profile picture
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

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