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Cem Karsan 🥐 Profile picture
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8 Dec, 4 tweets, 2 min read
1/x Time’s on the side of the bulls this week, as Vanna should put in more & more late night & EOD work all week,& there’s a decent amount of potential energy to be released from positioning early next week w/ the resolution of the electoral college, Fed meeting, fiscal stim/govt
2/x shutdown, vaccine approval, & qrtrly OpEx/VIX. That said, the only thing stronger than Vanna right now is her daddy IVol Compression, & he’s got the market under his thumb until 12/11. Our calendar & dispersion trades continue to print $. We plan to continue to ride these
3/x winners, as the dynamics remain the same. 1/8 on back Vol is simply too cheap, while the indices are pinned for at least another week. EVERYTHING FROM SUNDAY’S COMMENTARY STILL APPLIES, the only addendum would be to look to increase delta exposure on a dip and then look to
4/4 scalp from the long side @ the right Vanna times as the week moves fwd, w/a game plan of taking profits & adding gamma exposure on a rally into 12/14 morning. 3658.50 *** is an important area to watch for an opportunity on a pullback. Good luck! 🍀

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Cem Karsan 🥐 Profile picture
10 Dec
1/x I have an early start tomorrow, so I’m gonna keep this brief. So, apparently the dip down to 3664.25 wasn’t the final dip, as we finally got down near our targeted 3658.5*** support from several days ago & bounced. Beeks must have released the ‘crop report’ a bit early as the
2/x markets seems to have front run the anti-trust case against Facebook, wreaking havoc on the growth complex. The retail call buying overextension definitely played a role in over exaggerating the move in the growth complex while the relative pinning of the SPX helped to force
3/x significant underlying rotation, as discussed in my previous tweet on dispersion. The dispersion trade has obviously been a home run. This should continue to be the case as counterintuitively, low Index IVol should continue to INCREASE Factor & ‘name’ RVol b/c the rules of
Read 7 tweets
Cem Karsan 🥐 Profile picture
10 Dec
1/x Alright, finally getting back to this...When IVol’s oversupplied, like it is now, it’s almost always centered in the indices which is the 10k 🦍...This causes dealer gamma hedging & RVol compression...Which causes more IVol compression...Which causes more Vanna/Charm flows...
2/x Rinse/Repeat ad nauseam...Once we enter a period like this, it’s hard to escape this Maelstrom in indices, but that doesn’t mean idiosyncratic risk’s diminished. RVol in the indices is just being unnaturally suppressed. So, this makes for an incredible dispersion opportunity.
3/x Moreover, counterintuitively, low Index IVol can actually serve to INCREASE Factor & ‘name’ RVol because the rules of arbitrage dictate that if idiosyncratic risk still exists & the indices are pinned, that by definition for every move in an index constituent there must be an
Read 5 tweets
Cem Karsan 🥐 Profile picture
9 Dec
1/x Last night we got a nice dip down to 3664.25, but if you blinked, you missed it. That was the dip we were looking for...Despite the pullback, Vol was compressed, making it nearly impossible for the market to escape the suffocating iVol compression & exponentially increasing
2/x daily charm/Vanna flows. As stated, the key has been, & will continue to be, to ride this market from the long side scalping tactically at our levels. I would look for this market to keep trying to shake the aggressive longs, but to begin stretching more aggressively,
3/x Towards an expanding 2 std dev up of the 20 day as we head into 12/14-12/16. Come 12/16 it’ll be time to briefly consider selling the news & preparing for a brief correction in time/ price again, being watchful of potential drama, as the prospects for final resolution of the
Read 6 tweets
Cem Karsan 🥐 Profile picture
8 Dec
1/x I received a simple question today from an RIA asking: WHAT WAS THAT VIX SPIKE ON THE OPEN THIS AM?...& thought I might share the answer here for others that aren’t as familiar w/these products, b/c it addresses a few common issues w/looking at the VIX as a ‘fear index’w/out
2/x having context regarding how it’s calculated...THE ANSWER IS AS FOLLOWS: There was no actual Vol spike on the open. This was caused by 2 data artifacts: 1)The Mon VIX effect: the VIX is priced in calendar days, but the market tends to price Ivol in trading days. So, on Mon’s
3/x the VIX takes 3 days of time out relative to Fri, but the market really only deducts 1 day of theta, pushing up the calculation 2)the GA runoff is on 1/6 which is about 30 days out (VIX=30d Vol). So, as expirations past that higher Ivol ‘event date,’ including the event Vol
Read 4 tweets
Cem Karsan 🥐 Profile picture
7 Dec
1/x Vanna is back & ready to turn back on the charm! Overnight the market hit our weeklong target of **3705 and pulled back... We were able to take profits & play for a bit of morning digestion. It’s been a nice +3.5% in a week w/a few extra scalps along the way...But the best
2/x part has been the gift of Vol compression, which along w/ short Vol profits, has given us significant calendar expansion & dispersion opps, as predicted. I expect this to continue this week as well, as Ivol oversupply should continue to be the dominant force until 12/11.This,
3/x paired w/ the significantly increasing Vanna & Charm flows, will make it hard for any decline until 12/14 to catch meaningful momentum. This said, the narrowing of 20 day RVol as well as the 2 stddev of the 20 day just overhead should cap any rallies, given the dramatically
Read 9 tweets
Cem Karsan 🥐 Profile picture
3 Dec
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.
Read 4 tweets

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