1/x ‘Tis the holiday season, & the gift 🎁 of reflexive IVol compression is the gift 🎁 that keeps on giving...Along w/ some short Vol profits, massive calendar expansion & dispersion opportunities, continue to print $ with VRP >90th % of occurrences. This train doesn’t show any
2/x sign of stopping, as I expect Ivol oversupply should continue to be the dominant force through 12/16 & potentially beyond...while Vanna & Charm flows should continue to support this market for the next week w/ qrtrly OpEx & Vixperation upon us. NTM lots of imbedded potential
3/x energy still in the VRP to fuel more vanna/charm flows in the month to come, making it difficult for any decline to catch meaningful momentum. Pair that w/ much needed sentiment/positioning adjustment from the last few days of the minor correction in price/time & increasingly
4/x positive Dark Pool (DIX) demand & the picture appears supportive...This said, the narrowing of 20 day RVol as well as the 2 stdev of the 20 day just overhead @ 3725 should serve to cap rallies, given the dramatically overextended retail (8-day SMA of P/C equity is near the
5/x lowest in 20 years) & institutional positioning. This push/pull, should ultimately continue to keep the market fairly pinned this week...As mentioned before Jan 8th call’s on back are still very cheap w/ a GA runoff event straddle of only $62, which given the potential macro-
6/x cyclical consequences of the next 2 years of fiscal stimulus, NTM final election resolution on 1/6 seems absurd...as I’ve said for almost 2 weeks now...Given all these factors, index call calendars continue to be the best trade in town! Especially as these LT Ivols continue
7/x to approach a floor. The dispersion trade should continue to present opportunities as well w/the prospects of continued Index IVol compression, but persistent elevated idiosyncratic risk still on the horizon for factors + single names...Come 12/16 we will briefly be more
8/x cautious going into the Fed, as it will be a time to briefly consider a longer gamma position for some short term potential drama or a coming call squeeze until 12/21...greater certainty revolving around a $1 trillion fiscal stimulus bill + govt shutdown resolution, likely
9/x added EOY Fed liquidity, NTM qrtrly Dec 🧙♀️ 🧙♀️ 🧙♀️expiry will likely all resolve to likely light a Yuletide🔥 under the market into 1/5. The market should continue to chop w/seasonality-accelerated Charm/Vanna flows w/classic wall of worry Ivol upside resolution. From a delta
10/10 perspective, we’ll continue to scalp tactically @ our levels from the long side, but using the quickly ascending 20 day SMA on close as a tight trailing stop. Good luck! ! !🍀 🍀 🍀
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