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Cem Karsan 🥐 Profile picture
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16 Dec, 5 tweets, 2 min read
1/x I’m going to do this early & keep it short today... EVERYTHING FROM YESTERDAY STILL APPLIES, but I’ll add a little more texture here. Tomorrow morning is vixperation. Which is another 1 of Vanna’s big mornings. It is also Fed day, which is historically the most bullish days
2/x of the year. In particular there is significant potential headline risk to this fed meeting b/c of what it says about what the Fed will do to ease liquidity concerns surrounding EOY... This paired w/ potential headline risk around the fiscal stimulus plan, would make me very
3/x worried, if I was exposed to upside risk in the market. That doesn’t mean that we can’t get disappointment on either of these fronts, we clearly could. & given vanna’s diminishing role after the open, it will likely pay to take profits if vanna is able to muster another push
4/ up to our next level overnight. Historically the best time to buy gamma for the fed is right between the 1pm CST announcement and Powell’s commentary. I’ll be looking to take a small shot on some gamma in this window into 12/21, if it gets cheaper than it already is here.
5/x Assuming, we stay above the 1 std dev down of the 20 day by EOD 12/21, it’ll be time to turn back short short-dated puts & long, post 1/22 calls with an eye for a Christmas rally into 1/5-1/11, as discussed. Good luck!!!🍀 🍀 🍀

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Cem Karsan 🥐 Profile picture
15 Dec
1/x The market continues to try & shake out weak hands from overextended positioning by both HF & Retail...After a strong Vanna run up overnight, as expected, retail exuberance exploded on the open in the form of retail call buying, this fragility, paired w/a)Mean reverting flows
2/x from pinned Index Vol b) well documented, risk parity rebalancing flows & c) selling flows tied to bank EOY liquidity constraints. In combination, these flows have together have amounted to substantive selling pressures, strong enough to counteract the positive vanna/ charm
3/x flows, & point to continued likely index RVol an IVol pinning...Historically, the week of quarterly OpEx markets are notoriously volatile intraday, but also mean reverting like we saw today. I think it is fair to expect continued IVol compression & more of the same underlying
Read 12 tweets
Cem Karsan 🥐 Profile picture
14 Dec
1/x Vanna joined the wheel of fortune on this day in 1982,& 38 years later she’s stronger than ever...Friday’s into the Mon of qrtrly OpEx in particular aren’t a time to trifle w/her...As called for, the market continues to try & shake out weak hands from overextended positioning
2/x by both HF & Retail, but ultimately these moves are no match for our fair lady’s charming flows during this window, & should continue to support this market through 12/16 w/ qrtrly Vixperation & the Fed upon us....As I highlighted Fri, the minor correction in price/time that
3/x we got down to the 20 day, w/precise technical support at that level, paired w/ increasingly positive Dark Pool (DIX) demand was a textbook buy signal, given the timing...Despite all of this, the real story is not these positive flows nearly as much as the continued reflexive
Read 13 tweets
Cem Karsan 🥐 Profile picture
11 Dec
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
Read 10 tweets
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

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