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Cem Karsan 🥐 Profile picture
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18 Dec, 4 tweets, 2 min read
1/x This’ll be short...For those wondering why I haven’t had a new daily thread, it’s because nothing has changed. Tomorrow is 🧙‍♀️🧙‍♀️🧙‍♀️ OpEx, & per usual, I expect morning support, followed by a correction in time & price as any remaining Vanna dissipates. Index compression
2/x continues to drive the price action & as mentioned in an earlier TSLA thread, the compression is so extreme at this point it has all but pinned the index until 12/28. We’re witnessing this overnight as the blacklisting of dozens of Chinese firms received ~ no SPX reaction.
3/x Due to this I expect very little moves in the next few days. If we do get a pullback, on any stimulus worries, I would look to be a buyer around the 20 day or by EOD 11/21. Although cheap, next week IVol is a sale & calendar call spds & dispersion trades continue to be my
4/4 spreads of choice as we await a likely fiscal stimulus deal & coming post Xmas & January effect run up into already cheap fixed strike calls for the underpriced Georgia runoff. Good Luck! 🍀

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Cem Karsan 🥐 Profile picture
18 Dec
1/x I’ve done some thinking about this TSLA inclusion event... My read is that @bauhiniacapital is right that TSLA is it’s own Vol center & will not have its RVol meaningfully suppressed by SPX...That said, SPX RVol for the next 2-3 weeks won’t likely be meaningfully raised by
2/x TSLA’s addition either. The compression due to oversupply in the SPX is simply too extreme @ this juncture over the holidays, EOY, and Jan effect. Which leaves the the only possible remaining outcome as a decrease in constituent correlation...This is what we saw in 2017 & is
3/x the usual release valve under these types of conflicts between index Vol suppression and single name idiosyncratic Vol. So, IMO, in the short term the answer to make $ on this, will likely not be to sell 1 Vol & or buy the other. The way to profit here will be to suss out who
Read 7 tweets
Cem Karsan 🥐 Profile picture
16 Dec
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
Read 5 tweets
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

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