Thread by @jam_croissant

1/x All’s quiet on the western front... Gary 🦍 is well rested after the weekend & vanna after a Mon morning zoom call will be back to the beach until 1/29. As predicted several days ago the countertrend strength of growth names have and should continue to provide support after a

https://twitter.com/jam_croissant/status/1352527551885946880

2/x strong run for valué names since Sep. This ST trend, as noted, is a fxn of over positioning paired with likely coming surges followed by 1 more round of lockdowns, as the hammer & the dance continúes w/ an increasing narrative surrounding the Irish covid variant in the month

3/x to come. This, plus growing frustration surrounding what’s currently a slow vaccine roll out & growing opposition to the size of Biden’s $1.9 tril stimulus deal should only add to the contra reflation thesis. Ultimately, this should end up being simply a refresh of what we

4/x continúe to believe will be a secular LT trend to higher rates & strong DCF companies. But this ST rebalancing of positioning & dampening of the inflation response will likely give way to a perception of a Goldilocks economy, as more checks roll in & we march slowly towards >

5/x vaccination levels w/less ST fear of a strong LT rates response. This should lead to a healthy continued VRP to digest in the front of the curve. Despite this, & the continued sideways digestion this week, & likely following grind higher 1/29-2/17, longer dated fixed strike

6/x IVol should continue to bounce off of a 20 VIX floor, as there are simply no longer enough Vol sellers in the back, after most were washed out in March. & there has now been the addition of massive new buyers in the form of retail call buyers & the growing popularity of IVol

7/x exposure as a replacement to bonds in a potentially inflationary trend, NTM the fear of equities at record valuations. In the ST, this makes for a great risk reward for calendar call spreads in the indices & dispersion trades once again. This is especially true given the

8/x onslaught of earnings season this week,as well as greater clarity on new policy directives imbedded in the revealing of Biden’s new stimulus package. I’d expect more continued idiosyncratic moves based on this news with very muted index movement. There’s still a brief window

9/x of muted vanna through 1/29, but having BTD on Fri to flatten exposure on the dip to 3822.75, we’ll continue to cautiously add exposure at our levels as we digest the overextended rally from early last week in what is a seasonally weak time w/overextended positioning.

10/10 Ride any longs with a stop at the rising 1 stdev down of the 20 day on close & funding skew & convexity with local IVol, aware that when this market does finally come untethered in the months to come, that it’ll be due for a sharp correction. Good luck! 🍀