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Darren 🥚 Profile picture
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25 Jan, 8 tweets, 3 min read
GME Jan 2022 80 strike
call: $36.00 mid
put: $47.50 mid

BBBY Jan 2022 32 strike
call: $10.45 mid
put: $11.94 mid
BBBY and BB:

stockcharts.com/h-sc/ui?s=bbby…

stockcharts.com/h-sc/ui?s=BB&p…
Heavily-shorted stocks typically have poor returns, though the past year has been an exception.

Thread:


There may indeed be an opportunity to front-run WSB and/or provide liquidity to them, but I think that is a temporary opportunity that will not last.
Skimmed WSB this morning... it seems like people are buying the stock without trying to collect any of the borrow fee. Price target $1000... they are treating it like an all-out war. (Who knows - they may win)
GME
83.62% to borrow
100% utilization
Insanity... the borrow rate implied in the Feb 19 contract is even higher, yet they still buy the stock. WSB is breaking the markets

No offense intended, @breakingthemark LOL
Just when you think you've seen it all... buying houses on credit cards, XIV blowing up, TLT trading at a discount to NAV, oil going negative...

turns out you haven't

reddit.com/r/wallstreetbe…

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More from @ReformedTrader

Darren 🥚 Profile picture
26 Jan
Paper 1 (abstract): Based on lots of assumptions and this particular data set, we find that lockdowns don't work.

Paper 2 (abstract): Based on lots of other assumptions and a different data set, we find that lockdowns do work and strongly recommend them as policy interventions.
Paper 3 (abstract): Based on our own arbitrary criteria, we find that lockdowns may have been somewhat effective but were not worth the cost.

Paper 4 (abstract): We find that lockdowns were somewhat effective in saving lives and strongly recommend them as policy interventions.
Read 4 tweets
Darren 🥚 Profile picture
24 Jan
Given two possibilities,
A. Factor death (zero expected returns)
B. Factor reversion (high expected returns)

What could help in either scenario?

Initial thoughts:
* Better execution
* Less aggressive trading
* Thoughtful turnover management
* Harvesting tax losses
* Lower AUM
Applications might not be as obvious as they seem.

For example, long-dated options have optically high spreads but reduce the need for aggressive vol targeting when it's most expensive to trade the underlying. They also make it possible to rebalance into dislocated assets.
Momentum can become much lower turnover and more tax efficient when rebalanced differently:

Implementing Momentum: What Have We Learned?


Shorting is more tax-efficient than it looks:

Taxes, Shorting, and Active Management
Read 9 tweets
Darren 🥚 Profile picture
23 Jan
One way to be a liquidity provider is to be an endowment: no leverage and infinite time to wait for convergence.

Another is to be simultaneously diversified/hedged, such that divergence has a payoff and allows you to hold on to convergence trades with very high expected returns.
Related reading:
Read 4 tweets
Darren 🥚 Profile picture
22 Jan
How would diversification have done in 2020?

#1: SPY: 18% CAGR (-19% dd, 0.76 Sharpe, 0.89√2 Sortino)

#2: SPY, TLT, DBC, and VXZ (inverse vol): 20% CAGR (-4% dd, 2.34 Sharpe, 4.38√2 Sortino)

#2 did FIVE times better (Sortino) due to lower drawdowns.

portfoliovisualizer.com/test-market-ti…
Read 7 tweets
Darren 🥚 Profile picture
21 Jan
1/ Implementing Momentum: What Have We Learned? (Ross, Moskowitz, Israel, Serban)

"Live momentum portfolios are capable of capturing the momentum premium, even after expenses, trading costs, taxes, & other frictions associated with real-life portfolios."

papers.ssrn.com/sol3/papers.cf…
2/ "We decompose the performance differences between the live momentum strategies and the theoretical AQR Momentum Indices.

"We expect that trading costs and expenses will always be a drag on performance, but ‘smarter’ portfolio construction decisions should offset this."
3/ "Momentum's historical excess return is 1.0-1.5%/yr. Even if transaction costs were twice as high as realized, they may only put a small dent in performance.

"These results contrast with papers that estimates costs based on liquidity-demanding orders for immediate execution."
Read 8 tweets
Darren 🥚 Profile picture
21 Jan
...
2020's winners included
* Benn Eifert’s QVR Advisors (+77% ret/-12% dd)
* Covenant Total Volatility (+21%)
* Rotella Long Biased Vol (+20% ret/-1.5% dd)
* Artemis Vega (+15% ret/-10% dd)
* Logica (+15% ret/-7% dd)
* Quadriga (+13% ret/-35% dd)
...
Read 5 tweets

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