1/x The summer of George is back to its regularly timed programming. JPM’s Ivol 🔨 took over in earnest yesterday, as MMakers proactively began the process of lowering Sep OpEx in preparation for the oncoming 🌊 of supply. This should single handedly continue to keep the s&p 📌.
2/x A game of 🐔 is afoot @ the 1.5 stdev up of the 20 day. Watch this level on close as this could operate as a 🧲. We continue to aggressively buy Vol in interest rate sensitive names and sell it in SPX. June 25th Ivol is dramatically oversupplied, as is June 30th, & markets
3/x are about to receive a new wave of IVol on 6/30. Followed by a long weekend 7/3-7/5 and then 7/6-7/12 #charmweek… All this said, HF positioning has been in the 98-99th %’ile for some time….and if it weren’t for Gary being so well FED, the Jets levitating this market would
4/x be plunging us to the ground far below. HF positioning is just 1 of many major drivers of the tail fragility that I’ve been so adamant about…Decreasing breadth and momentum are a few other classic ⚠️ signs. As I’ve mentioned, the Fed is now in the process of ‘selling calls’
5/x continued upside will be met with tapering. DONT FIGHT THE FED. The economy is improving & the rest of the 🌎 is slowly coming back on line, THIS is the safest bet right now & the part of the distribution that is most overvalued. Look to sell the rips w/ calls under hedged.
6/x There will soon be a time for caution, & the Fed’s taper signal will eventually remove 🍌’s from the system, but the crowds must give up on this narrative & dealers must move beyond the massive IVol supply to allow IVols to move higher & reverse vanna flows for a long awaited
7/x correction…7/12 sits on the horizon as an important potential window of market weakness to be aware of. It’s important to note we knew about covid for 2 months & the market rallied hard during that period before ultimately rolling over. This could very well be the type of
8/x pattern we see here. Narrative almost always follows flows & ultimately price, so continue to focus on the flows, with one foot by the exit. Tail fragility continues to be systemic & despite misunderstood SKEW metrics screaming that skew is high, it is still cheap relative to
9/9 the actual potential probability & scale of tail outcomes and should be held, funded with closer to ATM Ivol in indexes at all times as a tail hedge. Keep 🔥 SPX theta until 7/12 via dispersion & SPX calls underhedged. Good luck! 🍀 (Not Investment Advice)
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