The prices of the futures as a function of their time to expiry looks like below.
You step away from the desk to make some tea.
And, upon your return, you see a different picture...
1/n
What happened to the Feb expiry?
It kinda sticks up.
The curve looks kinky now.
Why?
2/n
Could be many things:
1. Random large demand for that expiry has created temporary price impact, likely to revert 2. New info impacting that month is being priced efficiently 3. Somebody knows something and you're likely to see more demand come in behind in that expiry
3/n
People say a lot of things about trading, and most of it is worthless.
So it's useful to be able to quickly discard ideas.
Let's take an example...
Many in crypto, including @zhusu, will tell you that buying new highs is a good plan.
Is it? Let's have a look...
1/n
It's important to understand that discarding ideas is a lot easier and quicker than verifying ideas.
Your mission is not to do the most perfect simulation of reality from the offset. You'll waste a lot of time doing that.
You want to do very quick data analysis.
2/n
Plenty of time to go deep later.
We: 1. pull daily price data for all FTX spot contracts 3. for each asset for each day, calculate the 20d high 4. calculate the distance in days from the 20d high 5. calculate next day log returns
3/n
And, is it just me, or is getting absolutely balls long a concentrated hugely negative-carry bet written and marked my a more powerful counterparty, essentially a masterclass in how NOT to trade?
If I were Burry then, instead of having a cringe boomer Twitter meltdown, I would simply put on some My Chemical Romance, do some blow with some goth hookers, and blow off steam the old-fashioned way.