1/atm straddles came down significantly from the open as nothing has rly happened in $spy #SPX since open but premium destruction. The play was to short overnight but this account can't do that. Expect more volatility as $vix expiration this week..
2/ $vix showing no real signs of panic, fear, or backwardation (bullish). The curve is in contango and suggests this 3-day down move has been a healthy shakeout. We keep a long-bias here but it has been smart to not be aggressive as OpEx just passed and VIXperation lies ahead
3/ We still seek to protect the last 3 weeks of profit. Given the significance of overnight moves recently, my hunch tells me this is mostly dealer-driven. For this same reason, it's a gamble to hold overnight risk without any ability to hedge in futures so we are wary of that.
4/ This feels a lot like Dec '18 when we bottomed shortly following vixperation and OpEx, however we are not at vixperation yet until Wednesday. Beginning on the 24th thru mid-January we should see a lot of bullish flows, and therefore are ready to gain upside exposure
5/ put/call ratios have been elevated.. sentiment is down across social media and retail faves ( $arkk $tsla etc.).. skew is showing fear similar to late sept and march of this year. Can a market really go down significantly when everyone is hedged? Likely not
6/ So..we're glad to not chase straddles today as the move had already happened. We are ready to start building bullish exposure this week, but are not going to chase and gamble overnight. Certain metrics suggest we are LIKELY basing in $spy & $spx .. however, anything can happen

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More from @Newnorthcapital

21 Dec
1/ I had been using slightly different methods to find these expected moves, straddle pricing, etc. for a bit now, but I wanted to point out this method showed to me by @jp242x
2/ this seems like tricky math but what's important is the simplified version of Black-Scholes found at the bottom.. here's the screen grab Image
3/ This is key for new traders.. Straddles are inherently neutral strategies and as @cloudy_cl has constantly pointed out recently, sometimes it's best to accept uncertainty and simply put this trade on. New ppl tend to be overly convinced of one outcome long calls or long puts
Read 7 tweets

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