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Andy Constan

@dampedspring

4 Jan

Damped Spring Framework 101
I believe 4 factors drive major market macro assets.
1. Growth Expectations and their changes
2. Inflation expectations and their changes
3. Changes in Risk premiums which are driven by changes in monetary conditions and expected future portfolio vol

4. Positioning and flow

With this framework I evaluate each asset across the globe. I focus on the DM
1. Equity index
2. Long term bonds
3. Currencies
4. Gold and oil

I will add short term bonds if they ever offer more symmetric returns

This framework is used to generate alpha in an uncorrelated fashion. It is also used to generate a balance portfolio of beta for long term investing. The Bridgewater All Weather fund, Harry Browne's permanent portfolio, 60/30/10 are all versions of this type of beta

Read 18 tweets

Andy Constan

@dampedspring

31 Dec 21

$JHEQX post mortem
I lost money on a trade that I had tweeted about and researched for many months. As trading for profit is the standard for me I did not achieve my standard. So a number of things come to mind when reflecting on this episode. 1.Did I make a specific mistake?

2. Did I miss something important in the basic research?
3. Did I underestimate various players behavior
4. Did the high profile of this trade squeeze the edge out of it?
5. Did I miss other macro forces today?
6. Did I make a reasonable bet?

The answer on reflection is mixed and on balance I was modestly over confident that I could make better than a coin flip odds win. I may have been unlucky. But I am pretty sure I didn't have enough alpha to bet. Thankfully I bet small.

Read 14 tweets

Andy Constan

@dampedspring

28 Dec 21

Options (gamma) walls 101- what is a gamma wall? Well it is a long options position above or below the market which puts a cap or a floor on the market. Let's use the current case. There is a wall at 4800 on the SPX that expires on Friday.

How does the wall work? Very short dated otm options have a low delta when they go itm their delta jumps quickly to 1. That means dynamic hedgers suddenly have a ton of SPX to sell which offsets demand and caps the stock until the hedgers are full up. Then the market continues

Gamma walls happen every options expiration and often at round numbers like today's year end 4800 strike. Of course fundamentals do matter and if the market chews through the supply then not only can it go higher but the wall is now a floor for prices as if the option goes OTM

Read 8 tweets

Andy Constan

@dampedspring

21 Dec 21

Liquidity vs volume 101 - in my flow 101 I talked about forced selling/inelastic flow. Selling at any price. That inelastic flow tends to have a large impact on price. I want to talk about volume in this context. My view of normal conditions in markets is that supply and demand

Are both highly elastic for around last sale. This creates the conditions necessary for tons of volume. However I think when a large inelastic player enters the market it overwhelms the local elasticity and pushes into a portion of the elasticity curve that is much less elastic.

Of course at some price change extremely high elasticity returns. So conceptually something like this

Read 12 tweets

Andy Constan

@dampedspring

19 Dec 21

To the Damped Spring Community: Once I began curating financial tweets, I quickly learned that interacting with and building this community are my true passions. I will now also be creating a Private Twitter experience. My current feed will also remain active with great content.

My journey on Twitter has been incredibly rewarding. I am looking forward to continuing to provide interesting commentary and educational threads to all of you. I wanted to let you all know that I have decided to launch a paid account. This decision was not easy.

So much of what you see on Twitter is so blatantly a money-grabbing scam. I hope you all know me well enough by now to know that I am not like that.

To improve the content on my public account, new private account, and institutional business,

Read 9 tweets

Andy Constan

@dampedspring

19 Dec 21

Flow 101 - Flow moves markets. If you know of a market moving flow before it hits the market or you know that a market moving flow is about to end you can make money in markets if, and this is a big if more most, you know about market moving flow and others don't. Some musings.

The best way to know about a market moving flow is to literally know before it is sent to market. There are people who became billionaires by colluding with sell side Wall Street firms who would disclose market moving orders they held from large "Boston based Fund" I saw it.

It's called Front Running and anybody who lived through the 80's and 90's can tell you stories. To this day one form or another exists. It is illegal BTW. But that's not what this thread is about. I mention it because front running is flow trading just not the illegal part.

Read 24 tweets

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