Good Morning! Yesterday was a decent sized MOC, negating a comeback rally. One thing to note, the dollar was up about the same as Friday with similar moves across the "scary" assets and the equity drop was muted. That shows to me the vanna rally is about to grow legs.
Looking at premarket, those legs start to stretch a little today.
It is that time again where we are going to hear about #JHEQX a ton again, and I can't stress once again that it is not as significant event as people make it out to be. Here's the thing:
It is that time again where we are going to hear about #JHEQX a ton again, and I can't stress once again that it is not as significant event as people make it out to be. Here's the thing:
As soon as that trade is put on, MMs put on a synthetic combo at the appropriate delta where they can find liquidity. Short put, long call, same strike. They do a combination of them all up and down the chain in the open market, and at the deltas required for hedging.
This is key because it takes out the volatility risk and mutes the gamma risk of the trade itself. There may be tremors on the roll, but unless you know what strikes and expiries (later expirations typically) the MMs are going to use for their combos, there is no action.
Can these #JHEQX strikes have some "stickiness" from vanna? Yes, but only in proportion to how much vega they consume, and only near expiration. 0DTE traders trade 2-3x #JHEQX level volume every day now! This numbs any impact from that delta roll. MMs know what they are doing.
They aren't going to leave themselves exposed that easily to Twits like us who have public access to their moves and can frontrun them.
But it is fun watching Twits flip out about it quarterly. Lol.
But it is fun watching Twits flip out about it quarterly. Lol.
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