It is time.. for a vacationWhy type many word when little word do trick.
Ideal setup, catalyst probably needed, just the truth.
as you can see by my drawing.. i need a vacation.
pay me
Gamma
21D DDOI Gamma ExposureThis chart is intended for other idea articles but I thought it was interesting enough for its own idea.
I'm not allowed to post my website, but you can find it in my profile it contains the data I used for charting this.
1) Naive Gex - Is the total option chain of a stock across all expirations. In other words the gamma exposure assumes customer is always long call short put meaning the dealer is short call and long put.
Not very helpful, but it gives you the idea of the total value of options out there. It is based on CBOE delayed data.
2) 21DMA of dealer directional open interest (DDOI) gamma exposure across all option chains of the S&P 500.
This data is mapped from my website into Trading View.
There is no way I found to get options pricing data for all of option chains, so tracing is the only way I can get this data into trading view.
What you can take from this data is simple.
It is a measure of liquidity in the entire S&P options data.
I labeled what type of liquidity regime we are in.
To those who are predicting a crash during positive liquidity environments.
Don't get caught to short. If you manage a portfolio properly then I doubt you will need to worry about a market crash.
I see 2 scenarios of a market crash happening at the bottom in stocks and bonds.
1) It's short lived (~15-20%) and corrected via interest rate decreases and changes to SLR / ON Reverse Repo. Long enough to see who has been swimming naked, but not break Central banks.
2) a crash so big it collapses central banks and US has not choice but to change to CBDC (the "great reset" scenario)
If you manage a portfolio properly, you wouldn't listen to any advice I have for doing so anyway.
and you are prepared for the scenario 1.
if scenario 2 happens it will break society and USD and everybody finds out they only own fugazzi (nothing).
Realestate, hard assets like gold, silver, food, water. oil will sky rocket.
Throughout all the selling last week the entire S&P did not go negative gamma.
This is positive market conditions.
Next week is considered a very large window of weakness in options event volatility and expiration.
I expect volatility next week and we won't know the true outcome until after OPEX.
Have you ever heard the phrase don't fight the fed.
Well in this case, don't fight the fed liquidity.
I think we're at that critical juncture the next 3 months and I will be the first waving red flags.
A slight flinch in PPI not meeting expectations was just repositioning for CPI miss and FOMC 75bps hike.
To be clear on my position.
1) I think PPI is a bad measure to inflation. so many factors. I only track for event vol and how dealers position around events.
2) CPI will likely be same as PPI. Lower but beat expectations.
3) FOMC - no rate hike. Hold for more data. Price stability...
I believe Elon Musk.
He Believes Cathy Woods
My instinct tells me that ARKK is at its tipping point now and more losses on stocks like TSLA will cause liquidity issues.
The amount of selling after Archegos would pale in comparison the financial storm of a larger hedge fund going under.
And I could be completely wrong.
It is easy to call a trend change while in the trend.
It is incredible difficult to build economic models that identify when a trend will change or when a market will crash.
But I'm trying.
So before you come clown bashing my work, at least provide some of your own information or data to backup your claims.
I have used these models of liquidity measurement to predict precisely when trends will change.
over and over
and over
and over again.
TLDR;
Dealer Directional Gamma Exposure is trending positive.
Lower CPI + Fed Rate Pause will increase liquidity.
Increased Liquidity will lower volatility through Christmas for a Christmas rally.
If no pause and higher CPI then I will buy OTM puts and go out for pizza
This trend needs to break because lower lows for this expiry or next (quad witching) will likely cause a liquidity crisis. A Taper Tantrum. The Big One.
Final Thoughts.
I am an Optimist, a Protagonist, an Innovator, Engineer, Artist, but far from ever joking around except to turn a frown upside down.
Thanks to all who support my ideas.
If the white rabbit is what you seek. The trendsetter xyz is the key.
Tip toe around a Christmas Rally this yearSo here we are not to many deviations away from the last post on Hedged Equity funds being firmly in positive gamma territory.
Overall gamma for the S&P 500 options chain has been positive 15 straight trading days.
This indicates a 0.20% daily distribution along with a VIX that continues to compress into 2023.
However, there are indicators suggesting VIX is now oversold and may test higher ranges over the next month.
This would reflect a rug pull in December for JHEQX reset at the end of Dec.
There is only 1 man capable of such a rug pull.
Here are some economic event dates to prepare for.
Nov 30th Jerome Powell speech at 2pm
Dec 9th is PPI (before CPI may hint to next headline CPI)
Dec 13th is CPI
Dec 13/14 FOMC
Towel stock will have a glorious bounce. Good entry area now.OBV hasn’t even came close to falling back to its previous lows before BBBY’s run up in July/August.
In fact.. OBV hasn’t even broken down resistance.. it’s still holding a pretty strong bullish signal and share price is below previous lows in July..
Certainly share price is undervalued on the technical side.
Check out my ideas on GME because these stocks tie together in my personal opinion.
NOT FINANCIAL ADVICE
(UPDATED)Revisiting my prior theory on creation of FTDs thru TTTInstead of explaining why I believe GameStop still has immense value, I am just going to make an update to my previous 3 posts on creation of “Failure to Delivers” through SWAPs and the short ETF, “TTT.”
Please check out my other posts if this type of stuff interests you, it is brand new information that just hasn’t been picked up by anyone yet, the correlation between TTT & GME is blatantly painful to look at, considering the amount of people who ignore it.
I strongly believe TTT is being manipulated to then also manipulate GME..
We’ve watched GME follow closer to SPY on intraday trading than apple, Microsoft, or even amazon!! WHY?! Crime is the answer… algorithms.. liquidity grabs.. it’s all one big game in which we will end up victorious this time.
Now.. for the reason you are all here.. looking at the updated chart above, you can clearly see that TTT has been going straight parabolic ever since we’ve dipped from over the 40’s.. interesting right?? Around when Mayo Man moved over half a billion dollars for “strategic setups.”
BS… my real opinion is the price has been even faker than it has ever been since August 8th. I believe this could potentially be the end game short ladder attack..
Mark my words..
Educate yourselves with my ideas on all of my other posts.. it’s okay if you disagree.
DRS
TO THE FKN MOOOOOOOOOOOOON
NOT FINANCIAL ADVICE
IM NOT SELLING
You ever dance with the devil in the pale moonlight?Last night futures bounced off JHEQX Zero Gamma support.
Significance of this level can not be understated.
Losing 3585 may find support below from JHQDX long put flipping positive gamma.
With VIX at 32 you should be expecting a 2% move a day.
I have an alert at 34 VIX as the point where we could see a pop higher.
GEX on SPX is -2.5B which implies more volatility to a range of 3% or more.
I predicted CPI will be lower because commodities reached a low by the end of Sept.
After a lower CPI I expect a rally to close the range on JHQDX long put as a target close for end of October.
Updated Delta/Gamma IndicatorUpdated Delta/Gamma Indicator to include the strikes for the current strategy.
You will be able to leave it blank to generate the strikes.
You can use the Indicator on ES Futures as it sources SPX and VIX directly.
I wanted to show you all the delta accumulation of JHEQX around the first 20 Days (and 20D moving average)
The accumulation of delta in the first 20 days is a fairly good leading indicator for where the rest of the quarter is going to go.
The reset of the hedge also predicts many tops and bottoms throughout the recent years.
Late 2018 & Early 2019
Negative accumulation to expiry, flipped positive, reset and accumulated just over 20D
Cause
If you zoom out and see look at the volume during the 3 weeks prior to end of quarter (quad witching) .
Effect
A lot of deltas and gamma roll off after a quad witching.
This frees up the indexes just as JHEQX gains strength 3 weeks prior to its end of month expiry.
Tiny Update (JHQTX)
The smallest and current just rejected the ITM Put. Short Squeezes if 3800 breaks.
Mamma Update (JHQDX)
Mamma is deep ITM put territory and reaching strongest effects the final 3 weeks prior to expiry.
Under 3600 gamma will flip positive (supportive).
At 14k contracts, Mamma can not bounce the titanic, but in the past quarters it finds a way to stay out of the money.
Expect Momma to try and run up to 3900 in the last 3 weeks of October.
This fits in with my idea that the next CPI will print lower and provide a short term bottom for indexes.
Delta and Gamma IndicatorPutting the finishing touches on a delta / gamma indicator.
Only outstanding issues is to complete is fixed strike implied volatility.
Check FAQ I created here if you have questions about it.
The indicator can be configured to reset on the 1st, 2nd or 3rd last business day of the month.
The first new day after the reset the new strikes will be calculated.
The purpose is to see a visual representation of hedged equity funds put spread collar history.
Hedged Equity Fund
Reset: EOM Dec, Mar, Jun, Sept
Mutual Fund: JHEQX
Assets: 15 Billion
Contracts: 44.5k
Here is the main equity fund collar strategies history.
This fund was established in DEC 2013 and grown into one of the largest managed equity funds.
I talk a lot about how this fund creates a pinning effect to the market around quarterly expiry.
With the history now in full view, you can clearly see a recurring pattern as the largest index in the world follows a put collar through zones of support and volatility.
Hedged Equity 2 Fund
Reset: EOM Jan, Apr, Jul, Oct
Mutal Fund: JHQDX
Assets: 5.7 Billion
Contracts: 14k
This funds reset frequently finds nearly the exact same close from the previous quarter.
Hedged Equity 3 Fund
Reset: EOM Feb, May, Aug, Nov
Mutal Fund: JHQTX
Assets: 2.5 Billion
Contracts: 7k
Not as many contracts but still provide short term support and resistance.
A Put Spread Collars Gamma IndicatorWhat is a Put Spread Collar?
A put spread collar is an options strategy used to insure underlying assets from downside while limiting upside.
Why would someone use a Put Spread Collar?
What is unique about this strategy is the premium is paid for by selling an 5-6% OTM call and selling at 20% OTM put.
Selling those 2 options pays for the long put premium.
Why do I care about these Put Spread Collars?
These strategies are insurance for over 30 billion dollars of assets.
A market maker selling this option strategy will not take that risk so they need to constantly dynamically hedge the risk.
Dynamically hedging billions of dollars worth of options will cause considerable flows positive and negative in the market.
What do you mean 'Flows'?
It's not really a flow but you need to understand how a market maker dynamically hedges to get a better picture.
For the scope of this indicator I will only use "flows" to describe dealers buying and selling.
I'm currently working on an indicator to track dealer flows. est. 2-4 more weeks.
When are flows the strongest?
Typically flows will be the strongest in the last 3 weeks prior to expiry.
Flows will increase and decrease from Implied Volatility depending on gamma direction being positive or negative.
Increased gamma is indicated by larger sized bubbles.
What is GEX?
GEX is short for Gamma Exposure.
When a market maker sells an option they are at a direction risk if the underlying price goes up or down.
To remain risk free, market makers will buy or sell the underlying the amount of delta of an options contract.
Gamma is the delta Change in from the underlying price moving up or down.
What is Positive and Negative Gamma?
Each bar on the indicator will calculate the Gamma of the total option strategy.
This is the amount of delta a dealer will need to hedge per 1 point move in underlying.
If the overall gamma is positive, the dealer flows are supportive (i.e. Sells highs, Buys lows).
if the overall gamma is negative, the dealer flows add to volatility (i.e. Buys Highs, Sells Lows)
Script will be published next week. I still have some issues with fix with implied volatility.
Asteroid JHEQX UpdateAsteroid JHEQX.
This idea is an update on the JHEQX for any of you that track this market asteroid.
The JHEQX is approaching Zero Gamma.
At zero gamma the flows are fairly muted. The strike price is ~3795 for zero Gamma.
BEAR CASE
If the price declines below 3795, dealers will start selling with the market and create more volatility.
BULL CASE
The same is true for the positive side of 3800. It has been very supportive bottom for SPX.
PINNED CASE
There is also the case JHEQX at zero gamma acts as a pin until the end of September when the product is reset.
Here is the gamma curve
(Negative is positive for dealer position)
And the delta curve for tomorrow at 2:30pm
VIX could go either way.
My guess is 3795-85 back up to 4000 for end of OCT.
The 0.75 hike is priced in already.
If a surprise full point hike then 3200 possible by the end of Sept.
See asteroid Trail for times of negative gamma.
See Jan13 decline into negative Gamma.
See Apr21 decline into negative Gamma.
Both times SPX dropped 12-15% in 10 days or less.
Both times were after JHEQX expired, not near expiration like we are.
Zero Gamma acts as support in a decline from positive gamma near expiration.
See Sept 20 Bounce from 2021. Right at same expiry, direction.
After reset, when the asteroid no longer has gravity like flows, much less resistance rolling over.
I’m not sure how far JHEQX resets go back. But if you look at the trail I created of estimated positioning during roll overs, you can get a good sense of when the market breaks for a leg down.
UVXY seemingly engaging ina somewhat“heavy” (potential) reversalI see many other patterns of strong bullish cones in stocks that seem somewhat threatening to the financial sector.
By the I mean every singe one.
Let’s see.
God be with us.. good people with grace
Revisiting my prior theory on creation of GME FTDs through TTTHello everyone, Chem here..
Earlier this year along with the help of copious amounts of information on Reddit.
I discovered that it is super blatant that
TTT (ProShares Ultra Pro Short),
seemingly spikes strongly into GameStop
run ups.
Overlaying the charts has allowed
me to view and observe perfect symmetry
between the two.
My theory and ideals on this entire topic
stands. If you wish to read my extremely
detailed ideas and rant topics then feel
free to somewhat educate yourself.
Kenny G, ain't no stoppin' me.
Cant stop. Wont stop. GameStop.
Just sold my car for more shares, I bike to
my chemical warehouse job where I work
80 hours a week at. I'Il inhale cancerous
products 24/7 just to fuel GME fractional
amounts if it means cell one day. You give
me power Kenny G. Thanks you
Check out my other great topics about this
same idea.
GME to the moon
Not financial advice.
Also I'm 100% on my calls so far, in terms
of success, if that means anything to you
analytical people.
Further explanation in comments.
Revisiting my theory on GME FTDs creation through TTTHello everyone, Chem here..
Earlier this year along with the help of copious amounts of information on Reddit. I discovered that it is super blatant that TTT (ProShares Ultra Pro Short), seemingly spikes strongly into GameStop run ups. Overlaying the charts has allowed me to view and observe perfect symmetry between the two.
My theory and ideals on this entire topic stands. If you wish to read my extremely detailed ideas and rant topics then feel free to somewhat educate yourself.
Kenny G, ain’t no stoppin’ me.
Cant stop. Wont stop. GameStop.
Just sold my car for more shares, I bike to my chemical warehouse job where I work 80 hours a week at. I’ll inhale cancerous products 24/7 just to fuel GME fractional amounts if it means cell one day. You give me power Kenny G. Thanks you
Check out my other great topics about this same idea.
GME to the moon
Not financial advice.
Also I’m 100% on my calls so far, in terms of success, if that means anything to you analytical people.
Quick Gamma UpdateMost of you by now know I like to follow these big hedges in the market as a gauge for volatility.
It's a driving factor behind things like Vix Highs and Lows being pinned at very specific ranges.
CPI was really just a catalyst that pushed some larger Marco flows negative like the hedges I track.
The closer these funds get to their long put strike, the more selling pressure these dynamic funds will have on the markets.
JHQTX, the youngest.
Time is also a big factor for these flows. The smaller fund just rolled over in august.
You can see by the gamma curve now compared to when the options expires in November, we’re still in positive gamma territory.
At ~3700 this fund will add to volatility.
JHQDX, the middle child.
This fund also went negative the past few days adding to selling pressure.
While the fund is still 46 days to roll over.
The closer to expiry, the more the negative gamma effects will be (dotted purple line in gamma curve)
JHEQX, The Big Tamale
Is approaching expiry in 2 weeks.
These flows are now approaching the strongest.
The gamma curve not only dictates the direction of delta hedges but also the amount.
In 11 days the gamma curve will be at its peak potential for daily flows (positive or negative).
What I can tell you is the closer to gamma zero, the less supportive flows will be.
The more markets drop below 3800 the more chance of a significant drop to ~3600 than to ~3200.
The key here is volatility. The selling over the past few weeks has consistently been capped around this 27 mark for weeks.
I think there is a good chance the next week there could be some sideways movement until FOMC.
PowerHou$e SPY TARGETS 16.9.22 Reverse Gamma continuedIdea continued of successful CPI trade. PPI tomorrow 830am EST , sideways and down market action predicted, reverse gamma squeeze, ultimate 3 standard deviation move to downside this week. potential place to load up on further puts tomorrow to price target for Friday.
Options Trading / Gaining the Edge & VIX Curve Implications
Options Leverage has become increasingly popular over the past decade. In the past 30 months,
their popularity has risen significantly relative to the Underlying Instrument.
Increasingly so, Options tend to move Prices through the effects of Leverage.
This is why we see Stocks Split, it vastly reduces the Price of Entry and increases the Potential
for increased participation.
As in all Markets, Liquidity plays the most important Function.
________________________________________________________________________________
The Traders Edge is best capitalized through an understanding of the Derivatives/Options Greeks as
well as VIX timing (previously discussed and linked below).
I will thoroughly explain the relationships and provide direct correlations using Price in each example.
Simplicity will become self-evident after All the Variables are explained.
Directional Risk Management is the Traders Edge. It provides the Risk/Reward parameters in Options
Trading will make you a far better Options Trader.
________________________________________________________________________________
Options are a 1st Tier Derivative, ie. - their value is "derived" from an underlying asset. How this value
is derived depends upon a number of factors:
1. The 5 Greeks and their functions - Delta, Gamma, Theta, Vega & Rho.
With any Derivative - Dependent and Independent Variables define the Function.
Greek Dependent Variable Independent Variable
Delta Option price Value of Underlying Asset
Gamma Delta Value of Underlying Asset
Vega Option Price Volatility
Theta Option Price Time to Maturity
Rho Option Price Sensitivity to Risk-Free Rates
Let's put this into context with simple and concise examples of each.
________________________________________________________________________________
Delta - How much the Options Price will increase or decrease with a
$1 move in the Price of the underlying Instrument.
By Example:
Underlying Price of Instrument = $100
Options Premium = $2
Delta = $0.60
For instance - were the Price to move from $100 to $101 the Price of the
Option would increase by 60 Cents to $2.60.
Were the Price to decline from $100 to $99 in the underlying instrument,
the Price of the Option would decline to $1.40 ($2.00 - $0.60).
It is extremely important to understand Implied Delta is to occur at
any point in time prior to or upon Expiration.
Think of Delta as the Probability of your Options Potential, as well,
it is actually the Number of Shares relative to the Options 100 Share
implied leverage.
An out-of-the-money Call Option with a 0.25 Delta has an estimated 25%
probability of being in the money at expiration.
A deep-in-the-money call option with a 0.90 Delta has an estimated 90%
probability of being in the money at expiration.
A Delta of 1 cannot occur as it implies Par with the underlying instrument
and provides Zero incentive/profit Potential. This is important as we can
observe it would be far more intelligent to purchase the underlying outright.
For example, with a Delta of 1, for every $ move higher in the underlying,
the option price would rise by $100. As you can see there is no incentive to
simply not purchase the underlying instrument, it becomes a zero-sum
game.
Think of Delta in its simplest form with respect to Leverage.
Delta in my example above is $0.60 - you are leveraging 60 Shares as
opposed to 100 @ a theoretical Delta of 1.
Delta's implied theoretical ranges:
Calls - 0 to 1
Puts - 0 to (-1)
Actual Range @ the Money
0.50 Delta - therefore a Trader is leveraging 50 shares.
Why?
Because a Trader does not technically own the shares.
Consider it the Options Writers Profit Margin or Vig.
The further in the Money on an options chain, the higher the
Probability your Option will have less Risk. Of course, there is
a premium to Risk/Reward as we move lower and away from the
underlying Instrument or Share Price.
________________________________________________________________________________
Gamma - How much Delta change with a $1 move in the underlying
Price.
Delta and Gamma are both affected by Price movements up or down
by $1 increments.
Continuing our Example above:
Underlying Price of Instrument = $100
Options Premium = $2
Delta = $0.60
Gamma = 0.012
For instance - were the Price to move from $100 to $101 the Price of the
Option would increase by 60 Cents to $2.60.
The Delta will change as it will include Gamma after the $1 Price increase:
Delta 0.60 + 0.012 or - 0.612, the New Delta or $2.612.
As the Option price moves towards In the Money, once again - Gamma will
increase.
It is important to lock down the context, these are Price relationships - Delta
and Gamma.
________________________________________________________________________________
Theta - Options Prices decrease as Time passes moving to the Expiration Date
aka "Time Decay"
There are 2 distinct variables to decay.
1. Intrinsic Value: Simply put a Call option will have Intrinsic Value when the
underlying Asset is above the Strike price of the Option.
By Example:
Underlying Price of Instrument = $100
Option Strike Price = $90
Intrinsic Value of Call Option = $10 ($100 - $90)
Intrinsic Values can only range from Zero to a Positive number.
For Put Options, the Value is the opposite, or when the
underlying Aesst is below the Strike Price of the Option.
Underlying Price of Instrument = $100
Option Strike Price = $110
Intrinsic Value of Call Option = $10 ($110 - $100)
Intrinsic Value is Directly related to Price and only changes when
the underlying Price changes.
Time has no impact on an Options Intrinsic Value given there is
no change in the price of the Underlying Asset.
2. Extrinsic Value: aka "Time Value" or Options with more time
until expiration will have more Extrinsic Value than Options with
less time until Expiration for the same underlying Asset for the same
Expiration Cycle. ie. OPEX Date.
Why?
Over time Price ranges have the potential to expand and contract.
Expansion leads to Contraction and vice versa.
LEAP Options - 365 or more Days to Expiration have immense
Extrinsic Value due to the component of time.
It is important to note Theta begins its larger declines within 30 to 45
Days of Expiration. Theta goes steeply negative within this timeframe
with a very High Probability.
"Time" truly is Money - Extrinsically.
Less Time, less Extrinsic Value, less Money.
Options lose Time Value (Extrinsic) - Theta is expressed as a Negative
Number.
By Example:
Underlying Price of Instrument = $100
Theta = $0.50
Time to Expiration = 10 Days
Option Strike Price = $90 ($10 Intrinsic Value)
Theta (decay) $0.50 X Time (duration) 10 Days = $5.00 of Extrinsic loss
over Time to Expiration (Theta).
Projected Theta Burn (decay) implies the Price of the Option will be $95.
* This assumes there is No Change in Implied Volatility (More on this later).
It is important to note when your Portfolio may show a steady change in
Portfolio Theta, this is should not be assumed to be a linear function as
Delta or Change is the only Constant. Markets move Higher and Lower
with increasing Volatility.
Changes can and are significant.
________________________________________________________________________________
Vega - Changes in an Options Value with respect to a 1% Change in
Volatility or the Implied Volatility (aka the Widow Maker).
Why the Widow Maker?
If (IV) Implied Volatility drops significantly while the Underlying Asset's
Price remains constant. This is an extreme example, but one that has
become increasingly more common since September of 2021.
Implied Volatility is the expected change to Price in the Underlying Asset's
can change over time. Consider it the Price Range.
It is important to remember an Options Price must change for Implied
Volatility to change.
Simply Put - a change in demand for an Option over time will determine
its Implied Volatility.
Supply becomes a Factor as Risk (implied volatility changes) - you would
not want to assume the Risk of selling Naked Puts in a downtrend. Supply
would decrease and Premiums would rise. The overall level of confidence
and Fear would dictate demands while Supply would Price Risk.
Conversely - and this is the Key, any option with a Higher Extrinsic Value
will have higher Implied Volatility.
By Example:
Underlying Asset 1
Price = $110
Call = $100
IV = .69
Underlying Asset 2
Price = $105
Call = $100
IV = .47
A favorite time for the IV Crush is into Earnings of the Underlying as
Volatility drops significantly aka - Buy the Rumor, Sell the News.
As well, the timing of VIX Roll to Settle play a very large Role in
Vega, as does the term Structure of the VIX Curve.
Timing and Positioning in Time are the leys to the proverbial Kingdom
in Options Trading.
An Options Price changes by its Vega with a corresponding move in the
Underlying Price of the Assets, Implied Volatility will rise by 1%
By Example:
Underlying Price of Instrument = $100
Option Strike Price = $90
Intrinsic Value = $10
Vega = 0.25
Implied Volatility = 60%
Option Price $10 + Vega $0.25 = $10.25
Implied Volatily = 60% + 1% = 61%
What has the highest exposure to Vega?
Options At the Money and those with High Extrinsic Values.
Remember, Volatility scales with Time, contraction to expansion.
By Example:
Implied Volatility is expressed on a 365 Day Basis.
$100 Underlying Price
Implied Volatility = .25
We can simply calculate the Range for the Underlying Price
for the next 30 days:
1 Month Range = $100 x 0.25 x Square Root (30/365)
Or $3.45 either side of $100
Or $103.45 to $96.65
or a $6.90 range.
Finally - and of extreme importance: The shorter the Duration the more Extremes in Volatility
affect Price.
A large Decrease or Increase in an Underlying Assets price will have a far more pronounced
effect on Options of shorter Duration.
Melt ups and Melt Downs can be anticipated for Large moves in Leverage and isn't this what
today's Options Trader is seeking.. the answer is yes, absolutely.
The Setups require patience and an Edge over the Greeks.
________________________________________________________________________________
Rho - Measures the sensitivity of the option price relative to interest rates.
A benchmark Interest Rate increases by 1% - Option Prices will change
by Rho's Value as a percentage.
Rho is presently within an arrangement unseen in prior Cycles, be it Business
or Credit.
The Treasury Curve, as well as the Effective Funds Rate, have direct Impacts
upon Rho.
Underlying's Alpha (Which has lower Volatility and higher Pricing Power) has less
sensitivity to Rho - to a point, a point where Rates become too burdensome
on the Economy.
Underlying Beta (Which has Higher Volatility and Lower Pricing Power) has more
sensitivity to Rho as forward Earnings are more steeply discounted to Low Beta or
low to high Alpha.
Given the tumultuous environment currently, Rho is being turned on its head as this
Cycle is quite frankly unlike any in history. it Rhymes, yes, its repeat will be similar
to Long Cycle Durations.
This primarily due to the expansion of Credit and Default/Liquidity Risks present
which are unseen in Human History.
In prior expansions, rising yields had a profound effect on Bank's Balance Sheets.
That was then, Rho would provide a lift to Delta increasing the Value of an option.
The exact opposite is beginning to occur now and will likely stay in trend for some
time.
The math is exactly the same as above, this is where you, dear trader get to exercise
your skills in what you have learned.
Reminder:
Delta and Gamma are Price Calculated in $1 Increments.
Theta, Vega, and Rho are Percentage Calculated in 1% Increments.
________________________________________________________________________________
This week will be particularly challenging given the sheer size of this Expiration @
Quad Witching in Septenber 16th.
With CPI due Wednesday and the FOMC the following week.
It's going to be Volatile in the extreme.
I hope this helped you in gaining an Edge with respect to trading Options.
Trade Safely, with the Edge, and Good Luck this Week.
- HK
Please remember the VIX roll to Settle Strategies I discussed here -
Gamma Levels StrategyHello Traders!
I am presenting in action how I trade intraday using Gamma Levels in Intraday trading. I discuss setups, SL and TP placement as well as market behaviour, including positioning of Smart Money from Options & Darkpool markets. I also introduce my personal Money Management approach, as this is key step in order to be successful (profitable) trader.
How a 17 Billion Fund Hedges DeltaJHEQX - 17 Billion Fund - Delta Hedging Flows
Today, I’m breaking down the hedging flows of the JHEQX strategy I have been following.
The idea is simple.
Large fund means you know the dealers position on the trade. Since they remain delta neutral, one can anticipate if the dealer will be buying or selling delta as the price moves up or down.
POSITIVE GAMMA (Supportive)
Dealer will Buy SPX / Futures during a decline and Sell SPX / Futures during a Rally.
When the trade is Positive Gamma it acts as a supportive force for the markets.
As the price of SPX moves down near the put strikes, the strategy delta hedging will flip negative.
NEGATIVE GAMMA ( Volatility )
Dealers delta hedging will move in the same direction as the market. Sell lower, Buy higher.
When the trade is negative Gamma it increases volatility in the market.
DELTA GRAPH
The delta graph represents the rate of change and direction this strategies deltas will move.
You can see today (Aug 28) the curve is muted and doesn’t change quickly.
Inversely, the deltas rate of change accelerates the closer to expiry the options get.
How does that help?
For one, you know where the strategy moves from a positive to negative gamma (is volatile or supportive).
Two, you can anticipate the magnitude of volatility or support.
Hope you enjoyed your gains as notified, prepare for more!I predict the stock. I know the stock. I’m 8-Ball for stock :)
I’ve been watching this stock for 17 months. Almost every. Single.. day..
I can say a few things… I confidently understand algos being used. I confidently understand MOASS is tomorrow. I confidently understand apes are unmatched. I confidently understand we can buy more each day and it will still be a good price no matter how many digits..
No cell. No sell.
DRS DRS DRS.
Follow me for more GME posts, to the moon gentlemen. I’m proud to be sharing knowledge on my favorite stock in existence and I can’t wait til we are all as rich as they are, without cheating.
APES FOR THE MOTHERLANDDDDD!!!!
DRS DRS DRS
Check out all of my other ideas for consistently accurate GME price prediction as well as theories and discussions.
LINK TO LAST POST I NAILED 110%
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Automatic Gamma Levels Spot alternative on TradingView? Sure!By combining Options expiration data, DarkPool & process it by Machine Learning algorithm, we can get another perspective of market picture. One of the services is already trying to provide this data, however so far it requires manual work in order to apply those levels on the chart. I provide a way for automatic level recognition valid for intraday session, based on data calculated by ML/AI algorithm, exported to Quandl database and imported to TradingView indicator. When you add to that Call & Put Wall levels I publish on website, you will have all information in hand that you can use for intraday trading.
I provide current for the moment of writing analysis snapshot of 4 majors with applied Gamma Levels as well as key levels from Options&Darkpool data market. If you want to learn more and start having edge on the market (information is the key!), you will for sure find more details at my profile ;) I wish you all Big Profits on the market!
Oil shift to downtrend? Options and AI whispersWe can observe at the beginning of this week major shift in sentiment of the traders with Oil in their portfolio. As previous week still we saw money put on 130$, this week the last major level as Call Wall is at 100$. I would even include scenario that around that level we can go slightly higher due to Virgin VPOCs at 102 and 104.5 - still though it should be short-term run and only possible if wet closer to 100$ first.
So far we can observe downtrend on Oil. If 92.2$ will be broken, downtrend can continue. The next major Options and Darkpool markets Support lays at 80$. Before that there is no other level (so far) that can stop this move.
Buckle Up ButtercupI have been following GME forever. I have even gone to that little movie that was created to show my dedication. I have GameStop merchandise and clothing. I love this company.
Lately things have been feeling different than usual, I still expect time to do its duty, as well as catalysts to potentially increase our duration at these levels as well.
Soon however, GME will be more than a stock.
Soon I expect large green bars.
Soon.
Buy. Hold. DRS.
Want a choccy milky from the gas station to fill ur tum tum with num nums?! NO!!!!
Because save $$ -> BUY -> HOLD -> DRS
I LOVE YOU ALL
GOODNIGHT
(NFA)
Market Positioning on Q's and SPY$SPY
Gamma Environment: Positive (289mn)
Key Gamma Levels:
5th
465 - R3 resistance
460 - R2 resistance
458 - R1 resistance
452 - S1 (First Support)
450 - S2 (Second Support)
447 - S3 (Third Support)
Views:
Vix no longer remains bid maintains a clear path below 18, given the current stats and the 100% spike the past would suggest we don’t see another spike till mid-2023. That being said, the key catalysts for vix that remain include an unexpected fed hike intra meeting. Major escalations from Russia on the Ukraine side.
VIX levels based volatility range of +1.2%/-1.2%, Negative gamma environment volatility is likely to continue to be more muted given the VIX’s current levels and as hedges begin to wind down.
SPY pushed into negative gamma territory (short term) and long term (now at $-1.4Bn, down from $1.03bn yesterday looking two months forward). We now look ahead with a cautious view on direction as we reach a tilt on direction. There still remains opportunity for bulls to take this up as the negative gamma environment skew provides short term charm flows in favour of bulls should we stagnate.
Call volumes -16% and put volumes -2% with puts now up to 2.2x the volume of calls. Following this drawdown there provides room as mentioned above to give a move higher should call buyers begin to step in. Note though that this volume is isolated to SPX and so in this case the underlying seems to have been the main driver in indices action. As a result we place an eye on TSLA/AAPL/MSFT contracts to see if volume continues to push in as there is likely to be some more put unwind in these names. As calls are likely to have unwound for the most part since last week already.
10 Delta Put premiums (465C) vs call IV (at the 10 delta, 445P) across duration remain at 1.1x on an IV basis (at parity), the skew here suggests puts are now much more favourable than before (explaining the increase in negative positioning) vs calls and even more so in the short term, so we expect some resistance going lower than 450 due to negative positioning at 452.
-2% on calls -16% on puts
OrderFlow
For order flow perspective levels please see the levels provided in the chart. See these lines as “barriers” to overcome and if done then price can be “accepted” into areas where previous buyers (Navajo white = up volume) and sellers (purple = down volume) wanted to engage up until points where there are much greater levels of volume. These are areas that you can consider as greater points of resistance.
Calls/Puts Volume
Bull Scenario
Above 4600 (with continuous bid at 4580) ($ES) additional call buying to increase up the chain at further expiries and up the chain would be needed to continue this drive up. Note the skew toward call buying has lightened dramatically but a portion of short date puts are still set to unwind (see screenshot). The majority of flow is likely to be driven by TAAN. (TSLA/AAPL/AMD/NVDA) given they attributed for ~3million contracts. Continuous exhaustion @ 4600 (we are at 4581 as of writing - having found brief support at 4520) in the first 30 mins defines whether there is a clear aggressive direction and a move above could set us up for a hold above 4600 should positioning continue to drive higher. VIX crush below 18 will also help produce the environment we expect.
Bear Scenario
If we maintain below 4550 in particular we’re interested in further sell off as this level provides a key level down. That being said this will be a difficult area to break. A break below this could generate sell down to 4500 as Vanna flows above drive us lower and with put gamma at 4500 and under increases exponentially. This begins to act as a magnet to price with selling intensifying from above and below. We would need to see call buying decline in AAPL/TSLA as well as semi weakness. VIX climbing over 20 and hold above 22 then signs that VIX is being bid and presence of further downward trend are present are increasingly there. We would also need to see some weakness in big tech particularly and strength in gold miners and other precious metal cos (NEM, GLD,SLV etc)
$QQQ
Gamma Environment: Positive (-74m)
Key Gamma Levels
5th
375 - R3 (NQ -15371.0)
370 - R2 (NQ - 15166.0)
369 - R1 (NQ - 15125.0)
368 - S1 (NQ - 15084.0)
365- S2 (NQ - 14962.0)
360 - S3 (NQ - 14757.0)
Views:
Q’s positioning moved out of negative territory with AAPL buyback news leading the charge higher the move of which was a result of negative deltas that had to be bought back. Concentration at 375 is an area that could provide more pull higher should we break higher.
Put IV to call IV is even (Puts 1.1 vs Calls ) the 10+/10- Delta (379 vs 359). Despite the drawdown puts are reasonably priced vs calls and as a result we may expect more drawdown should puts continue to increase down the chain. We continue to review VIX and look for this to hold above 20 to determine an increase in puts.
(Key themes below still stand)
A key eye remains on energy names as we look to see for continued flow out of equities, though this doesn’t seem to be the case. This is important for more drawdown, without strength in commodities we are unlikely to see much lower. We also noted weakness in steel, copper etc though a downtrend is yet to be confirmed.
(Unchanged)
Bonds: HYG to maintain weakness as will help indicate much lower which seems to be the case thus far. Weakness/Strength in Gold & Oil should help with this continued upside. Note that the flow into energy stocks whilst initially seemed to be increasing still seems muted so this hesitance may be off the back of worry heading into the next business cycle where demand destruction is expected. Another indicator being china home growth.
FANG (Big Tech) had 124% increase in net positioning $490mn net gamma from $218mn, this positioning is an outlier in comparison to prior levels and is now reaching zones similar to February where we achieved a major rally. With breadth improving too this provides an extra boost and likely move higher to the Qs, though the window remains short for this week.
A continuous bid at 370 (15166.0) is key to demonstrate lack of bearish bias and unwind of any put flows bought. Maintain a view of AAPL, TSLA, GLD, NEM, HYG, CRWD, DOCN, PANW, ARK, XOM, XOP, SLV with the commentary above in mind.
OrderFlow
For order flow perspective levels please see the levels provided in the chart. See these lines as “barriers” to overcome and if done then price can be “accepted” into areas where previous buyers and sellers wanted to engage up until points where there are much greater levels of volume. These are areas that you can consider as greater points of resistance.
Bull Scenario
If we can hold above 370 (15166.0) with a move higher into (ideally above) 375 (15371.0) into the close, additional gamma levels would need to increase further( particularly at the 370 mark) up the chain and as a result positive deltas would need to bought higher. The negative gamma in short duration below should also continue its last legs and decay with this effect resulting in pops in the final market hours. We would also want to see the VIX continue to drawdown and maintain below 18.
Bear Scenario
Maintaining below 368 (15084.0) should result in the decline down to 365 (14962.0) and 360 (14757.0) potentially on the cards should VIX remained elevated with a gradual increase. Strength in commodities and weakness in AAPL/TSLA in particular especially at 177.5 will demonstrate a lack of bias to the upside. As mentioned above we would want to see SLV, XAUUSD and CL (Oil) get a bid (noted in call vs put volumes as of late).
Any questions,
Hit me up on twitter @Vexxly.
Appendix:
Key Terms:
Key Gamma Levels:
Areas to identify for key support and resistance i.e. a call wall can act as a resistance zone as call buyers sell as we reach closer to the money and so MMs will re-hedge accordingly
Negative Gamma = Increased volatility
Why? Because MMs are enhancing volatility and flows are supportive of direction
Positive Gamma = Reduced volatility
Why? Because MMs are suppressing volatility and flows are against of direction
Gamma Environment (Negative/ Positive)
Vol Trigger (Where gamma flips through a key negative level and reinforces flow, as MMs re-hedge)
R1/R2 resistance - resistance level one etc
S1/S2 support - support level one/two etc
Note:
This information was never intended nor will ever be considered a place to give or receive investment advice. This information was created for the sole purpose for education and fun. Anything said by anyone on this commentary should never be taken as investment advice. Do your own due diligence before making any decisions to invest your money and seek investment advice from a registered advisor should you choose to do so.
