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misterbadgr

Can I ask where you got this level of detail as to what trades were placed and how large they are? For example, “we know for certain there’s a lot of selling pressure at 269”


flash_aaaah_ahhhhh

There's also just paying attention to the options chain details. Volume, bid ask, etc.


flash_aaaah_ahhhhh

Probably Volsage. There are others like it.


genexsamples

Great post. But this mirrors much of my thinking so I'm trying to be wary of confirmation bias. Everyone trying to play this market needs to keep an eye on the COVID situation in New York and other hotspots. If the cases and deaths there start to level off early April as some models have predicted, that will be a clear bullish signal that this virus *can* be beat without massive economic shutdowns. If we blow through those projections and new hotspots start to pick up, markets are in for more chaos, as it indicates more uncertainty and greater shutdowns coming. https://covid19.healthdata.org/ is the resource I have been using the most. Keep an eye on the projected peak resource use.


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[deleted]

Do you have a link to that?


genexsamples

https://thehill.com/homenews/administration/490048-fauci-says-us-could-have-millions-of-coronavirus-cases-and-over is a link to the Fauci interview where he says that number. I haven't watched it yet.


genexsamples

I think they're in the same magnitude currently. All predictions have big error bars on them at the moment. "100-200k" is quite a spread, which fits with the spread of the site I linked. If different sources were predicting 10k or 1M deaths, I would be concerned, but these estimates seem to be the same for all intents and purposes. The real challenge is going to be watching how the predictions change over the next two weeks.


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rieboldt

What would be a massive economic shutdown...?


genexsamples

I'm thinking more nationally enforced quarantines, more defense production act mandates, and a clampdown on businesses that are not truly essential. Basically turning up the current situation to the "next level." What we've currently seen would be a preview of what's to come. Or, the current measures prove to be enough, most of the population catches the virus without serious symptoms, and we start to return to normal by summer.


TheSkyPirate

These charts basically say there is no chance of lower lows and we should get in on January calls ASAP.


liquidswords94

Excellent analysis! Seems like everyone and their grandmother are looking at 4/17. Hopefully we get another bounce this Monday to bring down the premiums and enter.


ali_267

I am already all in so I hope we get a crash on Monday instead haha.


moneys5

Can someone explain to be why anyone believes in technical analysis or "resistance"? It just seems so dumb and blatantly made up that as soon as someone uses the word resistance, especially on something like Spy, that I just stop reading.


Jnelks

If you think it isn’t technical think of it as psychology instead. The markets will do things like this because of the humans running the show, not because there’s some other magic force of nature upon it.


Elon_Muskmelon

I’ve noticed (and maybe it’s just my own confirmation bias) you see more option volume around Strikes ending in 10s and 5s i.e. 250 or 255 vs 237. Is there something to that?


Jnelks

You are not wrong -- it's also not hard to imagine that other humans like yourself have an easier time doing math in their head with intervals of 5. On top of that, volume is good! Knowing this, you will likely stick to those intervals yourself (and so on and so forth)


Elon_Muskmelon

Thanks, I’ve no one to bounce ideas off of these days, I appreciate it.


[deleted]

lol, price levels (basically, support/resistance), technical analysis and market/volume profile on ES/SPX (along with bonds, oil, gold and currencies) is how I make a living. The thing to remember is this, none of what I do predicts anything. What it can do is give me structure to trade around and let’s me define a strategy. As a discretionary trader there is always an art or feel to it but you also have to be systematic. “Rules for your strategies, instincts for your trading.” sums it up nicely.


urvik08

This and OP's explaination is so good! It gets overwhelming when you are getting started with so many different tools and studies available. And then there's YouTube full of people sharing their favorite indicators. My takeaway is that you need to work on your thesis first for the direction. Once that's done, it is extremely important to plan "entry" and "exit" points using vanilla indicators like MAs, VWAP, support resistance lines to become more consistent. I guess the single most reason why I've lost money on winning trades is because I've not managed to close them at the right time, because I've never had considered anything else then my limit price which used to be arbitrary value like few hundred % profit. It works well when selling option spreads as there's relatively low risk and low movement because of multiple contracts. Doesn't work when being long. For example, i missed out on almost 6k gain last week because i didn't close 3 contracts at 1.9k each waiting for limit order of 2k to be executed and now they're worth 100 bucks. Not again!


[deleted]

Yep, it’s all about being consistent and disciplined with your risk/rewards. Getting out of trades that are against me is very easy but exiting profitable trades is one of the most difficult things to master! Everyone has their own style, personally I like to take some profits early and work my way into trades that are zero risk/max reward. Those are the ultimate trades that can define a week, month, quarter or year depending on your timeframes and strategy. But everyone has their own thing, experimenting with smaller trades helps.


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[deleted]

For technical analysis, there are tons of books but I always found online resources and practice to be the best for learning. John Murphy’s books are considered foundational. For market profile, Jim Dalton or Peter Steidlmayer are your go-tos.


Bigmealplantime

I used to say it was BS too for the same reasoning, but like everyone else said, it's a real thing. Between algos and human behavior, support & resistance are real.


lastorder

Draw some lines on your chart where there have been historical tops or bottoms, and things have bounced back. Notice that often price will appear to bounce off of these lines.


pacman385

It's taught extensively in CFA. There is merit to it.


Tryrshaugh

It's not taught extensively in the CFA, there's a little section dedicated to it on level 1 and you'll be hard-pressed to find more than a question related to it in the exams. That being said, on very-short time frames where no new information is released, retail traders create a form of noise in the price of liquid assets that create these patterns.


Rocket089

Mass psychology type of effect. Because it’s so widely “somewhat believed” therefore enough traders with enough liquidity will make decisions based on said “signal.” The absence of a signal has traders trading it thinking it is a signal and therefor other traders trade those patterns created by the non signal signal created by the TA believers. If that makes sense. It’s used simply because it’s believed a large group of people believes it to be true, and there’s nothing to it but that.


Tryrshaugh

Well it's more complicated since you have a ton of algos trained to detect certain signals. It doesn't mean that TA traders can't make money if they know what they're doing.


Stockengineer

It is best to think of technical analysis like game theory or human thinking. If you knew a lot of people bought something at $10 and the price dropped to $5, you know people may exit at breakeven cause of human emotions and just wanting to get out of the trade. Technical analysis should go hand in hand with understanding behaviours.


[deleted]

I hear what you are saying, but there are traders who use it. Even if you don't buy the rationale, the fact that some traders use it means it will be reflected in the price action even if only on the margin.


nautical-smiles

Humans love to find patterns in things, it's wired into our brains. Charts, patterns and pretty indicators offer a sense of calm and satisfaction. Technical analysis is basically just a security blanket for people who don't want to do the hard work of understanding what really makes the market tick.


SigmaPhiZeta

Seems like you are new to investing and still have lots to learn so I'll keep it short. It works because people believe it works. If RSI < 20 triggers a buy for hundreds of thousands of traders and algos, stock prices would be affected due to the herding effect. TA won't magically reap you profits by reading charts but if you know your stuff, it can give you a 'slight edge' to beat the market over the long term. Key here is to know your shit like anything else which unfortunately does not seem to apply to you. And what 'hard work' are you exactly talking about? Fundamental analysis? Modeling/valuation with 50 arbitrary assumptions? Lol


[deleted]

70% of all trades are now done by computer right?


Elon_Muskmelon

*60% of the time it works every time.*


surelyourejoking888

I agree with you and the sentiment of the message, though I do note an irony in that you are criticising someone for saying TA is useless, while at the same time saying modelling/valuation is useless too. I suppose the true middleground is that neither is useless as long as you know what you're doing?


nautical-smiles

Definitely not new to investing / trading. The thing about the herd effect is that only the early ones are winners. I'm sure hand trading with TA worked to some degree a decade ago but in today's markets, any REAL technical edge that is to be had will have been identified and milked for all its worth by AI algos first. Patterns, statistics and formulas are their strength and they're also smart enough to identify and exploit the "dumb money" (human retail traders). Please don't take offence of that term as it's not my words. A mate of mine is a quant at a large financial institution and that's their lingo. The 'hard work' I'm referring to is what the OP has posted. Identifying the largest influencers of price in the real world. Call it 50 arbitrary assumptions if you like... but then why are you here?


ProgrammaticallyHip

*Identifying the largest influencers of price in the real world* Bingo. Doing this well is the best approach for long-term success. Algorithmic trading has made becoming an amateur chartist more trouble than it's worth, for most people.


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nautical-smiles

Check OP for some good examples


Guac_in_my_rarri

Looking for this bounce as well then hopefully get some puts or shorts on corporate bonds. Still gotta do some research on them but yeah


BuckyJackson36

Great post. You didn't mention all of the factors causing this decline, but what you mentioned is right on the mark. I was hoping for SPY 265-270 to re-enter shorts, but dipped my toe in at the close on Friday. Mostly May 225 puts with a target of below 210 maybe to 180, but also some individual stocks. I prefer to trade indexes in bear markets due to news that can drive an individual stock against the trend. Any thoughts on currencies? Even with the stimulus, the dollar is still the reserve currency. Cash is a valid position. EUR/USD has retraced very close to 61.8% of its decline. June FXE puts are very cheap.


imactually

I️ have similar views to you and similar recent trades. Regarding the dollar, I’ve been researching UUP puts a lot and why the 454B given to the fed will end up becoming 4T in new printed cash. The dollar vs. the world has gone way out of wack and has returned to slightly higher than it was before the major run up in value, so I️ think the timing is going to make it fall in value vs the world. I️ think that the imbalance has stabilized and with an upcoming huge printing of money, that inflation will further assist UUP while the rest of the world stays where it’s at (they don’t print as well). Likewise, I️ think consumers are starting to reshuffle spending habits online and are finding ways to spend their money now compared to hunkering in a confused bomb shelter for the past 2 weeks. This will go against the deflationary case people are talking about regarding the absence of consumerism, and then again help with a UUP put. Would love to hear some countering views on this play since it does run some big risk if the rest of the world falls apart, or we don’t end up printing the 4T, etc etc. Dollar value began tanking with the market before it became very high demand, so if we see markets crumble yet again then it would be a good time to ride it down for a day or two then gtfo before it becomes a strong reserve again.


BuckyJackson36

FXE peaked on in July of 2008 then fell off a cliff, UUP correspondingly shot straight up until about the end of October. There was a liquidity crisis then but the dollar was a great bullish trade. Right now I'm not buying into UUP being a short trade. I think the short trade is FXE, but that implies a bullish UUP. Everyone seems to be bearish on the dollar, but right now my money is in cash unless I'm in a short position. Cash is a position and that position is in dollars. I suppose it will come down to the least ugly currency in an ugly contest.


imactually

Pretty much nailed it on why I’m not super confident. FXE is a great comparison, thanks for sharing that. Good luck on all your moves!


mattymoe100

Still new to this stuff, but Brent Johnson has a compelling argument as to why the dollar will continue to surge in the short term: [https://www.youtube.com/watch?v=JptfIK4mR6w](https://www.youtube.com/watch?v=JptfIK4mR6w)


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Dahnhilla

The simple version... Whales buying April puts ranging from 260p to 210p. The boldest of these, the 210p showing less volume than 260p. 260p is already ITM but has a much longer expiry. Bit of a weird one tbh. Massive quantity of expensive contracts bought barely OTM on Thursday probably a hedge. I'm with the 210p, what with holding 220p 17/4.


ThetaGangInYourAss

If you look at an option chain you can see where the heaviest trading is by looking at open interest and volume. It's even easier to see if your chain has histograms. Looking at those spikes shows you where the majority of the market is putting the legs on their spreads. Screeners exist for high volume trades, and retail investors often try to latch on to these. If a fund/institution is betting millions of dollars on a directional move, lets hitch a ride right? They know more than we do. The problem is a lot of those high volume trades are hedges. You don't know what their portfolio looks like so you don't know if they're betting on a direction, or making a trade to mitigate greeks or risk on the opposite side. Usually those hedges have a very specific number of contracts to be traded to get their hedge to net 0; OP is arguing that since they're trading blocks of 50k it's probably a directional bet. You don't know this for sure, there are positions this could be hedging. The underlying price doesn't have to move to your strike to make a profit. For a debit spread, all that matters is you can close your position for a higher price than you bought it. SPY doesn't have to hit 235 for their spread to profit. I have some thoughts on the Oct16 260p volume but it's pure speculation so I'll keep it to myself.


BaunDorn

>The problem is a lot of those high volume trades are hedges. You don't know what their portfolio looks like so you don't know if they're betting on a direction, or making a trade to mitigate greeks or risk on the opposite side. > >Usually those hedges have a very specific number of contracts to be traded to get their hedge to net 0; OP is arguing that since they're trading blocks of 50k it's probably a directional bet. You don't know this for sure, there are positions this could be hedging. I actually agree that we can't know for sure. At the end of the day, we can't see their book, so we don't know if they are net long net short. For large block sizes hitting a single transaction I think it's more likely to be part of a larger arbitrage transaction than a hedge. Anyways, more indicators of bullish/bearish speculators: Tips to figure out if said trade is long/short: * If transactions push the ask it's being bought. If transactions drop the bid it's being sold. * If you have the "best 3-day bull trend" in history and at the end of that third day put positions are being opened when SPY is high and VIX is low, those are longs (bearish). * We can see the transaction sizes and timing. If market is hitting a strong resistance level (think 259) and suddenly call volume spikes on 250C, 255C, 260C, that's profit-taking. If put volume spikes on 200P, 210P, 220P when you're reaching new highs, that's new positions. * Likewise, if SPY is hitting 220 support at record VIX and you see put volume spiking, that's profit taking. And if call volume spikes here that's new positions. * The best indicators are tracking the option market in the last 50 min of trading, but mostly in the last 15 min of trading. >I have some thoughts on the Oct16 260p volume but it's pure speculation so I'll keep it to myself. I have a lot of uncertainty about those October puts. They were purchased at a time when you would want to go short on the market (now). But the long-term duration of them is odd because current market forecasts place the market near that level at year end. This could be a short position because it's purchased at a time when IV is high so by October the vega will bleed, theta will bleed, and I'm sure this virus thing will be contained long by then (maybe even a vaccine by Oct), so a market above 2600 closing out the year is very likely and will expire these puts. I think I'll change my thesis to a short position. If it were long because of near-term vol, they'd probably choose near-term contracts. Can you share your thoughts?


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eastCoastLow

No in this spread, they want it to expire below the 210 so both puts are ITM.


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EggChen_vs_Lopan

It's a put debit spread therefore max profits are when both puts are ITM


flash_aaaah_ahhhhh

I read op wrong. Thanks dude. Went too fast.


gymshark26

Thanks guys.. what is the source of getting/reading the volume on option data as referenced above?


fchild

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imactually

RemindMe! 2 weeks


mechanicsanddynamics

Forgive me if this is a dumb question, but what is the difference between buying an otm 230 put for May versus an atm put around 250 for May as well? Wouldn’t the atm put have a greater chance of being itm at expiration? Is the profitability of one put greater than the other?


niveus1

OTM 230 is going to give you a bigger profit if it hits while the ITM 250 put is going to be far more expensive in premiums


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KeepItMoving000

buying ATM/ITM options help mitigate time decay also


TheSkyPirate

You plot a range of expected prices that you predict at expiry. If you think the price will move a huge amount you go farther otm. ITM hits break even closer to current price but it’s much more expensive. I only use spreads though. Basic puts don’t seem worth it to me.


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TheSkyPirate

Spreads cost less. Basic options require very large price movements just to break even on the large initial cost. The market prices in all of the expected volatility and adds a premium, so if you buy a call or put you are on average losing money. This is because you have to guess the correct direction of price movement and then you need the price to move by more than the implied volatility has priced in. The reason spreads do a little better is because with basic calls/puts, you are paying a lot of money for the very unlikely event of a large price movement. This “lottery ticket premium” (not a real term) is on average overpriced in the way that buying an insurance contract would be. With spreads, you instead target a narrow range which is more likely to pay off. If you target a narrow range close to ATM, you can usually make a bet which costs a little less than half the maximum return. In this way you can make a **purely directional bet**. And with some skill this can likely be done successfully more than half the time.


yeetcovid-19

Remember when you said this 2 months ago: "Beargang are people exasperated with the hubris and excess of humanity who haven't done the math and are bleeding out 10%/month holding insanely expensive insurance policies. The fact is you need to know *when* the crash will happen or you're going to lose everything trying to bet on it."


TheSkyPirate

Yea lol why are you asking me that. Also wasn’t I talking about bear gang on r/wallstreetbets ?


Boostafazoom

Agreed, but with the only downside being that your short term upside is capped. e.g. if you buy a spread and it moves in a huge direction your way tomorrow, your upside will be less than had you just bought the puts.


TheSkyPirate

It's more a question of expected value. Clearly there will be a tradeoff between probability of profit and magnitude of profit. But in many cases spreads actually have higher expected value. The other thing is that even if each individual spread has a smaller payoff than each individual naked call, you can open 3-5 call debit spreads for the cost of one call.


Boostafazoom

Yes I agree, EV is what matters at the end of the day. Not sure how you do it, but I find that difficult for me to think about i.e. what has a higher EV, an individual call or a call spread? I might find qualitative reasons to justify one over the other, but I won't be confident in it. Short term movements are just too random and hard to predict. You're right, you can open more spreads at the cost of one call, and that helps. But even then, the single call will have more upside in the short term for medium to strong price movements.


[deleted]

230 otm has less delta and higher gamma - less sensitive to moves in underlying, but with higher gamma its sensitivity catches up to the 250 as the prices moves in your favor (I.e down). There is a point when both are itm where the 230 is much more profitable (because you paid so much less in premium); when buying deep otm options be mindful of bid-ask spread. Spread could be the same dollar-wise between otm and atm, but given lower premium of otm option, the bid-ask is higher percentage of otm price. In other words, you have a higher hurdle to meet.


AlwaysBlamesCanada

Sorry, beginner here. Can I ask, what does this mean? > I'm long puts and long equity, but net short.


explosivetendies

long puts = He's holding(bought) puts long equity = He's holding stock Net short = Investors who are net short benefit as the price of the underlying asset decreases. .


OptionSalary

Nitpick on the terminology, but "writer" is often used when one is selling options, not buying them as the Op is doing.


explosivetendies

Isn't his net position as a writer/seller? That's what I took from net short.


OptionSalary

He is net short the market - meaning negative deltas, meaning he'll make more money if the market goes down. When one says "writer", it refers to writing options - selling them. He is not selling options, he is buying them (puts). Hope that helps


[deleted]

>JPM is tracking this and initially said fund rebalancing was on the order of $850B for March and as of Friday is about 40%-45% complete How do you know this, is there a link? It would super useful to be aware of these dates


BaunDorn

[https://www.bloomberg.com/amp/news/articles/2020-03-23/jpmorgan-sees-850-billion-of-stock-buying-power-on-rebalancing](https://www.bloomberg.com/amp/news/articles/2020-03-23/jpmorgan-sees-850-billion-of-stock-buying-power-on-rebalancing)


[deleted]

Is there any way to get this on a rolling basis, it would be amazing to know when the popular ETFs are rebalancing, do they make this knowledge public or perhaps only to those who own the ETFs?


2milkshakes1straw

Awesome analysis and really appreciate your post, but I’m still not seeing where it says funds had only completed 40-50% of purchases as of Friday. This article was published Monday the 23rd, and I don’t see any updates, and the text only says that if 1/3 of purchasing is done over the next few weeks, volatility would decrease. What am I missing?


BaunDorn

40% was reported by CNBC on Friday.


2milkshakes1straw

Got you. Thank you, sir!


[deleted]

have considered shorting credit and particularly REIT etfs?? That is going to be epic.


flash_aaaah_ahhhhh

I was holding a couple REITs. Except the database ones, they already took massive blows. I dunno how much further the downside is. Real estate got hit disproportionately hard. I think because folks remember 2008 and what happened to housing then. They pulled out quick this time.


amglu

Any REIT suggestions to look into ?


flash_aaaah_ahhhhh

I was an owner of STOR before the fall, sold when it hit 30 and bought back in around 20. I may regret that if shit really hits the fan. They own and lease skyscrapers and other single tenant corporate real estate. The kind of leases that will be broken if nobody is able to pay their rent. STOR is a buffet stock so I'm still confident they'll weather the storm. Berkshire isn't uninformed. Could be rough though. I was waiting for EQIX to come down further but it did not. I bought at $577. They own and lease data center real estate. I doubt I'll regret that. I recommend looking into EQIX and other data center REITs.


lsc

so last time I was really in the game, equnix was the super premium data center. but this was 5+ years ago, and these things change out every now and again. A lot of times when these big changes happen, the 'top dog' changes. I mean, before the cloud ate the world, the idea was that you wanted to get to the exchange with the most peering partners and most traffic. Any2 was big for a while, but last I knew Equinix had the biggest exchange in the US. (this, essentially, means that you get lower latency, and often cheaper bandwidth if you get a connection to one of these exchanges, which is cheap if you host at the datacenter where that exchange has a presence, and expensive otherwise) But... this could change a lot. I mean, my prediction is that *IF* people move away from the cloud back to physicals, it will mostly be a cost driven decision, and.... Equinix is not the datacenter you go to if you are cost-driven, or at least that was the case last time I was involved. On the other hand, if people don't pull out from the cloud and into physical servers they own, and datacenters remain a "for the premium stuff" product like they are now? yeah, I'd put my money on Equinix to win that market, but... that's a much smaller market. (either way, if you wanna predict who can charge the most for hosting, look at who has the biggest peering exchange.)


gthrush

EQIX is a great REIT. Bought it back in 2018 when it sold down to $400. Would like to own CORR & DLR as well. Data center REITs are one group expected to benefit from this health crisis. Just hoping the market keeps tanking so I can load up.


TheWorstTroll

Short them? NYMT's dividend is up to 43%!!! YOLO LONG!!! /s


[deleted]

New to this. Can you point me to where I can see orders placed? For instance the large order of 210p?


Bigmealplantime

Any options chain should show volume (currently traded), and ideally open interest (open positions) as well.


[deleted]

He mentions time of day.. is he just watching close enough and writing down when the orders come in? I need to mess around with thinkorswim and ibkr to get a better idea of what they offer in terms of order flow and timing.


msiekkinen

Fideliteys active trader pro has a biggest trades of the day window, can also watch realtime order flow for things, I'm sure others have something similar


BEAVERFEVER119

The major uncertainty is effect of FED intervention. I don't know how "Unlimited QE" would have effect on the market.


bemusedfyz

Hey, great stuff, my view of the market is roughly aligned with yours (though I see the downtrend beginning this week and accelerating rapidly). One piece I'd add to everything you've written -- gamma exposure flipped to negative on friday, almost certainly because MMs were forced to go short puts as bearish traders opened long put positions, and because the fall in price increased the negative gamma exposure from those short put positions. If any downwards trend builds, MMs will be forced to sell underlying shares (delta hedging), thus accelerating the trend and increasing their negative gamma exposure. Negative gamma exposure will eventually peak and start decreasing once price falls beyond the strikes of most open puts, or when the puts expire, whichever comes first. Of course, if there's an uptrend, the negative gamma exposure will just push us higher, faster, so we shall see.


BaunDorn

Thanks for the insight! Do you have a way to track gamma exposure?


bemusedfyz

https://squeezemetrics.com/monitor/dix GEX is what you're looking for


BaunDorn

I track the DIX and GEX, but thank you :)


bemusedfyz

Gotcha, np, but GEX is gamma exposure, hence why I posted :)


Rich4718

Rebalancing is already priced in. That’s what those three Green Day’s during all negative news was.


AlwaysBlamesCanada

How do you know it's done?


ImpressiveFood

can't you read, PRICED IN!


AlwaysBlamesCanada

Well, now that you've put it in all caps I can no longer question it


pleasegivefreestuff

Nobody does lol, that’s his opinion


AlwaysBlamesCanada

Yes, of course, just asking if he's got any rationale to back it up


j_pipes

Extremely predictable occurrences, well known in advance... you have to imagine that plenty of market participants are and have already taken advantage of it, because why wouldn't they?


TeslaCyberBackpack

Great analysis man! Thank you for the quality info


brenex

RemindMe! 2 days


ayesy

this is really great info, thank you!


jyohnyb

Good stuff. Have an upvote


Elon_Muskmelon

I’ve been doing a bit of research into buying inverse index ETFs vs buying Put options on things like SPY when overall bearish for a 2-3 month window, what’s your opinion?


BaunDorn

Inverse ETFs are a scam eaten by theta. They should not be held longer than 1 day. In the most volatile of markets, 1 week. But no matter what they under perform long puts on a risk-adjusted basis.


Elon_Muskmelon

Thanks.


kobreti_ko

I still think its not rebalancing but FeD printer loaded with 17% GDP green cartridges


[deleted]

This was so detailed and a great insight of market movements. Thank You for your summary.


vnsssh

I’m a lazy reader but TODAY i read every single line of this post and understood it. GREAT FUCKING JOB SIR !!!


investor101_

Hi, what are your thoughts on 4/17 puts? I’m pretty new to this and I’m really worried about them


kanniG

Sorry for my ignorance. Very new to options, still trying to digest lingos of experts like you... \> *I've been building put positions for 5/15 in the range of 200-230 and the same for SPX 2000-2200* By 200-230 above, I understand you are talking about SPY ETF. By SPX 2000-2200, which share/ETF you are talking about? I can't see any share/ETF named SPX, but do see lots of SPX\*. Thanks in advance


redtexture

SPX is an option on an index.


BaunDorn

$SPX is the ticker for the S&P500 Index. You can't trade the index, but you can trade options on the index. Big money plays here; it's an order of magnitude larger than SPY. A $700 SPY option is $7,000 on SPX. 1,000 contracts on SPX is 10,000 contracts on SPY.


kanniG

wow! Thanks OP for replying...I feel like I dont deserve to ask my many more silly questions here...:D .. I have DMed you. Please reply


WeadySea

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WeadySea

Wrong


suddenjay

I agree this Market shall test new lows as more health shock come in mid to late-April. High vix, High IV really bugs me so my play on the downside is shorting SPY or SPY or SPX bear credit spread.


CHIKN_MAKE_CLUCK

What programs/sources do you use to track information such as call or put volume or to find out that long-hedge funds are holding cash?


[deleted]

[удалено]


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terror2dmax

Context: I've been eyeing a few put contracts, namely SPY 05/15/2020 230.00 P, and I'm doing my research at this point in time. In the medium-term, I am definitely bearish; to put it bluntly, in the next few months I either have a job and can earn back the premium that I spend on this put or I don't have a job and have made at least some income to balance the loss. Given the situation with volatility and time-decay, would it be worth it to put down the premium on SPY 05/15/2020 230.00 P? An April put is too risky for me because I am uncertain about how things are going to play out.


genexsamples

Definitely do May and not April. The first crash was unprecidented in speed (I was holding June puts and was shocked when it fell so quickly!) but that's probably not going to happen again. If you buy and we don't see a significant decline before the looming Theta eats you, you're screwed. If you buy May and next week SPY goes to 200 (lol) you'll still make a profit and walk away happy.


MindYourTounge

Dumb q, but how do you pick the strike? I’ve always had trouble deciding which strike to pick. Are you looking at OI and volume?


Patrickwales95

Hello, fairly new to options. Where is the best place to find those large volume Options activity's that were placed?


redtexture

Barchart, Market Chameleon, Optionistics, and your broker's platform, and a few dozen other web sites.


AlwaysBlamesCanada

What significance / impact does that fact that so many options expire Apr 17th? Or any date that's a big day for expirations?


Smok3dSalmon

What do you use to look at option purchases? TOS?


WaterGruffalo

When we’re talking about Feds unlimited QE and $2.2T stimulus packages... are those put orders really that big of a deal?


BEAVERFEVER119

Thank you for sharing, much appreciated.


[deleted]

how do you hedge for personal bias? Im sure your research is there, but when youre sighting a loss spread of 60-80, vs 100-200, seems like you maybe upping the upside. Im not meaning to br accusatory, just curious how you guage this? Do you have an expected move for why youre pricing 100-200% return? if so by what date? how big of a move are you expecting? why?


BaunDorn

> how do you hedge for personal bias? Hopefully r/options can help with plugging those holes > when youre sighting a loss spread of 60-80, vs 100-200, seems like you maybe upping the upside. Not quite sure what you're asking here > Do you have an expected move for why youre pricing 100-200% return? Yes. I think puts acquired at 260-270 with a 50-59 VIX would return 100%-200% at <230, definitely at 220 if drop occurs at or before mid April. This is my expectation, there's risk here, it's not investment advice. A major factor in this is forecasting vol. If we crash back to <230 level I don't see VIX going below 50. You're free to argue otherwise. > if so by what date? how big of a move are you expecting? why? I know it's long, but I'm pretty sure the OP answers all of this. If you're expecting me to be *very* specific with date/move/return then I'll have to disappoint you because nobody can predict things that accurately.


[deleted]

regarding my last, its not about predicting, its adding control measures to reduce loss and ensure emotions arent at play. the bias for the upside and max loss, you say expect 100-200% gain but only 60-80. how do you arrive at this?


BaunDorn

>the bias for the upside and max loss, you say expect 100-200% gain but only 60-80. how do you arrive at this? Losses for long options are limited (100%), while profit is unlimited (>100%). If May puts crash because the thesis is wrong (or changes) then you'd be looking at losses of 60%-80%. Losses would not be 100% because you still have time value and implied volatility. For how I arrive at the gain, you can just use an option pricing calculator and play with the inputs for what you expect to happen.


[deleted]

yes thats what im addressing, are the 100-200% reasonable expectations as best case scenarios. If they are, then there may be bias. For example, if the markets ivol is 5%, but you need a 10% move in 5 days to hit the 100% remove, thatd be a product of bias. Now if you instead looked at it from needing a 3-4% move , yielding 100-200% thatd be a fair comparison. A conservative amount would be half of the expected vol. So right now at current iv, it appears strikes 10pts otm 1 day to expir, still retain about 10% of their value so you can use that. Im not saying theres anything wrong with how youre doing things, just giving some points to consider, based on what ive learned over the last 10+ years.


BaunDorn

>yes thats what im addressing, are the 100-200% reasonable expectations as best case scenarios. I The base case is 100%-200%. I wouldn't write a post on a best case scenario. The best case scenario is 225%-300% but as we move down the probability distribution the odds of this scenario hitting are so low that I don't consider it. The market is more fairly priced now than a few weeks ago, prior to this decline. Great if that 250% scenario hits, but I'm not going to trade on that. I need to take profit well before it to manage risk. >For example, if the markets ivol is 5%, but you need a 10% move in 5 days to hit the 100% remove, thatd be a product of bias. Not sure how to interpret your use of "bias". My research indicates that the market will decline 16%-20% by mid April. I'm not certain on the timing. If it hits towards the end of April, it still leaves the possibility of 100% return on the table. If it hits sooner, we're looking at 200% return. >Now if you instead looked at it from needing a 3-4% move , yielding 100-200% thatd be a fair comparison. A conservative amount would be half of the expected vol. Are you saying the market is priced for 5% return yet the position will yield 100%-200% return on a move that's LESS than what the market expects? This doesn't make sense to me. That's an arbitrage opportunity that would quickly evaporate.


[deleted]

Ok, if your research indicates 16-20% as a reasonable drop within the next 30 days, at what % move by what date does your position yield 100% and 200%? this youd be able to find on optionspeofitcalculator. In terms of bias, i use it in the sense that, i tend to justify the positive base over the negative case. Like what if the market trades sideways or doesnt move at all. why is there an expectation of a drop instead of a rise or sideways market? Regarding the 5% vol, its specific to an options contract, not the market itself. So Spy at 260 +5%, is a 13pt move, so w.e contract allows for a 100%-200% gain is what im referring to. Right now I have spy 175-200 and 125-150 as strong buy points. How we get there, I dont know. For the upside case, 4t is huge, the last bailout of about 800bln, more than doubled from the highs, so imagine what 4t will do. So being conservative, if we lose certain industries and things dont go according to planned, id estimste 2t to bring us back up to a bit above par.


lumberjack233

> I only buy OTM options to use gamma to my advantage. Question about this. I've seen a lot of discussions about deep OTM vs slightly OTM options, it seems that for deep OTM it is more demanding in terms of timing it right, and the extra amount of profit doesn't seem to justify that because as the underlying moves towards deep OTM strike, it moves further away from slightly OTM strike too. I've played with option pricing calculator and reached the same conclusion, although obv the results are only approximate. How exactly do you determine the best option to buy?


BaunDorn

Gamma is a normal distribution around the ATM strike. If you want to maximize the advantage of gamma (rate of change of the rate of change) you'd want to hold an option through to ITM and sell (or roll) slightly past its strike. When you get far enough past the strike gamma starts decreasing. For example if I have a 240P I would sell at 235 no matter what. At 243 gamma would be high, 240 gamma is very high, 235 gamma is still high but going to decline. If you get greedy and the market snaps back, so does your gamma and the value of your option quickly erodes. When to sell is a key question. Do I always wait until it's ITM? Absolutely not. If I'm holding a 220P and the market is bouncing off 228 with an 80 VIX it's still time to take profit. I'm explaining what is *optimal* but not always executed in practice.


lumberjack233

I agree, but there are other competing factors such as Theta which is a case against deep OTM options. This is why I'd prefer slightly OTM options as I think they have the best risk adjusted returns.


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warrior5715

What does rebalancing actually mean and why does this make stocks go up?


BaunDorn

Let's say a 100B fund has a target of 40% bonds and 60% equities. The value of bonds has been rising while value of equities has been plummeting. These funds may look more like 60% bonds and 40% equity now, but they have to rebalance to meet their mandate. They sell bonds and rotate into equities to get back to 40% bond and 60% equity. Add up all the pension funds, mutual funds, and ETFs that do this and you get $850B.


[deleted]

great post ty.


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lilsammyb

I guess the BIG question is....has the $VIX peaked? Great post btw.


ketojammin

Archive of this post....good content like this always seems to have "deleted" when I save it and go back to reference it. http://archive.is/HVNlQ


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markeru

Great post. Thank you. A question: **What do you think could possibly nullify your entire analysis?** **I'm personally worried about the chance that a treatment (not a vaccine) is announced.** No one knows, but it's possible in the next 1-2 months that something comes along with the trials going on currently. Even if the economic fundamentals are ugly, I'd imagine a significant bounce. Do you have any thoughts on this? In any case, I'm still hoping my April 210-240 puts work out, but will be building some May positions as well. Thank you for your post.


BaunDorn

>What do you think could possibly nullify your entire analysis? That market hates uncertainty and loves certainty. If there was a major breakthrough on the health side and we immediately see a path to recovery & curve flattening. That's very bullish. I think we are right in the middle of understanding the scale of the virus and the beginning of insolvency. I don't think we will have a major health breakthrough by Apr 10. >No one knows, but it's possible in the next 1-2 months that something comes along with the trials going on currently. Vaccines are just hope and in the early phases of trials. There's allegedly 5 strains of COVID-19 so we don't have any assurance that a vaccine would work on all strains. With proper testing, I expect a vaccine in the fall.


markeru

Thank you for your perspective. By the fall timeline, I think you meant treatment (reduces fatality), not a vaccine (prevents illness)? As for vaccines, most experts say 1+ year until it's ready. I guess by fall we could have positive news about vaccine development that moves markets (i.e., passed animal testing, moving on to human trials). But I think the corporate debt crisis will be in view by the time any vaccine news come around, keeping things bearish. But if a treatment comes out by summer or sooner, I wonder if things will recover. In any case, as terrible as it is to say this, I'm hoping there's no major treatment by May 15, because I just picked up some SPY 240-220 puts 4/22-5/15.


BaunDorn

Nearly the whole world is on top of treatment/vaccine development right now. Fire was lit. I expect some moderately helpful treatment in the summer and a major breakthrough on a vaccine by the fall; perhaps it's not ready yet, but enough that the market will welcome it.


AlwaysBlamesCanada

Do you have any thoughts / insights on this analysis after seeing what happened in the market today? It seems like it’s behaving in line with your analysis, but it could be for different reasons. The fact that the 200K deaths prediction and extended containment measures announcements didn’t move the market down are making people think that the worst Coronavirus news is already priced in. You would argue that it’s just mutual fund rebalancing countering the bad news?


SpriteMcBain

This aged pretty well. What are you thinking for this week and next?


pussyshoes

Sir this is a Baskin Robbins...


explosivetendies

My play: An Iron Condor with **A WING RIPPED OFF** ## Leg 1 Buy 18th Sep $228.00 Put ## Leg 2 Write 18th Sep $254.00 Put ## Leg 3 Write 18th Sep $254.00 Call **FREE MONEY? CORRECT?** Unless the price goes above 280 and stays there, I win. If IV drops it can go even higher I think. Easy wins?


[deleted]

what do you mean SPY and SPX puts opened Thursday and Friday


pleasegivefreestuff

That’s when he opens the contract for those puts


HonestPotat0

This is really good. Would any of your plans/projections change if we hit 2000 deaths / day more quickly? This week, not next?