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Cemkarsan

Sticky Inflation will cause a Second Leg DownThis idea is to emphasize the risks sticky inflation will have on the world economy. The idea is my own interpretation of Cem Karsan warning on Aug 18th. In the 9 minute interview with TD, Cem warned everyone of the recent decline to the Day of. 19th. He also used the words "Time to be cautious" nearly 10-15 times in a 9 min interview that was incredible. ----------------- Notes from Interview along with my charts to explain ---------------------------- Realized Vol over the last 30 days is structurally higher than where the vix is We have naturally slide to lower fixed strike vol OTM Calls are at a steep discount That is a function of vol being compressed into a decline As that happens, Vanna and Charm flows gain strength. These are buybacks from vol compression Dangerous Period, Quarterly Cycle VERY IMPORTANT TOPIC FOR PEOPLE TO UNDERSTAND If you look at the Feb / March 2020 Covid Decline this is a great example OPEX in March and September are a time to be cautious. It means that the Tail is Fatter of the distribution OPEX FLOWS IN LOW LIQUIDITY ARE CAUSE FOR CONCERN. The Way I measure low liquidity is with a popular GAMMA index to track liquidity, G AMMA has been its lowest levels for longer since the pandemic Crash in Mar 2020. The Feds sticky price inflation has actually been very strong, you haven’t heard much about that China is coming back on and Stimulating which should ironically stem more inflation and harder for long term inflation to come down. If you look at the 10 year, its starting to RAMP back up and DXY (the dollar index) is also ramping back up Inflation is likely to remain, even though it is likely to decline, longer term inflation is likely to stabilize at higher levels And make the Fed be much more aggressive going forward. That is basically what the Fed has been telling you none stop for 2 weeks, but the market just hasn’t been listening CEM ended the interview with these words... The slide in the skew in the market is particularly dangerous
SP:SPXShort
by SPYvsGME
6
Following the Croissant CrumbsI've been a big fan of Cem Karsan for some time. Cem is a volatility expert, one of the best. Check him out on twitter at twitter.com ------- This new series, Following the Croissant Crumbs, will focus entirely on Cems appearances on podcasts. I'll put all my notes of his appearance along with charting some key crumbs he leaves behind for us to find. check it out if you want to listen at: twitter.com Most of the notes are merely observations from the kung fu master. -------- Options Insider - Cem Karsan - Friday Dec 18 HOLIDAY UNPIN & OMNICRON Thanksgiving Holiday Vol was suppressed. Pin removed after thanksgiving Vol well supplied. People have been broadly hedged. Makes larger moves down more difficult. Everyone sees what has been going on with individual stocks. Breadth has been Aweful 30% of QQQ stocks above their 20d moving average Longs/Shorts having a tough go at it. Structural Weakness under the hood Vol complex however has been broadly supportive. QUAD WITCHING Quad Witching you tend to have positive flows leading up Vanna Flows coming from the decay of time until expiry Big Quarterly Expirations have been significant Big moves coincided with fed meeting on Wednesday Was high vol priced into Event Vol CRUMB - As event Vol comes up, you tend to see things push higher. Got the big spike on FOMC Big spread on 46.5 47.5 range on 23rd expiration Really good (ICHAN) players front running the big VANNA moves up - Sells puts, then price goes up. Then right back down because of all the blood in major long / short names. There is structural weakness when/where vol is less supportive, noticeable in the nasdaq to the downside. CRUMB - thinks it will change sometime in the coming year. Nov26 - omicron - debt ceiling - vol popping Vol remained in rallies and selloffs CRUMB - Tug of War from vol as vanna steps in. Bigger moves up and down were expected DEC 3800 puts, trade at the offer, right at the bell on a reversal, the next day up Couple margin taps on the shoulder Led to high skew Good sign at a reversal Skew and margin protection means at the end of the stress. Bigger structural tug of wars Whats different is the speed at which we revert to the mean on VIX —————— ROLL YIELD moneyfortherestofus.com Commodity, Bitcoin and VIX ETFs enter and exit futures contracts to maintain exposure to the asset they are tracking. If the futures contract price increases during the holding period, then the futures contract holder earns a positive return. If the contract falls in price, then the futures holder has a negative return.  The roll yield is the difference between the futures price return and the spot price return.  —————— SUMO MARKETS Why is VOL reverting to mean so quickly now compared to earlier in the year (Jan took months) More leverage in the system now. Been increasing for the last 2 years New participants in capital markets Sumo wrestlers don’t move not wanting to move on either side. leptokurtic distributions causing bigger spikes but also quicker reversions back to mean. When one slips, the moves are much bigger Amidst many historic points * Pandemic * Evaluations * Quantative easing * Bond Markets * SPACs * Short Squeezes Bigger hedging as a result. Increased VANNA and CHARM flows Leads to real crazy rotations, like we are seeing Real structural weakness like we are seeing with Breadth in the market. --------- What is Market Breadth www.investopedia.com Market breadth indicators analyze the number of stocks advancing relative to those that are declining in a given index or on a stock exchange, such as the New York Stock Exchange (NYSE) or Nasdaq. Positive market breadth occurs when more stocks are advancing than are declining. This suggests that the bulls are in control of the market's momentum and helps confirm a price rise in the index. Conversely, a disproportional number of declining securities is used to confirm bearish momentum and a downside move in the stock index. IDEA. What if we are in fact in a BEAR & BULL Market at the same time! -------- New VOL futures products coming in FEB. Provides more flows. Fixed Strike VOL. Options Side Been muted given the moves. Because of higher skew S&P skew came down dramatically. Higher spikes into declines Harder to do put spreads when skew is flatter Which is likely to have a bigger effect on vix futures into decline Added convexity to declines IF we get more declines from here ———---- SEASONALITY Broadly vol is high JP Morgan trade Big trade in 2 weeks. Well supplied in next 2 weeks in index land End of year vol supply 500 trillion dollars of LONG assets in the world +80 trillion this year alone A big chunk of that is likely to get added JAN 1st Santa Clause rally at the end of 2018 tends to be even stronger from a decline VOL is part of that feedback loop that is seasonality A lot of potential energy in the system Vol is likely to get compressed going into the end of the year ----- VCP Trade from Friday -------- -------- There is pain out there but likely to result in moving higher short term. * JAN new bar for CPI numbers * JAN liquidity flows * BIG JPM Trade in 2 weeks SKEW Take 2 moving parts Call wing and put wing Only updated once a day, not for intraday Obvious Skew High = Don’t Buy Puts Looking at money net Dealers and Makers look at it as Delta Sticky Skew based on vol, delta, 1 STD DEV When you look at DSS It can be quite mean reverting When Skew Is High Far OTM puts are short by dealers Leads to by back of delta Easy to hedge when skew is high, VOL is Cheap Like put spreads reflexive support when skew is high Important to understand position on the tail To understand flows I'll break some of the Crumbs down in updates later tonight and some new chart ideas.
AMEX:SPY
by SPYvsGME
1