JHEQX: ITM vs OTM
Trading would be completely boring if there wasn’t a fintwit argument over market effects.
Leading up to this week it was all about the santa rally which was muted the past week by a pinning effect of significant gamma in SPX expiring around the 4800 mark.
The only topic of interest seems to be around the JPM quarterly collar trade.
I recently pointed out a video suggesting that futures would need to be bought today as a result of this trade.
It would seem that is not case according to the last croissant crumbs.
The JPM collar outlined here is the point of interest.
While some are suggesting that a significant amount of delta will need to be bought today to the tune of 8 billion worth of spx/futures.
What our volatility master suggests is that this is a delta neutral trade and the effects of the trades delta on the day of the expiry have already been priced in the market.
The effect was bananas for Gary and the result was compression of volatility if the trade is closer to in the money (ITM).
I mapped the trading day in this chart and you can see the moves on the day which is fairly muted and consistent except in September when the trade was Out of the Money (OTM).
You can also see below the trend in vol compression 21d before the trade date is consistent except when the collar is OTM vs ITM.
Leading up to this week it was all about the santa rally which was muted the past week by a pinning effect of significant gamma in SPX expiring around the 4800 mark.
The only topic of interest seems to be around the JPM quarterly collar trade.
I recently pointed out a video suggesting that futures would need to be bought today as a result of this trade.
It would seem that is not case according to the last croissant crumbs.
The JPM collar outlined here is the point of interest.
While some are suggesting that a significant amount of delta will need to be bought today to the tune of 8 billion worth of spx/futures.
What our volatility master suggests is that this is a delta neutral trade and the effects of the trades delta on the day of the expiry have already been priced in the market.
The effect was bananas for Gary and the result was compression of volatility if the trade is closer to in the money (ITM).
I mapped the trading day in this chart and you can see the moves on the day which is fairly muted and consistent except in September when the trade was Out of the Money (OTM).
You can also see below the trend in vol compression 21d before the trade date is consistent except when the collar is OTM vs ITM.
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