On Friday Croissant assessed the state of the market on TD Ameritrade Network
In the assessment, CEM enlightens us to the short term options market outlook.
We are still within the window of weakness (no vanna or charm flows) before the fed announcement, but time is not a bears friend.
It's speculated that taper will begin in Nov and will be announced in tomorrows fed meeting.
There are 2 supporting factors driving the next few weeks after the fed meeting in options flows.
1) Fed Meeting passing (end of vol event) will provide support as event vol comes out of the market.
2) HUGE JPM quarterly trade. (end of September)
Both are lined up to provide support. CEM points out to watch the flow levels between 430 into 440.
The Opportunity
SKEW is very high.
Term Structure is very steep.
PUT / CALL SKEW is elevated meaning there is higher put open interest.
The steepness of that curve, the pricing (premiums on puts x2 that of calls).
Sell What is high (Puts)
Buy closer to ATM VOL & GAMMA
This force is suppressive. It makes it hard for the markets to decline.
Usually into a rally and a blow off top which we saw today at Market Close.
If you haven't already, check out Cem Karsan.
Cem retweeted @Barton_option thread breakdown of the Evergrande events.
I suggest reading the entire thread.
@Barton_option ends with:
END/ After the short-term emotional sell-off is over, US equity market is probably going back to whatever track it was on before the Evergrande default.
In the assessment, CEM enlightens us to the short term options market outlook.
We are still within the window of weakness (no vanna or charm flows) before the fed announcement, but time is not a bears friend.
It's speculated that taper will begin in Nov and will be announced in tomorrows fed meeting.
There are 2 supporting factors driving the next few weeks after the fed meeting in options flows.
1) Fed Meeting passing (end of vol event) will provide support as event vol comes out of the market.
2) HUGE JPM quarterly trade. (end of September)
Both are lined up to provide support. CEM points out to watch the flow levels between 430 into 440.
The Opportunity
SKEW is very high.
Term Structure is very steep.
PUT / CALL SKEW is elevated meaning there is higher put open interest.
The steepness of that curve, the pricing (premiums on puts x2 that of calls).
Sell What is high (Puts)
Buy closer to ATM VOL & GAMMA
This force is suppressive. It makes it hard for the markets to decline.
Usually into a rally and a blow off top which we saw today at Market Close.
If you haven't already, check out Cem Karsan.
Cem retweeted @Barton_option thread breakdown of the Evergrande events.
I suggest reading the entire thread.
@Barton_option ends with:
END/ After the short-term emotional sell-off is over, US equity market is probably going back to whatever track it was on before the Evergrande default.
