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Derivatives & Options Trading
Derivatives & Options Trading
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Some of my favorite charts, but first a direct answer to your question in case the reading is too much:

What is the difference between the Japanese bubble controlled by the BOJ and the everything bubble controlled by the fed?

Both central banks are attempting to mask the fact that the value of assets have fallen because they were overvalued during excessive boom periods, and they are doing so thru a process that is effectively currency debasement, but not so obvious as to greatly cause consumer price inflation (people will argue this point, but they are splitting hairs and missing the bigger picture).

Are the overall motives and goals of the Fed today different or the same as the BOJ in the 80s, and how does that impact how the everything bubble pops, and when?

More or less they are trying to prevent the wealth destruction of the soon to be fully retired Baby Boomer generation, which if allowed to occur would make our current politics look like a friendly campfire singalong.

I personally would argue that the bubble did pop, but no one noticed because they think in terms of dollars and not in terms of notional vs real value. It is being masked from people, which is why we have everyone running around angry, but no one sounds like they know what the fuck they are talking about.

Ok, go grab a drink, I tend to write ALOT and just brain dump when I come across questions like... (More)

Weston NakamuraVisionary
Real Vision Exchange Manager, Programming and Community Engagement

How to EXIT trade: Short China Tech / Long US Tech (Short CQQQ / Long QQQ)

Its time to lock in gains and begin to close the trade.

The objective of this pair trade was to have a market neutral, net zero cost, reduced directional volatility, easy and straight forward way of betting against Chinese tech equities on further Chinese gov control actions (particularly tech focused), while maintaining US tech equity long exposure. Index ETFs (QQQ: Nasdaq100 / CQQQ: China tech) remove the single stock headline volatility single day double digit short squeeze risk, while providing significant enough movements to matter (as foreign investors in particular will go from stock picking which names will be at risk → indiscriminate broad based sector wide selling).

It seems that has been playing out quite well. Since inception, if you were just short CQQQ, you’re up 15% as of Mon close but took massive risk with unlimited downside exposure. If you just were long QQQ, you’re up about 4%, not bad for 1 month on an index. And if you were long QQQ funded by proceeds from short CQQQ, you would be zero cost out of pocket +23%, outperforming just being short CQQQ by 8% and just long QQQ by 19%.

You were also able to avoid drawdowns, which takes the psychologically driven emotional trading out of it and allowing you to keep the position on. For example, if you were just long QQQ opened on July 1, and enjoying a +3% gain by mid July - then on Mon July 19 when markets globally were deeply red and... (More)

Strong Hold In Small-Caps, Yields Reversing?

What are you all seeing? Rates bottoming here at the 50% retracement? Seems like that was the catalyst coupled with a strong BTD mentality in risk this morning. Small Cap proxy IWM holding all key levels with energy leading the way. 

VIX reacted to the short term resistance this morning. I know that several folks were talking about getting into a long volatility position over the last couple of weeks. That idea must have worked out well. Great call on that front. Are you all changing your stance here or looking to see more volatility? 

Weston NakamuraVisionary
Real Vision Exchange Manager, Programming and Community Engagement

The Crude Reversal off OPEC: $65 is key

yesterday as crude dropped -7% on OPEC headlines from Sunday, @Max Wiethe posted a market contrarian bull case (which I hope he acted on at least for a near term trade - though I know flipping blinking ticker symbols around as per idiots like me is also not his style), @John Ahearn also presented a pretty solid geopolitical case scenario on Saudis risk - see here → Term structure is king...Is it time to buy oil?

Although I was summoned by Max, I have nothing of value to add to that discussion on the geopolitical end. However, I did/do from a markets price action perspective, in which I explain how while crude directionally down is of course OPEC headline triggered, OPEC driven selling isn’t what’s behind the -7% single day drop in crude. Maybe -2% was OPEC, and the rest of it was US crude derivatives trading mechanics, which I’ve copy/pasted below this corresponding chart of crude from Asia market open until US close ↓

(from my post reply) Speaking of “max pain” strictly from a markets price action and technical market mechanics perspective, the size and velocity of the price drop was just that- sloppily executed (re)positioning. This headline came out on Sun. Mon at Asia open (sun night for you guys), saw a literal -1% flash crash instant rebound to flat, then starting Japan cash open to AM close a drift -1%, which was recovered back to flat right at cash close. Then EMEA comes in and sells... (More)