Moritz Heiden Expert: Quant Finance

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Head of Quant Research MunichRe Investment Partners and one of the @twoquants

Raoul Pal already mentioned it on Friday's daily briefing, but for everyone who might have missed it: Not only will RealVisionBot continue to do his weekly summary of Interview Sentiment vs CFTC data, we will augment this dataset with the weekly sentiment of you, the users of 'the Exchange'.

All of the data, RV Bot, CFTC and User sentiment will be made available for you to play with it and create your own insights.

We are still figuring out the details, but as a little teaser let me highlight some differences between RV Bot sentiment and the CFTC this week.

The Commodity Futures Trading Commission (CFTC) publishes the Commitments of Traders (COT) reports to help the public understand market dynamics. The COT reports provide a breakdown of each Tuesday’s open interest for futures and options on futures markets and are classified into different categories depending on the reported market (commodities/financials). Broadly speaking, the categories include sell side and buy side activity, which depending on the respective group tend to depict different trading activities. E.g. market making (e.g. Dealer's positioning) or speculative (so called non-reportable positioning).

While one might intuitively think that Dealer's positioning is the most informative, this group also includes a lot of hedging activity. For example, the Dealers are nearly all of the time net short BTC futures. This is part of their market making and not really informative.

That's why I like to look either at changes in positioning, extreme data points or the more dynamic positioning of the non-reportables.

Last week (yellow-red dots), this group was very bearish regarding Equities and Oil and even slightly Gold.
What's more interesting however, is the bullishness on Volatility and Bitcoin. While Volatility is quite understandable given the circumstances, the bullishness on Bitcoin really strikes me as something relevant. It increased considerably from last week's value (blue-red dot) and is much higher than sentiment extracted from RV interviews last week, despite the Crypto interviews from Friday.

As a little addition, RV Bot is now really running like a charm and read all the transcripts. Which means I can finally debunk one of the myths, namely that RV interviews are always bullish Gold. In the second chart I attached, you can see the average sentiment (blue line) on RV for Gold as well as the bullish/bearish signals (green/red triangles) plotted against the price of the GLD ETF. Definitely some red triangles in there!

Thanks for reading, hope you enjoy the sentiment. Let me know if you want to have special graphs/insights. The Bot can now even deliver sentiment for each person of each interview separatly, so there is definitely some interesting stuff coming.

For more insights stay tuned and follow him on www.twitter.com/realvisionbot

There's a bug on the most influential user board. Monthly stats are higher than all time. Seems like the label or link is mixed up, probably it should be the other way round.

Last week's final Real Vision sentiment compared to the CFTC's Commitment of Traders sentiment. Quite some differences in opinion here. CFTC surveys are always done Tuesday and published Friday night, which might explain the bearish sentiment towards Equities, Oil and even Gold as Tuesday last week was quite a meltdown in all of the above. Also Dealer and non reportable sentiment was extremely mixed for the CFTC reports this week, which usually goes hand in hand with higher volatility. Simply put, there is currently a lot of uncertainty in the market, but you might have already guessed that...

Never put the coding quant in front of a camera....ah screw it, here you go Raoul Pal.

@all If you want to know more about the Bot, follow him on Twitter www.twitter.com/realvisionbot or have a look at the paper that analyzes the trading strategies extracted from Real Vision interviews at https://www.researchgate.net/publication/342765150_With_a_pinch_of_stop_loss_a_Real_Vision_trading_recipe

I forgot to mention that Real Vision also inspired me to start another business with my friend Moritz Seibert: www.twoquants.com
It's currently under development but we are already blogging. Our goal is to put our personal trading to the test and share the stuff we do privately with our followers. And maybe in the end even the RealVisionBot may get an allocation, who knows...

Crypto firm and exchange Diginex is planning to list on Nasdaq this September. First publicly traded crypto exchange. It's doing this via a reverse merger with a SPAC. These kind of deals have been quite popular in the past two years, so definitely something I'll be watching.

https://www.coindesk.com/diginex-going-public-is-about-more-than-a-nasdaq-ticker-symbol

What's the benefit of having an Engine like Real Vision Bot that analyzes the sentiment in Real Vision interviews on an ongoing basis? Well, for one it's more dynamic than traditional sentiment based on CFTC Commitment of traders or other survey data. Given the speed at which Raoul Pal and his team publish these interviews the mood can change quickly.

Today I included the new interviews until yesterday and compared their sentiment (white bars) to sentiment extracted from positioning data at the CFTC Commitment of Traders (red-yellow dots). I included markets that are often discussed in the Real Vision interviews to get some good data. Since the latest CFTC survey was published at the beginning of September.

The world was still ok by then and no option whales were on the horizon. Hence sentiment from CFTC based on the latest survey is still much more bullish than the Real Vision sentiment.

Except for Bitcoin of course....keep cool, hodl on and happy trading!

And make sure to follow Real Vision Bot on twitter until I have his website live: twitter.com/realvisionbot

RealVisionBot and his view on China: While the interviews with the most relevant topics related to China and Asia have been overall positive until 2020, the mood has decreased since January and recently (mid August) turned slighlty negative. Plotted here against the price of the ASHR ETF which tracks the CSI 300, the top 300 stocks traded on the Shanghai Stock Exchange. The mood turned very close to the top of the chart...I just didn't have this on the radar but will follow it more closely for the coming interviews.

For more insights follow the RealVisionBot on twitter.com/realvisionbot
to get frequent insights into the sentiment extracted from the interviews on Real Vision

For everyone without Bloomberg access but interest in a visualization of the VIX (CBOE Volatility Index) which is often mentioned on Real Vision: You can have a look at http://vixcentral.com/

One of the very interesting trades I launched together with Moritz Seibert after hearing about it from Raoul Pal on Real Vision is the BTC carry trade which takes advantage of the large positiv basis of BTC futures vs spot.

We wrote about the trade on our blog, twoquants.com. Currently, we took profits and wait for another opportunity to get into the trade, so it might be interesting for Real Vision followers to gear up and hop onto the bandwagon:

- why does this trade exist: https://twoquants.com/for-a-few-bitcoin-more/
- additional things you might want to know about the trade: https://twoquants.com/20200507_trade_update_bitcoin/
- our latest update: https://twoquants.com/20200907-trade-update-for-a-few-bitcoin-more/

There are different reasons why this basis exist, amongst them
- Demand for Bitcoin futures from the long side (e.g., from institutional investors who are either afraid of, or not permitted to, being long spot Bitcoin).
- The high margin requirements for futures translate into high balance sheet costs for brokers. Those costs are reflected, in aggregate, in the forward price.
- Not enough market participants able, or willing to, engage in cash & carry trades.

Another reasons I learned today is the lack of liquidity in BTC spot markets. Institutional funds tend to move through the futures markets because of higher liquidity even if their final intention is to hold BTC.

Some of you might already have seen it. I'm running a research project called "Real Vision Bot" which is based on artifical intelligence to extract sentiment from Real Vision interviews. The bot regularly tweets at twitter.com/realvisionbot

Beside the somewhat creative character of the artifical intelligence, I'm developing a website which will give you insights into the current and historical sentiment extracted from interviews on Real Vision (www.realvisionbot.com)

To give you insights into what you can expect, I attached a chart on last week's vs last month's sentiment regarding the topics with the strongest sentiment during that period.

As you can see, there was increased positive sentiment for USD and certain "hot stocks" (mostly FAANG). Why do I like to look at this sentiment at all? Well, considering myself a contrarian guy, I think differences in opinion between Real Vision and mainstream media to be one of the most interesting things. This analysis can help you to get a feeling when and where these differences might arise. It can also give you a data driven and systematic way to extract information. My goal is for these time-series of sentiment to be useable after all.

Real Vision Bot can even nail down the exact spot where the sentiment came from. However it can not replace the insights you get from watching the videos.

So while I an tell you that last week's slightly negative sentiment towards Trump comes from this quote ...

"I'm no fan of orange man Trump. I am no fan of his whatsoever."

... you should definitely explore for yourself and watch the video!*

Happy to hear your feedback and questions. If you are interested into this please follow the bot on twitter to stay tuned.


* a little hint: It has to do with Megatrends