Categories
Commentary

Daily Brief For October 14, 2021

Update: This morning’s 7:55 AM ET release of the newsletter failed to include updated S&P 500 levels in the very first graphic, below. That graphic has been updated, now. Sorry!

Market Commentary

Equity index, commodity, bond futures trade sideways to higher. Volatility ebbs.

  • Consumer prices rose. Taper in play.
  • Ahead: Claims, PPI data, Fed speak.

What Happened: After news that consumer prices rose more than expected, alongside the release of Federal Open Market Committee (FOMC) minutes which revealed an intent to taper asset purchases, U.S. stock index futures auctioned higher.

Ahead is data on jobless claims and the producer price index (8:30 AM ET). After is Fed-speak by Lorie Logan (12:00 PM ET), Tom Barkin (1:00 PM ET), and Patrick Harker (6:00 PM ET).

Graphic updated 6:30 AM ET. Sentiment Risk-On if expected /ES open is above the prior day’s range. /ES levels are derived from the profile graphic at the bottom of the following section. SqueezeMetrics Dark Pool Index (DIX) and Gamma (GEX) calculations are based on where the prior day’s reading falls with respect to the MAX and MIN of all occurrences available. A higher DIX is bullish. At the same time, the lower the GEX, the more (expected) volatility. SHIFT data used for S&P 500 (INDEX: SPX) options activity. Note that options flow is sorted by the call premium spent; if more positive then more was spent on call options. Breadth reflects a reading of the prior day’s NYSE Advance/Decline indicator. VIX reflects a current reading of the CBOE Volatility Index (INDEX: VIX) from 0-100.

What To Expect: As of 6:30 AM ET, Thursday’s regular session (9:30 AM – 4:00 PM EST) in the S&P 500 will likely open outside of prior-range and -value, suggesting a potential for immediate directional opportunity.

Gap Scenarios: Gaps ought to fill quickly. Should they not, that’s a signal of strength; do not fade. Leaving value behind on a gap-fill or failing to fill a gap (i.e., remaining outside of the prior session’s range) is a go-with indicator.

Auctioning and spending at least 1-hour of trade back in the prior range suggests a lack of conviction; in such a case, do not follow the direction of the most recent initiative activity.

Adding, during the prior day’s regular trade, on positive intraday breadth and divergent market liquidity metrics, the best case outcome occurred; after numerous sessions of a minimum separation in value (i.e., the area where 70% of the day’s volume occurred) failed to support downside price discovery, participants took back Monday’s spike and weak close

The activity now puts in play the minimal excess high just short of the $4,408.75 low volume area (LVNode), as well as the $4,415.00 untested point of control (VPOC), two areas where initiative buyers were unable to counter the fading momentum from short covering.

Looking across the spectrum, the Nasdaq 100 and Russell 2000 are firming, relative to the S&P 500 and Dow Jones Industrial Average, two indices that held the relative strength mantle, prior. 

This rotation, if we will, may support sideways-to-higher trade in the coming sessions as participants clash head-on with the 50.00% and 61.80% Fibonacci retracements, levels that overlap key anchored volume-weighted average price (AVWAP) levels.

Note: VWAP is a metric highly regarded by chief investment officers, among other participants, for quality of trade. Additionally, liquidity algorithms are benchmarked and programmed to buy and sell around VWAPs. We look to buy above a flat/rising VWAP pinch. Sell below a flat/declining VWAP pinch.
Graphic: SPDR S&P 500 ETF (NYSE: SPY) top left, Invesco QQQ Trust Series 1 (NASDAQ: QQQ) top right, iShares Russell 2000 ETF (NYSE: IWM) bottom left, SPDR Dow Jones Industrial Average ETF Trust (NYSE: DIA) bottom right. Spending more than a few hours of trade above trend, VWAP (yellow), and the 61.80% Fibonacci retracement suggest good odds of upside continuation.

Further, the aforementioned trade is happening in the context of weakness into a seasonally bullish cycle of rebalancing and earnings

Some risks include the prospects of tapering off asset purchases, next month, alongside dangerous inflation pressures, as indicated by minutes from the FOMC meeting last month.

“Markets took the hint. Two-year yields are their highest since March last year, when the pandemic first hit,” said Bloomberg’s John Authers. “Meanwhile, the 10-year yield retreated from an approach toward its post-pandemic high. The two-year reflects the now-strong likelihood that the Fed will raise rates within the next two years; the 10-year reflects concerns about growth.” 

In terms of positioning, conditions may be supportive. 

Moreover, for today, participants may make use of the following frameworks.

In the best case, the S&P 500 trades sideways or higher; activity above the $4,381.25 LVNode puts in play the $4,393.75 high volume area (HVNode). Initiative trade beyond the HVNode could reach as high as the $4,415.00 VPOC and $4,437.75 micro composite point of control (MCPOC), or higher.

In the worst case, the S&P 500 trades lower; activity below the $4,381.25 LVNode puts in play the $4,360.25 LVNode. Initiative trade beyond the $4,360.25 LVNode could reach as low as the $4,349.00 VPOC and $4,330.25 LVNode, or lower.

Click here to load today’s updated real-time key levels into the web-based TradingView charting platform. Please note that all levels are derived using the 65-minute timeframe.
Graphic: 65-minute profile chart of the Micro E-mini S&P 500 Futures updated 6:30 AM ET.

Definitions

Spikes: Spike’s mark the beginning of a break from value. Spikes higher (lower) are validated by trade at or above (below) the spike base (i.e., the origin of the spike).

Volume Areas: A structurally sound market will build on areas of high volume (HVNodes). Should the market trend for long periods of time, it will lack sound structure, identified as low volume areas (LVNodes). LVNodes denote directional conviction and ought to offer support on any test. 

If participants were to auction and find acceptance into areas of prior low volume (LVNodes), then future discovery ought to be volatile and quick as participants look to HVNodes for favorable entry or exit.

POCs: POCs are valuable as they denote areas where two-sided trade was most prevalent in a prior day session. Participants will respond to future tests of value as they offer favorable entry and exit.

MCPOCs: POCs are valuable as they denote areas where two-sided trade was most prevalent over numerous day sessions. Participants will respond to future tests of value as they offer favorable entry and exit.

Excess: A proper end to price discovery; the market travels too far while advertising prices. Responsive, other-timeframe (OTF) participants aggressively enter the market, leaving tails or gaps which denote unfair prices.

Value-Area Placement: Perception of value unchanged if value overlapping (i.e., inside day). Perception of value has changed if value not overlapping (i.e., outside day). Delay trade in the former case.

News And Analysis

Consumer prices rise more than expected as energy costs surge.

Global minimum tax pact ups the chance of multinational tax hike.

Global gas crisis is spilling over into the oil markets, IEA explains.

China’s power cuts stressing economic growth and supply chains.

Federal Reserve officials seeing mid-November, December taper.

What People Are Saying

About

After years of self-education, strategy development, and trial-and-error, Renato Leonard Capelj began trading full-time and founded Physik Invest to detail his methods, research, and performance in the markets. 

Additionally, Capelj is a finance and technology reporter. Some of his biggest works include interviews with leaders such as John Chambers, founder and CEO, JC2 Ventures, Kevin O’Leary, businessman and Shark Tank host, Catherine Wood, CEO and CIO, ARK Invest, among others.

Disclaimer

At this time, Physik Invest does not manage outside capital and is not licensed. In no way should the materials herein be construed as advice. Derivatives carry a substantial risk of loss. All content is for informational purposes only.

Categories
Commentary

Daily Brief For October 11, 2021

Editor’s Note: The newsletter schedule has changed.

From now on, you can expect to see Daily Briefs only – Monday through Friday – posted shortly before 8:00 AM ET. The Weekly Trade Idea will be packaged into Monday’s commentary, also.

Thanks again for your continued support. I strive to simplify and add value, as best I can.

Market Commentary

Equity index futures trade sideways to lower with bonds. Commodities were mixed.

  • October bottom; a rip up into EOY?
  • Ahead: No economic reports today.

What Happened: Ahead of a busy start to the third-quarter earnings season, this week, U.S. stock index futures auctioned sideways to lower overnight alongside some mixed narratives.

Last night, it was revealed that Goldman Sachs Group (NYSE: GS) cut its U.S. growth forecast on consumption and a fiscal slowdown. Not even a day later, there is news that Goldman, alongside JPMorgan Chase & Co (NYSE: JPM) strategists, suggests the recent dip is a buy.

Given the Columbus Day holiday, today, no economic reports are scheduled.

Graphic updated 6:20 AM ET. Sentiment Risk-Off if expected /ES open is below the prior day’s range. /ES levels are derived from the profile graphic at the bottom of the following section. SqueezeMetrics Dark Pool Index (DIX) and Gamma (GEX) calculations are based on where the prior day’s reading falls with respect to the MAX and MIN of all occurrences available. A higher DIX is bullish. At the same time, the lower the GEX, the more (expected) volatility. SHIFT data used for S&P 500 (INDEX: SPX) options activity. Note that options flow is sorted by the call premium spent; if more positive then more was spent on call options. Breadth reflects a reading of the prior day’s NYSE Advance/Decline indicator. VIX reflects a current reading of the CBOE Volatility Index (INDEX: VIX) from 0-100.

What To Expect: As of 6:20 AM ET, Monday’s regular session (9:30 AM – 4:00 PM EST) in the S&P 500 will likely open outside of prior-range and -value, suggesting a potential for immediate directional opportunity.

Gap Scenarios: Gaps ought to fill quickly. Should they not, that’s a signal of strength; do not fade. Leaving value behind on a gap-fill or failing to fill a gap (i.e., remaining outside of the prior session’s range) is a go-with indicator.

Auctioning and spending at least 1-hour of trade back in the prior range suggests a lack of conviction; in such a case, do not follow the direction of the most recent initiative activity.

Further, during the prior week’s trade, on mostly strong intraday breadth and divergent market liquidity metrics, equity index futures established a rounded bottom and minimal excess low.

Then, a swift recovery ensued; initiative sellers lacked the wherewithal to take prices lower, beyond the S&P 500’s $4,363.25-$4,278.00 balance area. Initiative buyers were then emboldened, expanding range and value the opposite way.

During this recovery process, the S&P 500 – as evidenced by p-shaped emotional, multiple-distribution profile structures – established a minimal excess high before momentum from covering shorts was overpowered by responsive selling at key areas of resting liquidity, at and around /ES $4,410.25 (SPY $441.00), the site of a key anchored volume-weighted average price (VWAP) level.

Note: Liquidity algorithms are benchmarked and programmed to buy and sell around VWAPs.

Friday’s session succumbed to divergences in buying and selling power as calculated by the difference in volume traded at the bid and offer, resolving some of the aforementioned emotional structures through what’s called the “cave-fill” process. 

During this process, participants revisited, repaired, and strengthened – building out areas of high volume (HVNodes), or value – areas low volume (LVNodes).

Note: The cave-fill process widened the area deemed favorable to transact at by an increased share of participants. This is a good development.

Moreover, September’s seasonally-aligned weakness saw the Nasdaq 100 lead lower. Last week – alongside improvement amongst some positioning metrics – the tone shifted with the cash-settled Nasdaq 100 (INDEX: NDX) rising 4.35% versus the S&P 500 (INDEX: SPX) rising 3.25%.

That comes as October traditionally marks an end to weakness amidst a cycle of rebalancing and earnings; according to LPL Financial Research, “Stocks rise 3.8% on average during the fourth quarter, but the past seven times the S&P 500 was up 15% year-to-date heading into the home stretch of the year, the fourth quarter was higher every single time, up a very impressive 5.8%.” 

“Earnings for the third quarter should again be strong and mostly outpace expectations,” Leuthold Group chief investment strategist Jim Paulsen adds. “Hours worked in the third quarter rose by about 5% suggesting real GDP for the quarter may be close to 7%. With most companies reporting strong pricing power, solid real GDP growth should result in another surprisingly strong corporate earnings season.”

Graphic: LPL Financial Research unpacks S&P 500 seasonality.
Graphic: SPDR S&P 500 ETF (NYSE: SPY) top left, Invesco QQQ Trust Series 1 (NASDAQ: QQQ) top right, iShares Russell 2000 ETF (NYSE: IWM) bottom left, SPDR Dow Jones Industrial Average ETF Trust (NYSE: DIA) bottom right. Spending more than a few hours of trade above trend, VWAP (yellow), and the 61.80% Fibonacci retracement suggest good odds of upside continuation.

Notwithstanding, some risks to be aware of include the Federal Reserve’s tapering initiatives and the prospects of a rise in the Fed funds rate, amidst hot sentiment, a decline in top-of-book depth, as well as back and forth entry (exit) into (from) short-gamma.

“What we see in the equity space is a lot of sensitivity to higher real yields,” Joseph Little, chief global strategist at HSBC Holdings Plc (NYSE: HSBC) Asset Management, said. “We are seeing policy normalization everywhere. That creates a little bit of a challenge for [the] equity market because it does change the drivers of equity performance.”

Graphic: A “gentle reminder of the fact tapering matters,” via The Market Ear.
Graphic: Sentiment elevated, “generating a 96% historical probability of down markets in the next 12 months at current levels.”

In addition, to balance some of our Q4 bullishness, in a quote highlighted by The Market Ear, Bank of America Corporation (NYSE: BAC) explained: September 30 “was the 24th time since 1928 that the S&P experienced two or more 3-sigma shocks in 10 trading days, … [and] only in 3 of 23 episodes (and 1 in the last 50yrs) did the S&P surpass the prior month’s peak in the month following the second shock.”

Moreover, for today, participants may make use of the following frameworks.

In the best case, the S&P 500 trades sideways or higher; activity above the $4,363.25 high volume area (HVNode) puts in play the $4,393.00 untested point of control (VPOC). Initiative trade beyond the $4,393.00 VPOC could reach as high as the $4,415.00 VPOC and $4,437.75 micro composite point of control (MCPOC), or higher.

In the worst case, the S&P 500 trades lower; activity below the $4,363.25 HVNode puts in play the $4,346.75 HVNode. Initiative trade beyond the HVNode could reach as low as the $4,332.25 low volume area (LVNode) and $4,299.00 VPOC, or lower.

Graphic: 65-minute profile chart of the Micro E-mini S&P 500 Futures updated 6:20 AM ET.

Definitions

Volume Areas: A structurally sound market will build on areas of high volume (HVNodes). Should the market trend for long periods of time, it will lack sound structure, identified as low volume areas (LVNodes). LVNodes denote directional conviction and ought to offer support on any test. 

If participants were to auction and find acceptance into areas of prior low volume (LVNodes), then future discovery ought to be volatile and quick as participants look to HVNodes for favorable entry or exit.

Gamma: Gamma is the sensitivity of an option to changes in the underlying price. Dealers that take the other side of options trades hedge their exposure to risk by buying and selling the underlying. When dealers are short-gamma, they hedge by buying into strength and selling into weakness. When dealers are long-gamma, they hedge by selling into strength and buying into weakness. The former exacerbates volatility. The latter calms volatility.

POCs: POCs are valuable as they denote areas where two-sided trade was most prevalent in a prior day session. Participants will respond to future tests of value as they offer favorable entry and exit.

MCPOCs: POCs are valuable as they denote areas where two-sided trade was most prevalent over numerous day sessions. Participants will respond to future tests of value as they offer favorable entry and exit.

Excess: A proper end to price discovery; the market travels too far while advertising prices. Responsive, other-timeframe (OTF) participants aggressively enter the market, leaving tails or gaps which denote unfair prices.

Value-Area Placement: Perception of value unchanged if value overlapping (i.e., inside day). Perception of value has changed if value not overlapping (i.e., outside day). Delay trade in the former case.

News And Analysis

Banks bought epic amounts of safe assets; forget inflation.

The Fed is likely to side with growth and keep policy easy.

Merck seeks emergency use authorization for COVID pills.

Europe Economic Snapshot: Faster-than-expected restart.

Latin America settles into new post-pandemic slow growth.

S&P talking stock-flow confusion again – QE and tapering.

What People Are Saying

Weekly Trade Idea

About

After years of self-education, strategy development, and trial-and-error, Renato Leonard Capelj began trading full-time and founded Physik Invest to detail his methods, research, and performance in the markets. 

Additionally, Capelj is a finance and technology reporter. Some of his biggest works include interviews with leaders such as John Chambers, founder and CEO, JC2 Ventures, Kevin O’Leary, businessman and Shark Tank host, Catherine Wood, CEO and CIO, ARK Invest, among others.

Disclaimer

At this time, Physik Invest does not manage outside capital and is not licensed. In no way should the materials herein be construed as advice. Derivatives carry a substantial risk of loss. All content is for informational purposes only.

Categories
Commentary

Weekly Brief For September 4, 2021

Editor’s Note: Before getting into today’s commentary, we take a moment to reflect on the following quote taken from page 123 of The Disciplined Trader by Mark Douglas. 

“For years, many people in the academic community believed that the markets were random; this is a perfect example of their general lack of understanding of human nature. People act as a force on prices in perfectly logical ways, when you understand the logic of their fears.”

Also, given Labor Day, markets are closed Monday, September 6. As a result, Daily Briefs will resume Tuesday, September 7. Thank you and have a great extended weekend!

Market Commentary

Equity index futures traded sideways to higher last week.

  • Reality throwing a wrench in seasonality.
  • Ahead: Light calendar to base decisions.
  • Equity indices rising; SPX above 50-day.
  • Positioning risks mount case for volatility.
  • A couple trade ideas for the week ahead.

What Happened: U.S. stock index futures auctioned mostly sideways to higher, into Friday’s nonfarm payrolls miss.

Next week participants have a light calendar to base decisions around.

Graphic updated 10:30 AM ET 9/4/2021. Sentiment Neutral if expected /ES open is inside of the prior day’s range. SqueezeMetrics Dark Pool Index (DIX) and Gamma (GEX) calculations are based on where the prior day’s reading falls with respect to the MAX and MIN of all occurrences available. A higher DIX is bullish. At the same time, the lower the GEX, the more (expected) volatility. SHIFT data used for S&P 500 (INDEX: SPX) options activity approximation. Note that options flow is sorted by the call premium spent; if more positive then more was spent on call options. Breadth reflects a reading of the prior day’s NYSE Advance/Decline indicator. VIX reflects a current reading of the CBOE Volatility Index (INDEX: VIX) from 0-100.

What To Expect: During the prior week’s trade, on mostly lackluster intraday breadth and market liquidity metrics, the best case outcome occurred, evidenced by new all-time highs in the S&P 500 and Nasdaq 100. 

This is significant because the sideways to higher trade marks acceptance, or a willingness to transact at higher prices after a v-pattern recovery, above the key 50-day simple moving average.

V-Pattern: A pattern that forms after a market establishes a high, retests some support, and then breaks above said high. In most cases, this pattern portends continuation.
Graphic: S&P 500 maintaining prices above the 50-day simple moving average. This moving average can be looked at as a key dynamic level on any move lower. Losing that particular level likely changes the tone.

Further, the aforementioned trade is happening in the context of peak growth and a moderation in the economic recovery, as well as non-seasonally aligned inflows, impactful options market dynamics, divergent sentiment, and fears of a mid-cycle transition.

The implications of these themes on price are contradictory

To elaborate, August, over the past 25 years, has historically been the largest month for equity outflows. According to Goldman Sachs Group Inc’s (NYSE: GS) Scott Rubner, “We have seen none of these outflows and it has been buying the dip (TINA).” 

Given this divergence from the norm, advances are not “welcomed and may lead to a quick right tail hedging … [as] option volume notional is 120% of stock volume notional.” 

To put it simply, an increased share of options being traded expires within two weeks. The hedging of these directionally sensitive options can represent an increased share of volume in underlying stocks. 

As a result, option flows impact the underlying’s price, markedly. 

We couple this so-called right-tail hedging with the structural positioning – the so-called wall of worry – that can drive the market through three factors – change in the underlying price (gamma), implied volatility (vanna), and time (charm) – that are well known to impact an options exposure to directional risk or delta.

“Charm is a major driver for support in the markets,” said Cem Karsan of Kai Volatility Advisors. “All of that support is leading up to and accelerating into that Monday-Wednesday window” ahead of options expiration (OPEX). “And then the window really opens for lack of support. It’s not like there’s a bunch of selling all of a sudden. It’s a window of non-strength; a lack of these supportive flows that have been there prior.”

Graphic: @pat_hennessy breaks down returns for the S&P 500, categorized by the week relative to OPEX. Based on his analysis, Pat sees that the “2 weeks prior to OPEX (e.g., 7/30/21 to 8/6/21 in this late-cycle) [have] been extremely bullish.”

With the August monthly OPEX behind us, the focus shifts now to September. At and around the same time, Morgan Stanley’s (NYSE: MS) Michael Wilson expects a formal signal (which would align with Karsan’s window of non-strength) on the taper of asset purchases, that could lead to a mid-cycle transition and possibly an S&P 500 correction.

“Assuming a stable equity risk premium at 345bp, P/Es would fall to 19x, or 10% lower.”

Graphic: @pat_hennessy breaks down S&P 500 OPEX returns. Pat sees that “OPEX week returns peaked in 2016 and have trended lower since.”

Adding, the eventual reduction in the Federal Reserve’s balance sheet – a removal of liquidity – may exacerbate any sort of risk-off scenario in which participants try to get ahead of whatever cascading reaction may come with a taper.

As Karsan explains: “It’s not a coincidence that the mid-February to mid-March 2020 downturn literally started the day after February expiration and ended the day of March quarterly expiration. These derivatives are incredibly embedded in how the tail reacts and there’s not enough liquidity, given the leverage, if the Fed were to taper.”

SpotGamma – in a September 2, 2021 note – echoed the possibility of volatility; “markets are fast approaching a window of volatility which could produce some pretty sharp volatility: 9/15 VIX expiration, 9/17 Quarterly OPEX and the 9/22 FOMC. This lineup is particularly interesting as we believe that expiration leads to a pickup in volatility – however, traders may hold the pause button on selling that volatility due to the FOMC. This could catch less sophisticated vol sellers off guard and lead to some exacerbated volatility.”

Others, like SqueezeMetrics – which sees “the current combination of weak put flows and large customer vanna exposure” as fragile – suggest that volatility risks have risen, too.

Given the big picture context (i.e., status quo – higher prices – in the face of volatility risks) participants may make use of the following frameworks.

In the best case, the S&P 500 trades sideways or higher; activity above the $4,527.75 high volume area (HVNode) pivot puts in play the $4,550.00 overnight high (ONH). Initiative trade beyond the ONH could reach as high as the Fibonacci extensions at $4,556.25 and $4,592.25.

In the worst case, the S&P 500 trades lower; activity below the $4,527.75 HVNode puts in play the $4,510.00 regular trade high (RTH High). Initiative trade beyond the RTH High could reach as low as the $4,495.00 and $4,481.75 HVNodes.

Overnight Rally Highs (Lows): Typically, there is a low historical probability associated with overnight rally-highs (lows) ending the upside (downside) discovery process.

Volume Areas: A structurally sound market will build on past areas of high volume. Should the market trend for long periods of time, it will lack sound structure (identified as a low volume area which denotes directional conviction and ought to offer support on any test). 

If participants were to auction and find acceptance into areas of prior low volume, then future discovery ought to be volatile and quick as participants look to areas of high volume for favorable entry or exit.
Graphic: 65-minute profile chart of the Micro E-mini S&P 500 Futures updated 10:30 AM ET 9/4/2021.

Weekly Trade Ideas

Please Note: In no way is the below a trade recommendation. Derivatives carry a substantial risk of loss. All content is for informational purposes only.

Options offer an efficient way to gain directional exposure. 

If an option buyer was short (long) stock, he or she could buy a call (put) to hedge upside (downside) exposure. Additionally, one can spread, or buy (+) and sell (-) options together, strategically.

Commonly discussed spreads include credit, debit, ratio, back, and calendar.

  • Credit: Sell -1 option closer to the money. Buy +1 option farther out of the money.
  • Debit: Buy +1 option closer to the money. Sell -1 option farther out of the money.
  • Ratio: Buy +1 option closer to the money. Sell -2 options farther out of the money. 
  • Back: Sell -1 option closer to the money. Buy +2 options farther out of the money.
  • Calendar: Sell -1 option. Buy +1 option farther out in time, at the same strike.

Typically, if bullish (bearish), sell at-the-money put (call) credit spread and/or buy a call (put) debit/ratio spread structured around target price. Alternatively, if the expected directional move is great (small), opt for a back spread (calendar spread). Also, if credit spread, capture 50-75% of the premium collected. If debit spread, capture 2-300% of the premium paid.

Be cognizant of risk exposure to direction (delta), time (theta), and volatility (vega). 

  • Negative (positive) delta = synthetic short (long). 
  • Negative (positive) theta = time decay hurts (helps).
  • Negative (positive) vega = volatility hurts (helps).

Trade Idea 1: SELL -1 1/2 BACKRATIO GOOGL 100 17 SEP 21 2770/2670 PUT @.15 LMT

I’m neutral on Alphabet Inc and I think the stock may travel sideways to lower over the next couple of weeks, toward $2,770.00, or the volume-weighted average price anchored from the July 28 gap. I will structure a spread below the current stock price, expiring in 2 weeks. I will buy the 2770 put option once (+1) and sell the 2670 put option twice (-2) for a $0.15 credit. Should the stock not move to my target, I keep the $15 credit. Should it move to $2,670.00 I could make $10,015.00 at expiry. Should the stock move past $2,570.00 or so, I may incur unlimited losses. My goal, with this spread, is to capture the initial credit and close for additional credit if the stock moves lower.

If necessary, I will hedge the position by either (A) selling stock, (B) widening strikes, (C) buying a far out-of-the-money put option to cap downside in case of an unpredictable move lower, or (D) roll strikes down in price and out in time.

Trade Idea 2: SELL -1 1/2 BACKRATIO SPX 100 (Weeklys) 10 SEP 21 4480/4430 PUT @.25 LMT

I’m neutral on the S&P 500 and I think the index may travel sideways to lower over the next week, toward its key moving averages. I will structure a spread below the current index price, expiring in 2 weeks. I will buy the 4480 put option once (+1) and sell the 4430 put option twice (-2) for a $0.25 credit. Should the index not move to my target, I keep the $25 credit. Should it move to $4,430.00, past the 20-day simple moving average, I could make $5,025.00 at expiry. Should the index move past $4,380.00 or so, beyond the 50-day simple moving average, I may incur unlimited losses. My goal, with this spread, is to capture the initial credit and close for additional credit if the index moves lower.

If necessary, I will hedge the position by either (A) selling futures, (B) widening strikes, (C) buying a far out-of-the-money put option to cap downside in case of an unpredictable move lower, or (D) roll strikes down in price and out in time.

News And Analysis

Moody’s Weekly Market Outlook on Ida, gas, and inflation. 

Reinventing tail risk: a fresh look at market crash protection.

Kansas City Southern mulls $27B CP Rail bid after ruling.

ARK Invest on commodities, innovation, economic signals.

Taliban relies on financing from China following withdrawal.

Hedge Funds cut exposure to stocks that count on China.

Three hours a week: China has put limits on video gaming.

Global gas prices threatening to dent economic recovery.

Are Treasuries in a cautious stance as debt story unfolds?

Could the macro theme/picture be an edge for day traders?

George Soros: Investors in China face a rude awakening.

400,000 homeowners enter the final month in forbearance.

Let’s Hang Out

Los Angeles, CA September 10-12

Salt Lake City, UT September 28-30

About

After years of self-education, strategy development, and trial-and-error, Renato Leonard Capelj began trading full-time and founded Physik Invest to detail his methods, research, and performance in the markets. 

Additionally, Capelj is a finance and technology reporter. Some of his biggest works include interviews with leaders such as John Chambers, founder and CEO, JC2 Ventures, Kevin O’Leary, businessman and Shark Tank host, Catherine Wood, CEO and CIO, ARK Invest, among others.

Disclaimer

At this time, Physik Invest does not manage outside capital and is not licensed. In no way should the materials herein be construed as advice. Derivatives carry a substantial risk of loss. All content is for informational purposes only.

Categories
Commentary

Weekly Brief For August 22, 2021

Market Commentary

Equity index futures recover after last week’s liquidation.

  • Unpacking the inclination to taper.
  • Ahead: Busy week. Jackson Hole.

What Happened: The S&P 500, Nasdaq 100, and Dow Jones Industrial Average recovered more than 50% of last week’s liquidation. The Russell 2000 remains a laggard, trading weak below the halfway point of a multi-month consolidation.

Ahead is data on the Markit manufacturing and services PMI (Monday), existing-home sales (Monday), new home sales (Tuesday), durable goods orders (Wednesday), nondefense capital goods orders (Wednesday), jobless claims (Thursday), GDP revision (Thursday), personal income (Friday), consumer spending (Friday), core PCE price index (Friday), trade in goods (Friday), as well University of Michigan consumer sentiment (Friday). 

Also, the Jackson Hole Economic Policy Symposium starts Thursday.

Graphic updated 12:30 PM ET Sunday. Sentiment Neutral if expected /ES open is inside of the prior day’s range. See here for more on the Dark Pool Index (DPI) and Gamma (GEX). A higher DPI approximation is bullish. At the same time, the lower the GEX approximation, the more volatility. SHIFT data used for options activity approximation. Note that options flow is sorted by the call premium spent; if green and more positive then more was spent on call options. Breadth reflects a reading of the prior day’s Advance/Decline indicator. VIX reflects a current reading of the CBOE Volatility Index from 0-100.

What To Expect: During the prior week’s trade, on weak intraday breadth and market liquidity metrics, the worst-case outcome occurred, evidenced by a liquidation that repaired poor profile structures as low as the S&P 500’s $4,353.00 point of control (POC).

POCs: POCs are valuable as they denote areas where two-sided trade was most prevalent. Participants will respond to future tests of value as they offer favorable entry and exit.

Then, during Friday’s session, a p-shaped profile structure (which denotes short covering) took back the spike base a few ticks below the $4,422.75 balance area high (BAH) – a prior break from value – negating the post-Federal Open Market Committee (FOMC) minutes liquidation.

Further, the aforementioned trade is happening in the context of moderating growth, peak long equity positioning, breadth divergences, a resurgence in COVID-19, geopolitical tensions, and an inclination to taper stimulus.

The implications of these themes on price are contradictory; to elaborate, as measures of macro expectations rolled over, in line with companies’ profit expectations, Treasury yields declined, triggering a rotation back into high growth equities.

Graphic: As created by Bank of America Corporation (NYSE: BAC) and shared by Bloomberg, the proportion of fund managers expecting a stronger economy tumbles while the number who are overweight in equities has barely moved.

This comes at the same time a strong July jobs report helped the Federal Reserve (Fed) move toward a consensus on tapering. Given the Fed’s enormous share of the Treasury market, fear of downside equity volatility is apparent; a shift higher in the VIX futures terms structure denotes demand for protection into and through the Jackson Hole Economic Policy Symposium August 26-28, 2021.

“The Fed has fostered a broad range of bubbles because their massive liquidity injections have been trapped in the financial economy,” Rich Bernstein of Richard Bernstein Associates said in a summary quoted by Bloomberg. “As with any cornered market, there are limited buyers and prices fall as the “cornerer” sells. Accordingly, bond prices seem likely to fall (interest rates rise) [as the] Fed reduces its cornered positions. Rising interest rates could be the kryptonite to the bubble in long-duration assets (long-term bonds, technology, innovation, disruption, bitcoin, etc.).”

Obviously, tapering may have major repercussions. However, to balance our expectations, looking back to 2014, when the Fed was scaling back bond purchases, the S&P 500 rose over 10% and rates fell after spiking initially. 

Graphic: Ally Financial Inc-owned (NYSE: ALLY) Ally Invest unpacks 2014 taper of Federal Reserve bond buying.

Ally Invest’s chief investment strategist Lindsey Bell concludes: “Conditions may not be perfect, but they could be strong enough to move from a wheelchair to some heavy-duty crutches, especially if it means keeping overheating symptoms like inflation at bay.”

Regardless, major risks remain given the growth of derivatives and the potential for offsides positioning. Even the slightest reduction in the Federal Reserve’s balance sheet – the removal of liquidity – may prompt a cascading reaction that exacerbates underlying price movements.

As Kai Volatility’s Cem Karsan once told me for a Benzinga article: “It’s not a coincidence that the mid-February to mid-March 2020 downturn literally started the day after February expiration and ended the day of March quarterly expiration. These derivatives are incredibly embedded in how the tail reacts and there’s not enough liquidity, given the leverage, if the Fed were to taper.”

Moreover, for next week, given expectations of heightened volatility, participants may make use of the following frameworks.

In the best case, the S&P 500 trades sideways or higher; activity above the $4,437.75 high volume area (HVNode) pivot puts in play the $4,463.75 low volume area (LVNode). Initiative trade beyond the LVNode could reach as high as the $4,476.50 overnight high (ONH) and $4,511.50 Fibonacci extension, or higher.

In the worst case, the S&P 500 trades lower; activity below the $4,437.75 HVNode puts in play the $4,415.75 LVNode. Initiative trade beyond the LVNode could reach as low as $4,393.75 micro composite point of control (MCPOC) and $4,365.25 LVNode, or lower. 

Overnight Rally Highs (Lows): Typically, there is a low historical probability associated with overnight rally-highs (lows) ending the upside (downside) discovery process.

Volume Areas: A structurally sound market will build on past areas of high volume. Should the market trend for long periods of time, it will lack sound structure (identified as a low volume area which denotes directional conviction and ought to offer support on any test). 

If participants were to auction and find acceptance into areas of prior low volume, then future discovery ought to be volatile and quick as participants look to areas of high volume for favorable entry or exit.
Graphic: 65-minute profile chart of the Micro E-mini S&P 500 Futures updated 12:30 PM ET Sunday.

News And Analysis

Moody’s discusses taper – maybe this year, maybe not.

Single-family home construction the highest since 2007.

Fannie Mae says COVID-19 surge won’t impact growth. 

Goldman Sachs cut its U.S. growth forecast on the virus.

APAC corporate rating recovery may stall as cases rise.

Wall Street is just as baffled about markets as last year.

Canadian inflation has risen to 3.7%, troubling Trudeau. 

Powell second term approval boosted by Yellen backing.

A gaping 10-year bond call reveals growth uncertainties.

Michael Burry of ‘Big Short’ bet against ARK Invest ETF.

Outcry rises after White House looks to quell gas prices.

Big risks and trends facing banks globally and regionally.

Could a Western U.S. drought threaten municipal credit.

What People Are Saying

About

After years of self-education, strategy development, and trial-and-error, Renato Leonard Capelj began trading full-time and founded Physik Invest to detail his methods, research, and performance in the markets. 

Additionally, Capelj is a finance and technology reporter. Some of his biggest works include interviews with leaders such as John Chambers, founder and CEO, JC2 Ventures, Kevin O’Leary, businessman and Shark Tank host, Catherine Wood, CEO and CIO, ARK Invest, among others.

Disclaimer

At this time, Physik Invest does not manage outside capital and is not licensed. In no way should the materials herein be construed as advice. Derivatives carry a substantial risk of loss. All content is for informational purposes only.

Categories
Commentary

Daily Brief For August 4, 2021

Editor’s Note: On Thursday (8/5) and Friday (8/6) there will be no Daily Brief newsletter. Additionally, there will be no Weekly Brief Sunday (8/8), either. All commentaries to resume August 9, 2021.

Market Commentary

Equity index futures trade higher ahead of key fundamental events.

  • Worry dwindles and volatility ebbs.
  • Ahead: Data on jobs and services.
  • A mixed bag. Positioned for higher.

What Happened: U.S. stock index futures auctioned higher and sideways as participants discounted drivers like the COVID-19 coronavirus and China clampdown. 

At the same time, earnings are robust and stimulus remains in play; “Aside from the healthy earnings outlook, we also see equities being supported by continued monetary stimulus from the Federal Reserve and the attractiveness of stocks relative to low bond yields,” said Mark Haefele of UBS Group AG (NYSE: UBS). “Cyclicals are expected to benefit from the shift in consumer spending away from pandemic winners such as mega-cap tech.”

Ahead is data on ADP employment, Markit services PMI, and the ISM services index.

Graphic updated 6:30 AM ET. Sentiment Neutral if expected /ES open is inside of the prior day’s range. See here for more on the Dark Pool Index and Gamma. A positive Dark Pool Index reading is bullish. At the same time, the higher (lower) the gamma, the less (more) volatility. SHIFT Search data used for options activity. Note that options flow is sorted by the call premium spent; if green and more (less) positive then more (less) was spent on call options. Breadth reflects a reading of the prior day’s Advance/Decline indicator.

What To Expect: As of 6:30 AM ET, Wednesday’s regular session (9:30 AM – 4:00 PM EST) in the S&P 500 will likely open just inside of prior-range and -value, suggesting a limited potential for immediate directional opportunity.

Adding, during the prior day’s regular trade, the best case outcome occurred after a repair of the $4,370.50 minimal excess low; after testing the low (a level which corresponded with a volume-weighted average price or VWAP anchored from the July 19 swing low), responsive buyers initiated a rally that pushed prices to a higher close, away from value. 

Excess: A proper end to price discovery; the market travels too far while advertising prices. Responsive, other-timeframe (OTF) participants aggressively enter the market, leaving tails or gaps which denote unfair prices.

More On Volume-Weighted Average Prices (VWAPs): A metric highly regarded by chief investment officers, among other participants, for quality of trade. Additionally, liquidity algorithms are benchmarked and programmed to buy and sell around VWAPs.

In doing so, participants negated all of Monday’s selling which, as stated Tuesday, was not supported by value or strong metrics with respect to breadth and market liquidity

Coming into today’s session, opportunity resides in the S&P 500, Nasdaq 100, and Dow Jones Industrial Average; indices are trading at key go/no-go levels. 

Further up movement puts in play balance-area breakouts. In such a case, the modus operandi shifts from responsive trade (i.e., fade the edges) to initiative trade (i.e., play the break). Failure to expand range portends a rotation back into balance. 

Balance (Two-Timeframe Or Bracket): Rotational trade that denotes current prices offer favorable entry and exit. Balance-areas make it easy to spot a change in the market (i.e., the transition from two-time frame trade, or balance, to one-time frame trade, or trend).

Below are some rough levels to base expectations around. The width of the balance area, projected off the high end of the balance, is the typical target in such a breakout (e.g., $4,490 SPX cash).

Graphic: 65-minute candlestick charts of the cash-settled S&P 500 (INDEX: SPX), Nasdaq 100 (INDEX: NDX), Russell 2000 (INDEX: RUT), and Dow Jones Industrial Average (INDEX: DJI).

Moreover, for today, participants can trade from the following frameworks. 

In the best case, the S&P 500 trades sideways or higher; activity above the $4,406.25 low volume area (LVNode) pivot puts in play the $4,417.75 LVNode. Initiative trade beyond the $4,417.75 LVNode could reach as high as the $4,428.25 and $4,438.50 Fibonacci price extensions.

In the worst case, the S&P 500 trades lower; activity below the $4,406.25 LVNode puts in play the $4,392.75 micro-composite point of control (MCPOC). Initiative trade beyond the MCPOC could reach as low as the $4,381.75 untested point of control (VPOC) and $4,365.25 LVNode.

Volume Areas: A structurally sound market will build on past areas of high volume. Should the market trend for long periods of time, it will lack sound structure (identified as a low volume area which denotes directional conviction and ought to offer support on any test). 

If participants were to auction and find acceptance into areas of prior low volume, then future discovery ought to be volatile and quick as participants look to areas of high volume for favorable entry or exit.

POCs: POCs are valuable as they denote areas where two-sided trade was most prevalent. Participants will respond to future tests of value as they offer favorable entry and exit.
Graphic: 65-minute profile chart of the Micro E-mini S&P 500 Futures. Graphic updated 6:30 AM ET.

News And Analysis

Markets primed for Powell second term at risk from surprise pick.

China typhoons create latest supply-chain threat as ports close.

Economic data positive for risk but business cycle risks building.

New York City to require proof of vaccination for indoor activities.

Asia-Pacific on track for a strong rebound although scars will last.

What People Are Saying

About

After years of self-education, strategy development, and trial-and-error, Renato Leonard Capelj began trading full-time and founded Physik Invest to detail his methods, research, and performance in the markets. 

Additionally, Capelj is a finance and technology reporter. Some of his biggest works include interviews with leaders such as John Chambers, founder and CEO, JC2 Ventures, Kevin O’Leary, businessman and Shark Tank host, Catherine Wood, CEO and CIO, ARK Invest, among others.

Disclaimer

At this time, Physik Invest does not manage outside capital and is not licensed. In no way should the materials herein be construed as advice. Derivatives carry a substantial risk of loss. All content is for informational purposes only.

Categories
Commentary

Weekly Brief For July 25, 2021

Market Commentary

Key Takeaways: After a short sell-off, volatility ebbs as equity index futures trade higher.

  • Unpacking factors lending to the volatility.
  • Jitters ahead of Federal Reserve meeting.
  • Earnings outlook up. Priced to perfection? 
  • COVID-19 resurgence to not limit mobility.
  • Analyzing tightening and the shift to fiscal.

What Happened: Last week’s violent trade came as inflation measures rose the largest since the Global Financial Crisis.

At and around the same time was a monthly options expiration (OPEX) which opened the window to fundamental dynamics (e.g., a shift in preferences from saving and investing to spending, monetary tightening, seasonality, COVID-19 resurgence) given a “reduction in large options positions, and the hedging associated with them,” according to SpotGamma, an authority in the space.

The subsequent sell-off then moved the market into short-gamma, an environment in which the opposing side of options trades hedge by buying into strength and selling into weakness, thereby exacerbating volatility.

To note, we’re discussing the implications of derivatives since option volumes are comparable to stock volumes and, as a result, related hedging flows can represent an increased share of volume in underlying stocks.

Further, the reversal caught many by surprise. Why? Downside risks were thought to have been compounded by equity, bond, and derivatives market positioning, among other factors.

For instance, some metrics implied froth with respect to the number of put options being sold to open, a potentially destabilizing force given associated hedging forces.

To note, put sales, which can be part of sophisticated volatility-based trading strategies, can imply confidence as market participants look to options for income, and not insurance.

Amidst the selling, though, some indicators suggested participants more so became interested in puts as downside protection.

Then, on July 19, the S&P 500 rebounded as near-term discovery reached a potential limit, based on market liquidity metrics and the inventory positioning of participants.

SpotGamma’s metrics confirmed; participants bought calls and sold puts suggesting confidence in the low.

In explaining the violent reversal and follow-through, it’s useful to point to three factors – the change in the underlying price (gamma), implied volatility (vanna), and time (charm) – known to impact an options exposure to directional risk or delta.

Graphic: SqueezeMetrics details the implications of customer activity in the options market, on an underlying’s order book. 

In short, in selling a put, for instance, customers indirectly add liquidity and stabilize the market. 

How? The market maker long the put will buy (sell) the underlying to neutralize directional risk as price falls (rises).

On the other hand, as the market reverses and continues rising, volatility compresses, and any puts that were bought quickly lose value, thereby lowering the opposing side’s directional risk.

As a result, short hedges are bought back, adding fuel to the price rise.

Considerations: The recession is over and the outlook for earnings is great.

That is reflected by heightened valuations, peak positioning, and S&P 500 price targets.

Also, in spite of extreme fear in the face of a COVID-19 resurgence, red states, where the risks of transmission are greater given lower vaccination rates, will likely not limit mobility while blue states are more so highly vaccinated and will remain mobile, according to Bloomberg

That brings us to the topic of monetary policy. 

The U.S. is in a different place from the rest of the world and is likely to eliminate its output gap this year which would call for a tightening in policy and dollar strengthening, helping douse inflation.

Graphic: Implications of high single-digit inflation on S&P 500 returns via Bloomberg.

On that note, Moody’s strategists comment: “The impressive growth in value across many asset classes is projected to taper off within the next couple of years as supportive policy is unwound. The 10-year Treasury yield will rise above 2% by 2022 and the fiscal tailwinds will also have faded by then.”

When liquidity is removed, as policymakers look to fiscal policy to address inequality, for instance, corporations may have to worry about making money, again. 

“That’s ultimately how we grow out of these valuations,” Kai Volatility’s Cem Karsan explained to me in an article Benzinga will release next week. “These cycles are a lot shorter than the monetary supply-side cycles but they tend to be very bad for multiples and great for economic growth.”

What To Expect: Ahead of the upcoming Federal Reserve meeting, participants will want to temper their expectations on future volatility and focus their attention on where the S&P 500 trades in relation to the $4,384.50 low volume area (LVNode) pivot, a prior all-time high (ATH).

In the best case, the S&P 500 trades sideways or higher; activity above the $4,384.50 LVNode puts in play the $4,407.75 ATH. Initiative trade beyond the ATH could reach as high as the $4,428.25 and $4,470.75 Fibonacci-derived price extensions.

In the worst case, the S&P 500 trades lower; activity below the $4,384.50 LVNode puts in play the $4,357.75 LVNode. Initiative trade beyond the $4,357.75 LVNode could reach as low as the $4,341.75 micro-composite Point of Control (MCPOC) and $4,325.75 LVNode.

Note also that the last key level corresponds with two key Volume Weighted Average Price (VWAP) levels, a metric highly regarded by chief investment officers, among other participants, for quality of trade. Additionally, liquidity algorithms are benchmarked and programmed to buy and sell around VWAPs.

Volume Areas: A structurally sound market will build on past areas of high volume. Should the market trend for long periods of time, it will lack sound structure (identified as a low volume area which denotes directional conviction and ought to offer support on any test). 

If participants were to auction and find acceptance into areas of prior low volume, then future discovery ought to be volatile and quick as participants look to areas of high volume for favorable entry or exit.

POCs: POCs are valuable as they denote areas where two-sided trade was most prevalent. Participants will respond to future tests of value as they offer favorable entry and exit.

Significance Of Prior ATHs, ATLs: Prices often encounter resistance (support) at prior highs (lows) due to the supply (demand) of old business. These areas take time to resolve. Breaking and establishing value (i.e., trading more than 30-minutes beyond this level) portends continuation.
Graphic: 65-minute profile chart of the Micro E-mini S&P 500 Futures.
Graphic: Weekly candlestick charts of the S&P 500 (top left), Nasdaq 100 (top right), Russell 2000 (bottom left), and Dow Jones Industrial Average (bottom right).
Graphic: SHIFT search suggests participants were committing the most capital to call strikes at and below current prices in the cash-settled S&P 500 Index (INDEX: SPX) and Nasdaq 100 (INDEX: NDX), last week. Note, flow in the S&P 500 may denote the trade of box spreads.

About

After years of self-education, strategy development, and trial-and-error, Renato Leonard Capelj began trading full-time and founded Physik Invest to detail his methods, research, and performance in the markets. Additionally, Capelj is a finance and technology reporter. Some of his biggest works include interviews with leaders such as John Chambers, founder and CEO, JC2 Ventures, Kevin O’Leary, businessman and Shark Tank host, Catherine Wood, CEO and CIO, ARK Invest, among others.

Disclaimer

At this time, Physik Invest does not manage outside capital and is not licensed. In no way should the materials herein be construed as advice. Derivatives carry a substantial risk of loss. All content is for informational purposes only.

Categories
Commentary

Daily Brief For July 8, 2021

Market Commentary

Equity index futures explore lower prices, widening a developing balance area.

  • Traders edgy over virus variant, Fed action.
  • Ahead is data on jobs and consumer credit.
  • Internal divergence resolved in lower prices.

What Happened: U.S. stock index futures liquidated as participants sought to price in anxieties surrounding the spread of COVID-19 variants as well as an evolution in monetary policy. 

“Worries about variant strains have hurt investor confidence that the pandemic’s effects on the global economy are truly past us,” Nicholas Colas and Jessica Rabe of DataTrek Research wrote in a note cited by Bloomberg. “Our working theory is that we’re in the middle of a modest global growth scare.”

Today, also, participants get data on initial and continued jobless claims, as well as consumer credit.

Graphic updated 6:58 AM ET.

What To Expect: Thursday’s regular session (9:30 AM – 4:00 PM EST) in the S&P 500 will likely open outside of prior-range and -value, suggesting a potential for immediate directional opportunity. Balance-break and gap scenarios are in play.

Balance-Break and/or Gap Scenarios: Monitor for acceptance (i.e., more than 1-hour of trade) outside of the balance area.

Gaps ought to fill quickly. Should they not, that’s a signal of strength; do not fade. Leaving value behind on a gap-fill or failing to fill a gap (i.e., remaining outside of the prior session’s range) is a go-with indicator.

Auctioning and spending at least 1-hour of trade back in the prior range suggests a lack of conviction; in such a case, do not follow the direction of the most recent initiative activity.

Further, the overnight liquidation comes after participants had a tough time establishing value at higher prices. Despite steady exploration in days prior, internal divergences via breadth metrics, became more pronounced, while profile dynamics revealed weak commitment at higher prices and an abundance of poor structures (e.g., low-volume areas). 

Graphic: Equity index leaders rose in price as internal divergences – like the ratio of advancers to decliners – grew. Noting a bigger divergence in internals tracking Nasdaq issues. 
Graphic: Nasdaq-100 constituents fail to participate in price rise, via The Market Ear.

Also, yesterday, Federal Reserve officials, as evidenced by meeting minutes, were not yet ready to communicate their timeline for scaling back asset purchases. 

“The committee’s standard of ‘substantial further progress’ was generally seen as not having yet been met, though participants expected progress to continue,” according to minutes from the June 15-16 Federal Open Market Committee meeting published Wednesday. “Various participants mentioned that they expected the conditions for beginning to reduce the pace of asset purchases to be met somewhat earlier than they had anticipated at previous meetings.”

Following closely after, rates on the 10 Year T-Note moved into trend support. Though usually perceived as a boon for stocks – especially growth names – as low rates have to potential to increase the present value of future earnings, all major equity indexes are off their highs.

Graphic: Treasury yields nearly three standard deviations below their mode-implied fair value, via The Market Ear.

Regardless of the cause – comments by the Fed, in addition to the spread of COVID-19 variants, geopolitical tensions, among other things – for today, participants can trade from the following frameworks. 

In the best case, the S&P 500 trades sideways or higher; activity above the $4,285.00 micro-composite high volume area (HVNode), a pivot, participants may look for responses at the $4,299.00 Point of Control (POC), first. Thereafter, if higher, the $4,317.00 POC, which corresponds with the half-point of the overnight range comes next. If above $4,317.00, lookout. The S&P 500 may auction as high as the $4,340.75 HVNode. 

Volume Areas: A structurally sound market will build on past areas of high volume. Should the market trend for long periods of time, it will lack sound structure (identified as a low volume area which denotes directional conviction and ought to offer support on any test). 

If participants were to auction and find acceptance into areas of prior low volume, then future discovery ought to be volatile and quick as participants look to areas of high volume for favorable entry or exit.

POCs: POCs are valuable as they denote areas where two-sided trade was most prevalent. Participants will respond to future tests of value as they offer favorable entry and exit.

In the worst case, the S&P 500 trades lower; activity below $4,285.00 puts in play the $4,263.25 low volume area (LVNode). Trade beyond that signpost may reach as low as the $4,247.75 LVNode and $4,229.00 VPOC.

Graphic: 65-minute profile chart of the Micro E-mini S&P 500 Futures.
Graphic: Daily candlestick charts of the S&P 500 (top left), Nasdaq 100 (top right), Russell 2000 (bottom left), and Dow Jones Industrial Average (bottom right).
Graphic: SHIFT search suggests participants were committing the most capital to call strikes at and below current prices in the cash-settled S&P 500 Index (INDEX: SPX) and Nasdaq 100 (INDEX: NDX), yesterday. This activity may denote (1) stock replacement, (2) hedges for underlying short positions, or (3) speculation on the upside. Also, there was a meaningful bid in longer-dated puts on the S&P 500 and Nasdaq 100. This dynamic suggests participants, despite their commitment to higher prices, are hedging against near-term risks, like the Jackson Hole Economic Symposium.

News And Analysis

Economy | ECB unveils higher inflation goal that tolerates an overshoot. (BBG)

Politics | President Biden to speak on Afghanistan amid swift U.S. pullout. (REU)

Economy | Fed officials are split on easing quantitative easing program. (Axios)

Economy | Rates are down, jobs are up, but mortgage apps still decline. (MND)

Economy | External liquidity strains easing in some APAC economies. (Fitch)

Energy | OPEC gets ‘pass to lift oil prices’ as hedging losses hobble U.S. (FT)

COVID | Europe’s summer in peril as France warns on Spain, Portugal. (BBG)

Economy | Quest to define post-crisis global economic order is gaining. (BBG)

COVID | Tokyo games to go without fans as Japan declares emergency. (BBG)

What People Are Saying

Innovation And Emerging Trends

Markets | Crypto scammers rip off billions on pump-and-dump schemes. (BBG)

FinTech | Powell diary shows he met Coinbase CEO, crypto investor. (BBG)

Markets | A $9 trillion binge turns central banks into the biggest whales. (BBG)

FinTech | Momentum behind blockchain in public, private markets rises. (MM)

Markets | The LSE had its first direct listing of a technology company. (MM)

About

Renato founded Physik Invest after going through years of self-education, strategy development, and trial-and-error. His work reporting in the finance and technology space, interviewing leaders such as John Chambers, founder, and CEO, JC2 Ventures, Kevin O’Leary, businessman and Shark Tank host, Catherine Wood, CEO and CIO, ARK Invest, among others, afforded him the perspective and know-how very few come by.

Having worked in engineering and majored in economics, Renato is very detailed and analytical. His approach to the markets isn’t built on hope or guessing. Instead, he leverages the unique dynamics of time and volatility to efficiently act on opportunity.

Disclaimer

At this time, Physik Invest does not manage outside capital and is not licensed. In no way should the materials herein be construed as advice. Derivatives carry a substantial risk of loss. All content is for informational purposes only.

Categories
Commentary

Weekly Brief For July 3, 2021

Market Commentary

Key Takeaways: U.S. equity index futures diverge in their attempt to discover fair prices for two-sided trade.

  • Economy is set for sustained boom.
  • Ahead is a light economic calendar.
  • SPX, NDX, DJI higher. RUT coiling.

Summary: Last week, U.S. stock index futures auctioned sideways to higher into Friday’s employment report. The release showed an addition of 850,000 jobs in June, the strongest employment gain since last summer. 

The S&P 500 and Nasdaq 100 led the week-long rally, while the Dow Jones Industrial Average followed closely behind. Though the Russell 2000 did end lower, it has been building energy for a break.

Considerations: It was the beginning of April JPMorgan Chase & Co’s (NYSE: JPM) Jamie Dimon wrote strong consumer savings, an increased pace in COVID-19 coronavirus vaccinations, and unprecedented efforts to spur economic activity could mean that a boom lasts as long as 2023.

Dimon’s comments remain valid. Months after, officials are hard at work in helping the U.S. reach herd immunity with vaccines that produce antibodies for the most well-known variants of COVID-19. Additionally, the economy is making progress toward meeting the Federal Reserve’s objectives for employment and inflation; just a couple of weeks ago the institution brought forward the time frame on when it will raise interest rates. 

In a statement, BlackRock strategists noted: “We believe the Fed’s new outlook will not translate into significantly higher policy rates any time soon. This, combined with the powerful restart, underpins our pro-risk stance.”

Alongside that news, the equity market sold violently, into Quadruple Witching, or the large expiry of futures and options. Thereafter, indexes staged a massive reversal, and the CBOE Volatility Index (INDEX: VIX), a measure of the stock market’s expectation of volatility, traded to its lowest level since February 2020.

According to SpotGamma models, up to 50% of the gamma in and across the S&P 500 complex was taken off the table that expiry.

This, as SpotGamma has said in the past, “creates volatility because, as large options positions expire[], are closed and/or rolled, dealers have large hedges they need to adjust.”

Put more simply, the initial action, into the expiry, may have been attributable to the sale of long stock that hedged expiring short exposure above the market (i.e., call side).

After that exposure was cleared, the prospects for a rally improved, boosted by the buying back of short put hedges as volatility imploded.

Last week, though, things became a tad frothy with the number of put options sold-to-open seeing heightened levels.

Graphic: SpotGamma’s analysis suggests equity put options were sold-to-open (red arrow). 

Put sales, which can be part of sophisticated volatility-based trading strategies, often suggest increased confidence as market participants look to options for income, and not insurance.

Historically, the returns after such developments are mixed; more often the appearance of strong initiative buying surfaces (e.g., August and January 2020) before a liquidation helps correct excess inventory, and bring sense back into the market. 

Kris Sidial – co-chief investment officer at The Ambrus Group, a volatility arbitrage fund – and I recently held a conversation regarding meme stock volatility, market structure, and regulation. He noted that ongoing risk-on dynamics can be traced back to factors like Federal Reserve stabilization efforts, and low rates, which incentivize risk-taking.

“The growth of structured products, passive investing, the regulatory standpoint that’s been implemented with Dodd-Frank and dealers needing to hedge off their risk more frequently, than not,” are all part of a regime change that’s affected the stability of markets, Sidial notes. “These dislocations happen quite frequently in small windows, and it offers the potential for large outlier events,” like the equity bust and boom during 2020. “Strength and fragility are two completely different components. The market could be strong, but fragile.”

That dynamic is playing out as Cem Karsan, founder at Kai Volatility, notes volatility is dramatically oversupplied. As a result, as implied volatility drops, options gamma – an option delta’s sensitivity to market price changes – rises. Associated hedging forces make it so there’s more liquidity and less movement. In other words, the market tends to pin.

Still, in line with Sidial’s comments, Karsan believes expected distributions are fat-tailed, given “fragility.” In other words, it’s hard for the market to unpin. Should it unpin, however, there’s “not enough liquidity” to absorb leverage on the tails.

Given this, Karsan finds it interesting to sell at-the-money option structures to fund out-of-the-money structures. Alternatively, knowing what forces – e.g., charm or the rate at which the delta of an option changes with respect to time – decay poses on so-called “dealer positioning,” going into the July option expirations (OPEX), one could look into long calendar put spreads on the S&P 500.

In such a case, traders are short puts in July and long puts on forward. This way, you’re collecting decay as a result of realized pinning. Here’s Karsan’s full take, from the source.

Graphic: The risk profile of a long put calendar spread, via Fidelity.

After mid-July, though, the window for fundamental dynamics (e.g., a shift in preferences from saving and investing to spending, monetary tightening, seasonality, or a COVID-19 resurgence) to take over is opened. 

In a note on COVID resurgence, to not venture too far off into the abyss, I cite strategists led by JPMorgan Chase & Co’s (NYSE: JPM) Marko Kolanovic who last year correctly suggested equities would continue rallying on the basis of low rates, improved fundamentals, buybacks, as well as systematic and hedge fund strategies. 

“The delta variant should not have significant repercussions for the pandemic situation in developed markets (e.g. Europe and North America, which have [made] strong progress in vaccinations) due to the level of population immunity.”

What To Expect: In the coming sessions, participants will want to focus their attention on where the S&P 500 trades in relation to Friday’s $4,323.00 untested Point of Control (POC).

POCs: POCs are valuable as they denote areas where two-sided trade was most prevalent. Participants will respond to future tests of value as they offer favorable entry and exit.

That said, participants can trade from the following frameworks.

In the best case, the index trades sideways or higher; activity above the $4,323.00 POC puts in play the $4,347.00 excess high. Initiative trade beyond the excess high could reach as high as the $4,357.50 Fibonacci-derived price target.

Excess: A proper end to price discovery; the market travels too far while advertising prices. Responsive, other-timeframe (OTF) participants aggressively enter the market, leaving tails or gaps which denote unfair prices.

In the worst case, the index trades lower; activity below the $4,323.00 POC puts in play the untested POC at $4,299.00, as well as the POC and micro-composite HVNode at $4,285.00. Thereafter, if lower, participants may look for responses at the $4,263.25 LVNode, $4,247.75 LVNode, as well as the $4239.25 HVNode and $4,229.00 POC.

Volume Areas: A structurally sound market will build on past areas of high volume. Should the market trend for long periods of time, it will lack sound structure (identified as a low volume area which denotes directional conviction and ought to offer support on any test). 

If participants were to auction and find acceptance into areas of prior low volume, then future discovery ought to be volatile and quick as participants look to areas of high volume for favorable entry or exit.

For a full list of important levels, see the 65-minute profile and candlestick chart, below.

Graphic: 65-minute profile chart of the Micro E-mini S&P 500 Futures.
Graphic: Weekly candlestick charts of the S&P 500 (top left), Nasdaq 100 (top right), Russell 2000 (bottom left), and Dow Jones Industrial Average (bottom right).
Graphic: SHIFT search suggests participants were committing the most capital to call strikes at and below current prices in the cash-settled S&P 500 Index (INDEX: SPX) and Nasdaq 100 (INDEX: NDX), last week. This activity denotes (1) stock replacement, (2) hedges for underlying short positions, or (3) speculation on the upside. Also, there was a meaningful bid in September puts on the S&P 500 and Nasdaq 100. This dynamic suggests participants, despite their commitment to higher prices, are hedging against near-term risks, like the Jackson Hole Economic Symposium.

News And Analysis

Markets | The premium Elon Musk adds to Tesla, other ventures. (Kyla)

Markets | Forward-looking indicators point to improving credit trends. (S&P)

Travel | TSA screenings surpassed 2019 levels in a pandemic first. (CNBC)

Energy | WH is worried about high oil prices, sees enough supply. (REU)

Energy | An overview of data from IEA’s Energy prices database. (IEA)

Energy | OPEC ends Friday’s meeting without a deal for agreement. (CNBC)

Agriculture | Dry weather damage spells trouble for U.S. spring crops. (S&P)

Economy | States ending jobless benefits early hit labor milestones. (REU)

Markets | Spotlight turning to mergers, acquisition for fintech SPACs. (S&P)

Economy | Jobs gain largest in 10 months; employers up wages. (REU)

Energy | Cal-ISO, utilities ask consumers to conserve amid heatwave. (S&P)

Economy | Economic growth hiccup to derail credit spread stability. (BBG)

Markets | Record S&P 500 masks fear trade gripping stock market. (BBG)

Innovation And Emerging Trends

FinTech | BTC mining now easier, more profitable after crackdowns. (CNBC)

FinTech | ‘Flight to quality’ as private insurtechs draw big investments. (S&P)

FinTech | Bank customers cement relationships with digital channels. (S&P)

Markets | Money-losing companies sell record stock, flashing signal. (CNBC)

Markets | Wall Street rebels warning of ‘disastrous’ $11T index boom. (BBG)

Mobility | When do electric vehicles become cleaner than gas cars? (REU)

About

Renato founded Physik Invest after going through years of self-education, strategy development, and trial-and-error. His work reporting in the finance and technology space, interviewing leaders such as John Chambers, founder, and CEO, JC2 Ventures, Kevin O’Leary, businessman and Shark Tank host, Catherine Wood, CEO and CIO, ARK Invest, among others, afforded him the perspective and know-how very few come by.

Having worked in engineering and majored in economics, Renato is very detailed and analytical. His approach to the markets isn’t built on hope or guessing. Instead, he leverages the unique dynamics of time and volatility to efficiently act on opportunity.

Disclaimer

At this time, Physik Invest does not manage outside capital and is not licensed. In no way should the materials herein be construed as advice. Derivatives carry a substantial risk of loss. All content is for informational purposes only.

Categories
Commentary

Daily Brief For July 1, 2021

Market Commentary

Index futures diverge as the bracketing process continues.

  • OPEC to decide on production today.
  • Ahead: Claims, PMI, ISM, Fed speak.
  • SPX and NDX explored higher prices. 

What Happened: U.S. stock index futures auctioned sideways to higher overnight.

The S&P 500 and Nasdaq 100 discovered higher prices before coming back into the prior range. The Russell 2000 and Dow Jones Industrial Average hugged channel resistances suggesting a break may be imminent.

Fundamentally speaking, the U.S. added more jobs than expected last month. That’s good news ahead of Thursday releases on unemployment claims, June manufacturing PMI, ISM manufacturing, Fed speak, used car sales numbers, OECD corporate tax talk, and some miscellaneous earnings.

Graphic updated 7:50 AM ET.

What To Expect: Thursday’s regular session (9:30 AM – 4:00 PM EST) in the S&P 500 will likely open inside of prior-range and -value, suggesting a limited potential for immediate directional opportunity.

Adding, during the prior day’s regular trade, the best case outcome occurred, evidenced by sideways to higher trade, above the micro-composite Point of Control (POC) at $4,273.25.

POCs: POCs are valuable as they denote areas where two-sided trade was most prevalent. Participants will respond to future tests of value as they offer favorable entry and exit.

Further, after strong buying by longer time frame participants, short-term traders took over; moves became mechanical, halting at key, visual references. This comes alongside narrowing breadth, tapering volumes ahead of a holiday weekend, as well as fundamental concerns such as the resurgence of COVID-19.

Still, according to some, there is no cause for concern; “The delta variant should not have significant repercussions for the pandemic situation in developed markets (e.g. Europe and North America, which have [made] strong progress in vaccinations) due to the level of population immunity,” said strategists led by chief global markets JPMorgan Chase strategist Marko Kolanovic.

Given that broad outlook, for today, participants can trade from the following frameworks. 

In the best case, the S&P 500 trades sideways or higher; activity above the $4,285.00 POC puts in play the $4,294.75 level. Initiative trade beyond $4,294.75 could reach as high as the minimal excess $4,305.75 overnight high (ONH). 

Excess: A proper end to price discovery; the market travels too far while advertising prices. Responsive, other-timeframe (OTF) participants aggressively enter the market, leaving tails or gaps which denote unfair prices.

Overnight Rally Highs (Lows): Typically, there is a low historical probability associated with overnight rally-highs (lows) ending the upside (downside) discovery process.

In the worst case, the S&P 500 trades lower; activity below the $4,285.00 POC puts in play the HVNodes at $4,273.25, $4,256.75, and $4,239.75. 

Volume Areas: A structurally sound market will build on past areas of high volume. Should the market trend for long periods of time, it will lack sound structure (identified as a low volume area which denotes directional conviction and ought to offer support on any test). 

If participants were to auction and find acceptance into areas of prior low volume, then future discovery ought to be volatile and quick as participants look to areas of high volume for favorable entry or exit.
Graphic: 65-minute profile chart of the Micro E-mini S&P 500 Futures.
Graphic: Daily candlestick charts of the S&P 500 (top left), Nasdaq 100 (top right), Russell 2000 (bottom left), and Dow Jones Industrial Average (bottom right).
Graphic: SHIFT search suggests participants were committing the most capital to call strikes at and below current prices in the cash-settled S&P 500 Index (INDEX: SPX) and Nasdaq 100 (INDEX: NDX), last week. This activity may denote (1) stock replacement, (2) hedges for underlying short positions, or (3) speculation on the upside. Also, there was a meaningful bid in September puts on the S&P 500. This dynamic suggests participants, despite their commitment to higher prices, are hedging against near-term risks, like the Jackson Hole Economic Symposium.

News And Analysis

Markets | Tesla Q2 deliveries could clear 200K, set record. (BBG)

Markets | Congress has voted to overturn True Lender rule. (Moody’s)

Markets | Credit conditions ahead – things are looking good. (S&P)

Economy | Pandemic exacerbates affordable housing stress. (Fitch)

Markets | Ford will curb output at more plants on chip issue. (WSJ)

Markets | EV car sales up as Europe’s climate targets bite. (REU)

Markets | What could higher taxes mean for U.S. equities? (BLK)

Economy | Jobs gain is higher after disappointing months. (BBG)

Markets | Robinhood wants you to buy into its IPO in-app. (WSJ)

Markets | The delta variant poses no risk to stock markets. (MW)

Energy | Saudis, Russia have deal for OPEC+ output hikes. (BBG)

Markets | The spotlight is turning to M&A for fintech SPACs. (S&P)

What People Are Saying

Innovation And Emerging Trends

FinTech | Robinhood to pay $70M in large FINRA penalty. (CNBC)

Energy | Hydropower market report – analysis and forecast. (IEA)

FinTech | Senators mull Fed crypto as China races ahead. (S&P)

FinTech | A vision for decentralized finance built on bitcoin. (BBG)

FinTech | SoftBank gave $200M to Latam crypto exchange. (REU)

Travel | Air taxis coming but not in the way you are thinking. (WSJ)

FinTech | Bank users cement relations with digital channels. (S&P)

About

Renato founded Physik Invest after going through years of self-education, strategy development, and trial-and-error. His work reporting in the finance and technology space, interviewing leaders such as John Chambers, founder, and CEO, JC2 Ventures, Kevin O’Leary, businessman and Shark Tank host, Catherine Wood, CEO and CIO, ARK Invest, among others, afforded him the perspective and know-how very few come by.

Having worked in engineering and majored in economics, Renato is very detailed and analytical. His approach to the markets isn’t built on hope or guessing. Instead, he leverages the unique dynamics of time and volatility to efficiently act on opportunity. 

Disclaimer

At this time, Physik Invest does not manage outside capital and is not licensed. In no way should the materials herein be construed as advice. Derivatives carry a substantial risk of loss. All content is for informational purposes only.

Categories
Commentary

Daily Brief For June 29, 2021

Market Commentary

Equity index futures diverge, trade sideways.

  • COVID variants cause lockdowns.
  • Ahead are some economic reports.
  • RUT, DJI firming. SPX, NDX weak.

What Happened: U.S. stock index futures auctioned sideways ahead of some key releases. The Russell 2000 and Dow Jones Industrial Average firmed up relative to their peers, the S&P 500 and Nasdaq 100, the group leader.

This activity comes as banks boosted their dividends and uncertainties surrounding the COVID-19 delta-variant. Some reports suggest nearly half of Australia’s population is in lockdown, while Asian countries are looking to reduce the spread with mobility restrictions. Still, not all news is bad; some European countries are lifting restrictions on travel and OPEC may increase the supply of oil.

Of interest today is data around home prices, consumer confidence, and Fed speak.

Graphic updated 7:20 AM ET.

What To Expect: Tuesday’s regular session (9:30 AM – 4:00 PM EST) in the S&P 500 will likely open inside of prior-range and -value, suggesting a limited potential for immediate directional opportunity.

Adding, during the prior day’s regular trade, the best case outcome occurred, evidenced by initiative trade above the $4,257.00 Point of Control (POC), up to a new overnight high (ONH) at $4,283.00.

POCs: POCs are valuable as they denote areas where two-sided trade was most prevalent. Participants will respond to future tests of value as they offer favorable entry and exit.

Overnight Rally Highs (Lows): Typically, there is a low historical probability associated with overnight rally-highs (lows) ending the upside (downside) discovery process.

Prior to getting onto what’s expected for today’s trade, it is important to note some ongoing activity in the options market. Specifically, participants, despite their commitment to higher prices (as evidenced by longer-dated call activity), are likely hedging against near-term risks, like the Jackson Hole Economic symposium used in the past to signal monetary policy changes (see the graphic below for more detail). This hedging, in conjunction with lackluster breadth and poor expansion of range, cautions participants on increased volatility; a focus should be made on relatively strong issues.

Further, for today, participants can trade from the following frameworks. 

In the best case, the S&P 500 trades sideways or higher; activity above the $4,271.00 POC puts in play the $4,283.00 ONH. Initiative trade beyond the ONH could reach as high as the $4,294.75 Fibonacci-derived price target. 

In the worst case, the S&P 500 trades lower; activity below $4,271.00 puts in play the HVNodes at $4,256.75, $4,239.50, and $4,229.00.

Volume Areas: A structurally sound market will build on past areas of high volume. Should the market trend for long periods of time, it will lack sound structure (identified as a low volume area which denotes directional conviction and ought to offer support on any test). 

If participants were to auction and find acceptance into areas of prior low volume, then future discovery ought to be volatile and quick as participants look to areas of high volume for favorable entry or exit.
Graphic: 65-minute profile chart of the Micro E-mini S&P 500 Futures. Notice (1) increased churn at higher prices, (2) minimal excess on composite profile, (3) poor expansion of range, as well as (4) poor, and rather unsupportive, low volume structures beneath current price. 
Graphic: Daily candlestick charts of the S&P 500 (top left), Nasdaq 100 (top right), Russell 2000 (bottom left), and Dow Jones Industrial Average (bottom right). 
Graphic: SHIFT search suggests participants were committing the most capital to call strikes at and below current prices in the cash-settled S&P 500 Index (INDEX: SPX) and Nasdaq 100 (INDEX: NDX), last week. This activity may denote (1) stock replacement, (2) hedges for underlying short positions, or (3) speculation on the upside. Also, there was a meaningful bid in September puts on the S&P 500. This dynamic suggests participants, despite their commitment to higher prices, are hedging against near-term risks, like the Jackson Hole Economic Symposium.

News And Analysis

Economy | The Bank of Japan cuts some bond purchase targets. (BBG)

Markets | BlackRock warns U.S. stocks at risk from higher taxes. (BBG)

Markets | United Airlines confirmed 270 Boeing, Airbus jet order. (REU)

Markets | Wall Street funnels cash to investors post-stress-tests. (BBG)

Markets | FTC Facebook ruling slams brakes on tech’s legal foes. (Axios)

What People Are Saying

Innovation And Emerging Trends

FinTech | State Street is building out data and digital experiences. (BZ)

FinTech | Robinhood CEO backs SEC market modernization vision. (MI)

FinTech | ICAP launching crypto platform with Fidelity, StanChart. (BBG)

FinTech | JPMorgan buys an ESG investing platform, OpenInvest. (CNBC)

Markets | Cathie Wood’s ARK Invest to create bitcoin ETF, ‘ARKB’. (CNBC)

FinTech | Deutsche Boerse is buying Swiss fintech Crypto Finance. (REU)

About

Renato founded Physik Invest after going through years of self-education, strategy development, and trial-and-error. His work reporting in the finance and technology space, interviewing leaders such as John Chambers, founder, and CEO, JC2 Ventures, Kevin O’Leary, businessman and Shark Tank host, Catherine Wood, CEO and CIO, ARK Invest, among others, afforded him the perspective and know-how very few come by.

Having worked in engineering and majored in economics, Renato is very detailed and analytical. His approach to the markets isn’t built on hope or guessing. Instead, he leverages the unique dynamics of time and volatility to efficiently act on opportunity.

Disclaimer

At this time, Physik Invest does not manage outside capital and is not licensed. In no way should the materials herein be construed as advice. Derivatives carry a substantial risk of loss. All content is for informational purposes only.