Two important corrections - $UVXY is now a 1.5x levered ETF. Previously it was 2.0x. Also the volume lines in the final chart are not adjusted for splits so are not apples to apples with the longer term historical data, but the point is the monthly increase in the past two months (which is similar to uptick seen before prior unwinds). Thanks to the readers who pointed these out.
This is incredible. So much gratitude to you. I already bought some nov 19 UVXY calls $55. As one chart loving MD to another, thank you. You have inspired me in so many ways. I have also been backing up the UVXY truck for weeks now. I've tried to warn friends and family, and the responses are silence. But I know I'm not crazy.
It’s in-depth articles like this that show me my ignorance of what’s really going with the products I own, with markets, and with the games that humans play in general. Amazing content! This is what the internet is for. Sharing knowledge and openly discussing ideas and viewpoints. I only understood maybe 60%, but thanks so much for writing this up for us. 👏👏👏
Both of your articles reminded me that it’s quite amazing how humans have invented such complex financial games (trading is nothing else than a collaborative game where everyone tries to get ahead within the constraints of the game). I find it fascinating how this game involving not real assets but derivates and leveraged derivates of derivates is played continuously and globally and that it even works without breaking most of the time! Humans are weird. But what a time to be alive!
I thought this was an awesome read and incredible insight into a previously unknown factor into the market. I think you are pretty close to spot on. While of course I need to do my own research, this makes sense in my own mind.
A big hug for sharing your knowledge and insights. This is life changing information. You perfectly explained my unsettling feeling about todays markets. You confirmed why I'm a contrarian. Learned a wealth of valuable info. Thank you very much!
First of all, thank you -very instructive and useful. It fits very well in my strategy.
Nov19 '21 $50 calls I estimated it to be precisely 4-sigma.
Taleb was using a similar strategy back in the 80s and hugely benefited from it in the Black Monday. But also in Mar '20. For this strategy, I am currently buying short-dated (one month), far OTM calls (3 to 4 sigma) on Eurodollar. The advantage of Eurodollar is its very low volatility (circa 0.1%) makes the options supercheap so that you can buy in size. The rationale here is: following a liquidity event, there's a massive liquidity injection hence your Eurodollar rise dramatically.
Would love to know your opinion. Thanks for your work, Jehu
I was thinking the exact same thing, everytime they ALWAYS inject billions to trillions of liquidity. Now they would have to pump the Dow to 100.000 to be proportional.
Is this correct, that UVXY went from a 2.0x levered ETF to a 1.5x levered ETF on 2/28/2018? So that the March 2020 high was with UVXY as a 1.5x levered ETF, just as it is the same leverage factor now?
Two important corrections - $UVXY is now a 1.5x levered ETF. Previously it was 2.0x. Also the volume lines in the final chart are not adjusted for splits so are not apples to apples with the longer term historical data, but the point is the monthly increase in the past two months (which is similar to uptick seen before prior unwinds). Thanks to the readers who pointed these out.
This is incredible. So much gratitude to you. I already bought some nov 19 UVXY calls $55. As one chart loving MD to another, thank you. You have inspired me in so many ways. I have also been backing up the UVXY truck for weeks now. I've tried to warn friends and family, and the responses are silence. But I know I'm not crazy.
It’s in-depth articles like this that show me my ignorance of what’s really going with the products I own, with markets, and with the games that humans play in general. Amazing content! This is what the internet is for. Sharing knowledge and openly discussing ideas and viewpoints. I only understood maybe 60%, but thanks so much for writing this up for us. 👏👏👏
Both of your articles reminded me that it’s quite amazing how humans have invented such complex financial games (trading is nothing else than a collaborative game where everyone tries to get ahead within the constraints of the game). I find it fascinating how this game involving not real assets but derivates and leveraged derivates of derivates is played continuously and globally and that it even works without breaking most of the time! Humans are weird. But what a time to be alive!
the real black swan is probably the derivative market
I thought this was an awesome read and incredible insight into a previously unknown factor into the market. I think you are pretty close to spot on. While of course I need to do my own research, this makes sense in my own mind.
A big hug for sharing your knowledge and insights. This is life changing information. You perfectly explained my unsettling feeling about todays markets. You confirmed why I'm a contrarian. Learned a wealth of valuable info. Thank you very much!
Well. I learned something today.
The largest UVXY weekly volume in 20 years. This week.
nice work bear
your VIX target seems conservative i think the next spike hits around 200 which probs fits with your spx target
Thank you for your work and all your posts. I find more sanity in your insights than in any other place.
This is PURE GENIUS, Michael Burry would be proud.
I don't know why, but I'm fascinated by volatility. This was a great read and phenomenal info
First of all, thank you -very instructive and useful. It fits very well in my strategy.
Nov19 '21 $50 calls I estimated it to be precisely 4-sigma.
Taleb was using a similar strategy back in the 80s and hugely benefited from it in the Black Monday. But also in Mar '20. For this strategy, I am currently buying short-dated (one month), far OTM calls (3 to 4 sigma) on Eurodollar. The advantage of Eurodollar is its very low volatility (circa 0.1%) makes the options supercheap so that you can buy in size. The rationale here is: following a liquidity event, there's a massive liquidity injection hence your Eurodollar rise dramatically.
Would love to know your opinion. Thanks for your work, Jehu
I was thinking the exact same thing, everytime they ALWAYS inject billions to trillions of liquidity. Now they would have to pump the Dow to 100.000 to be proportional.
I was conversing with someone on twitter who was also looking at Nov 19 $50 calls interesting
Short dated work better. Now I am looking at $45 calls for Nov and Dec since it dropped a bit. I already bought Nov..
Is this correct, that UVXY went from a 2.0x levered ETF to a 1.5x levered ETF on 2/28/2018? So that the March 2020 high was with UVXY as a 1.5x levered ETF, just as it is the same leverage factor now?
I'm all-in on UVXY and UVIX. Bought mid June when VIX was ~33.
SP500 to 2900 by end of July. The next volatility squeeze is coming.
Please make a part 3! This is great. Part 3 could but an update to parts 1 and 2.
I think might be coming soon.