The first fall was hard to believe. The second rise was hard to believe. This fall is likely to surprise us again.
Did VIX tip its hand for this drop? I wish I knew. What I was using was some frothy behavior and sentiment. You should not be able to hit home runs over and over. If you are, you must be able to see the future or you are part of the invisible hand. One of the tells is the activity in threads here.
When I was trading in the tech bubble, I kept asking myself why I would do anything elseā¦ I found out soon enough.
ZIRP/NIRP are not good signs. The invisible hand stepping in to keep up the market is not a good thing. Didnāt they say the recession started in Feb? We didnāt lockdown until late March.
Even though people aware of swings, many do not aware of how market swings are made, which is common as market makers (Big banks and HFTs) make and break the market no matter what happens.
People here at least read about VIX ( mostly measure of SPX puts) !
When market makes buy millions of SPX Puts, 15 days expiry, they can bring down S&P market heavily (shorting) so that billions goes to them when they sell their puts in few days.
Retail traders sell their stocks by fear of losing money and at that time they cover the shorts.
The example looks simple, but in practice very complex, but they ( wallstreet ) do it every now and then.
They make big money like that one posted with AAPL unimaginable amounts.
With all such swings, Warren Buffet making it 500B in investment is an extraordinary work !
Puts donāt change the price of the underlying security. The only thing that changes the stock price is people buying and selling the stock. Itās really simple supply and demand.
Puts are an option contract which isnāt the same as selling a stock short.
I have a MBA and MS in finance and literally took grad school level courses in this from a top-tier business school. I literally took an entire course in calculating the value of options and derivatives.
With your background, it is simple to read the cboe VIX documentation, understand completely. There are lot of research papers (some are excellent) in SSRN database, read it, understand.
Trust me, this will help you in the long run. The VIX was excellent creativity to know what will happen ahead.
If I update here, it goes to endless debate for which I am not ready.
Ha ha ha ā¦you got it ! Time, time, I need more time to do analysis and back testing (along with 9-5 job).
I understand what the VIX is. Your idea that buying puts impacts the price of a stock is 100% wrong.
Also, VIX is an output of option prices. The more expensive OOM options are the higher the VIX. Itās not that VIX is set first then options are priced. Option prices move on supply and demand just like every other security. The fact people are willing to pay more for OOM options means they are expecting higher volatility. Thatās why VIX increases, since VIX is a measure of expected forward looking volatility calculated based on OOM option prices. Thatās because higher volatility increases the odds that OOM options will expire ITM. If the perceived odds increase, then the price people are willing to pay increases. That drives the VIX higher.
Thereās a reason individual stock options that expire just before earnings are much cheaper then options that expire after earnings. Earnings are an event that can significantly move a stock. They increase the odds of OOM options becoming ITM. For an individual stock, itās implied volatility (IV).
If VIX is an predictor of the future, then why was it 80 while the market made lows in March? By your theory, the VIX of 80 should have meant the market was going much lower. The VIX doesnāt predict the future.
He disses Buffett, touts stocks to legion of Twitter followers
Barstool Sportsā Dave Portnoy had bought just one stock in his life before the quarantine hit. When the country shut down in March, canceling sports and sports betting, the founder of the brash media empire considered sexist by some dusted off his old E*Trade account and started day trading.
Tuesday afternoon, a smallish Chinese real-estate firm, ticker symbol DUO, went crazy on the Nasdaq. Out of the blue, in a vacuum of news, depositary receipts of the Shenzhen-based outfit shot up 13-fold, taking its market capitalization to $4 billion.
Nobody had a definitive reason why. But people could guess. Its name: Fangdd Network Group Ltd., sounds like the acronym for that amalgamation of American megacaps, the āFaangs,ā comprising Facebook Inc. and others. Those shares were rallying, and it was easy to believe people had gotten it into their heads that Fangdd could ā somehow ā move along with them.
A lot of the stock market has this tinge of late. Get people to believe that other people will believe that a stock will go up, and fear-of-missing-out will take over. More than 15,000 retail clients of the Robinhood investing app added DUO to their account last week, a phalanx of day traders marching to war.
I donāt think itās the retailers that are causing the market to go up, but they will be the ones that usually bag hold / sell before a recovery. Itās not a good feeling to see people get tricked. HTZ, AAL and the like.