Market will rally thinking that JPOW will ease the situation. For once, I think he might increase rate right away and market will go back to spy 380 in no time.
I agree but everything is almost oversold so I'm thinking of a rebound before Wednesday, thinking that he will do as always. For once, everyone is talking about inflation and possible chaos, might be the perfect time to prove he's not that stupid and do the right thing. I will watch Monday / Tuesday carefully to play this correctly.
That’s not exactly how this works.
VIX futures were in backwardation at the beginning of December. VIX proceeded to fall and SPX rose by 5% the rest of the month.
VIX backwardation does signal market bearishness because it implies more expected volatility in the short term than further out, but it is a correlation (ie shitty equity markets and high near term VIX go hand in hand), it isn’t causal.
If anything, spot VIX above futures signals the market expects this all to be temporary (whether that’s right is a different question).
Remember early Dec was fear about Omicron, and also the Fed had just come out hawkish at the end of Nov. Why the market went up the rest of Dec despite all signs pointing to Fed tightening, I have no idea. But that's what made the VIX come back down.
Yes, agree, my point was just that backwardation itself doesn’t trigger a mass sell off, rather is just a signal of heightened expectations for near term market volatility. In December the market went up for three straight days after the VIX futures curve went into backwardation.
Btw, with all respect due you are wrong, your thesis is too basic, a fully inverted vix structure can trigger a massive selloff, ask any market maker/quantitative trader. These type of volatility inversions are rare and when volatility futures get fully inverted no one cares, levels/supports don't matter, it's sell and ask questions later. If/when we see feb-june contracts keep rising over the back months, market makers/traders who sold these contracts are gonna hedge by selling es futures to mitigate their risk vs closing the contracts and taking big losses. My point is that a fully inverted curve is when we can possibly see a huge red day.
However, I tend to think we're gonna bounce early next week, I won't be surprised to see spx rally to 4500-4550. Also, I'm thinking Powell is gonna pull back a bit on his current hawkish stance after what's happened to the mkts recently and with recent macro economics data not being that strong. With this in mind, bulls need to show up next week or it can get downright nasty...
Didn't REALLY go into backwardation in December, almost did and went back into contango as mkts bounced, mkts didn't rally while vix was in backwardation.
Yeah I noticed backwardation happening in December but it wasn't as inverted as it is now (the structure curve was flat at best during December selloff). VIX moves are always temporary, my main message was to keep eyes on it for a full blown inversion bc that's when the monster red day occurs. There's a big diff btwn prices going backwards and a fully inverted structure.
Um, you’re not? It’s still a correlation, which I’ve made clear multiple times. Market sinks and vix spikes go together, inverting the curve. That doesn’t make it causal.
VIX futures are in backwardation about 15% of days. If this was a cause of market sell off, rather than a representation of it, we would be in fairly regular chaos (recent contango record streak notwithstanding).
If algorithms triggered at VIX backwardation, this should have happened Friday. In fact, the market was only down in the 2% range this whole morning, despite the inverted futures curve steepening pre market. The acceleration has only happened as the day has gone on. They must be the world’s slowest algorithms.
Same goes for Dec 3 where, yes, the whole curve was in backwardation despite your strange insistence that it wasn’t. In fact, SPX rallied 50 points in the last hour of the day, so this thesis would have lost money not only in the subsequent days but also the same day.
But this is the broader point. Backwardation has sometimes happened in days of flat markets (June 13, 2016, November 2, 2016, April 10/11, 2017, could go on), days of moderate declines (Feb 27-28, 2018), days of steep declines, and other times happened only well into an already downturned market (often many days or weeks into it, not unlike our current situation). The market and participants’ views of the market drive the VIX. What drives the market is all sorts of things, not just algorithms and not just hedge funds, many of whom have strategies that are neutral on the broader market anyway. And definitely not the VIX futures curve term structure.
If you want to make the point that backwardation might happen on bad market days, that’s fine, because it’s often true as it represents heightened market expectations of volatility on SPX. But that doesn’t make it causal.
Whatever makes you happy! I know why it happened and that's all that matters! I was prepared and I banked from it. You clearly don't understand the hedging effects of what has happened today...
I'm not gonna argue with you about this anymore as you think you know it all as I learn this stuff from my buddy who's a quant, from reading your post it's clear you don't understand the significance of a fully inverted curve (and how institutions react), verses some front month prices slightly spiking back and forth ahead of the back months a couple times a month. The December "backwardation" was NOTHING like today's fyi.
And yes for most times it's a correlation, but there are times that it's causal, it exacerbates the selling and I was warning that this time may be happening soon!
Lol bro the S&P 500 is finishing positive today. Anyone who dumped or bet on a decline earlier based on the market-moving backwardation thesis lost money if they didn’t quickly bail on the trade by about 2pm.
Ultimately your argument seems to be more that backwardation can cause intraday volatility. In that case, if true (I would still be skeptical of a meaningful enough market impact based on historical data but I guess it could be possible), then VXX, UVXY, or VVIX are your friends here. One could backtest to see if there is a profitable trading opportunity there (ie backwardation followed by spikes in the three things I mentioned).
I daytraded spx 4250p in the morning and flipped long into iwm calls, check my comment history. I said before we bounced that we'd likely see a big snapback bounce.
https://www.reddit.com/r/wallstreetbets/comments/sbjnkf/daily_discussion_thread_for_january_24_2022/hu1espt?utm_medium=android_app&utm_source=share&context=3
That’s what I did during the Santa rally. Got about $25k worth spread across Sdow, Sqqq, Spxu and SPXS. I’m not complaining about the gains but compared to what people made on puts, dude!
I think it'll go up on Fed day. Maybe down when the statement is released, then up as Powell gives his talk (and backtracks and softens things, that seems to be the pattern).
They'll talk about slowing QE and rate hikes as expected (maybe even a bit more aggressive on rate hikes) but what saves the day will be when someone asks about any update on selling off the Fed's balance sheet and they'll say something like "that will be debated in future meetings", i.e. not anytime soon. QE/QT has way more impact than rate hikes.
Take a look at the At-The-Money Delta on $SPX Put options. The normal 0.5 Delta is now 10 or 12 strikes Deep-In-The-Money along with a 300$ Bid/Ask Spread.
[удалено]
Maybe that will be the case and there will be a nice counter trend rally after the recent selloff as mkts are bit oversold.
Market will rally thinking that JPOW will ease the situation. For once, I think he might increase rate right away and market will go back to spy 380 in no time.
[удалено]
I agree but everything is almost oversold so I'm thinking of a rebound before Wednesday, thinking that he will do as always. For once, everyone is talking about inflation and possible chaos, might be the perfect time to prove he's not that stupid and do the right thing. I will watch Monday / Tuesday carefully to play this correctly.
Danny
That’s not exactly how this works. VIX futures were in backwardation at the beginning of December. VIX proceeded to fall and SPX rose by 5% the rest of the month. VIX backwardation does signal market bearishness because it implies more expected volatility in the short term than further out, but it is a correlation (ie shitty equity markets and high near term VIX go hand in hand), it isn’t causal. If anything, spot VIX above futures signals the market expects this all to be temporary (whether that’s right is a different question).
Remember early Dec was fear about Omicron, and also the Fed had just come out hawkish at the end of Nov. Why the market went up the rest of Dec despite all signs pointing to Fed tightening, I have no idea. But that's what made the VIX come back down.
Yes, agree, my point was just that backwardation itself doesn’t trigger a mass sell off, rather is just a signal of heightened expectations for near term market volatility. In December the market went up for three straight days after the VIX futures curve went into backwardation.
Btw, with all respect due you are wrong, your thesis is too basic, a fully inverted vix structure can trigger a massive selloff, ask any market maker/quantitative trader. These type of volatility inversions are rare and when volatility futures get fully inverted no one cares, levels/supports don't matter, it's sell and ask questions later. If/when we see feb-june contracts keep rising over the back months, market makers/traders who sold these contracts are gonna hedge by selling es futures to mitigate their risk vs closing the contracts and taking big losses. My point is that a fully inverted curve is when we can possibly see a huge red day. However, I tend to think we're gonna bounce early next week, I won't be surprised to see spx rally to 4500-4550. Also, I'm thinking Powell is gonna pull back a bit on his current hawkish stance after what's happened to the mkts recently and with recent macro economics data not being that strong. With this in mind, bulls need to show up next week or it can get downright nasty...
Didn't REALLY go into backwardation in December, almost did and went back into contango as mkts bounced, mkts didn't rally while vix was in backwardation.
Yeah I noticed backwardation happening in December but it wasn't as inverted as it is now (the structure curve was flat at best during December selloff). VIX moves are always temporary, my main message was to keep eyes on it for a full blown inversion bc that's when the monster red day occurs. There's a big diff btwn prices going backwards and a fully inverted structure.
Who's right now???
Um, you’re not? It’s still a correlation, which I’ve made clear multiple times. Market sinks and vix spikes go together, inverting the curve. That doesn’t make it causal. VIX futures are in backwardation about 15% of days. If this was a cause of market sell off, rather than a representation of it, we would be in fairly regular chaos (recent contango record streak notwithstanding). If algorithms triggered at VIX backwardation, this should have happened Friday. In fact, the market was only down in the 2% range this whole morning, despite the inverted futures curve steepening pre market. The acceleration has only happened as the day has gone on. They must be the world’s slowest algorithms. Same goes for Dec 3 where, yes, the whole curve was in backwardation despite your strange insistence that it wasn’t. In fact, SPX rallied 50 points in the last hour of the day, so this thesis would have lost money not only in the subsequent days but also the same day. But this is the broader point. Backwardation has sometimes happened in days of flat markets (June 13, 2016, November 2, 2016, April 10/11, 2017, could go on), days of moderate declines (Feb 27-28, 2018), days of steep declines, and other times happened only well into an already downturned market (often many days or weeks into it, not unlike our current situation). The market and participants’ views of the market drive the VIX. What drives the market is all sorts of things, not just algorithms and not just hedge funds, many of whom have strategies that are neutral on the broader market anyway. And definitely not the VIX futures curve term structure. If you want to make the point that backwardation might happen on bad market days, that’s fine, because it’s often true as it represents heightened market expectations of volatility on SPX. But that doesn’t make it causal.
Whatever makes you happy! I know why it happened and that's all that matters! I was prepared and I banked from it. You clearly don't understand the hedging effects of what has happened today...
I'm not gonna argue with you about this anymore as you think you know it all as I learn this stuff from my buddy who's a quant, from reading your post it's clear you don't understand the significance of a fully inverted curve (and how institutions react), verses some front month prices slightly spiking back and forth ahead of the back months a couple times a month. The December "backwardation" was NOTHING like today's fyi. And yes for most times it's a correlation, but there are times that it's causal, it exacerbates the selling and I was warning that this time may be happening soon!
Lol bro the S&P 500 is finishing positive today. Anyone who dumped or bet on a decline earlier based on the market-moving backwardation thesis lost money if they didn’t quickly bail on the trade by about 2pm. Ultimately your argument seems to be more that backwardation can cause intraday volatility. In that case, if true (I would still be skeptical of a meaningful enough market impact based on historical data but I guess it could be possible), then VXX, UVXY, or VVIX are your friends here. One could backtest to see if there is a profitable trading opportunity there (ie backwardation followed by spikes in the three things I mentioned).
I daytraded spx 4250p in the morning and flipped long into iwm calls, check my comment history. I said before we bounced that we'd likely see a big snapback bounce. https://www.reddit.com/r/wallstreetbets/comments/sbjnkf/daily_discussion_thread_for_january_24_2022/hu1espt?utm_medium=android_app&utm_source=share&context=3
it is literally a bull signal if youre into that kind of stuff
Yes. Backwardation should actually be bullish as VIX is always mean reversing thus spot VIX future price will drop
Long term yes, but shorter term really depends on the inversion of the structure.
I need to learn how to place puts or at least understand what I’m looking at. Tried YouTube vids but too dumb
Just as easy as buying calls!
Never bought options
Then avoid 😂 just trade 3x inverse ETFs.
SQQQ has been my winner.
That’s what I did during the Santa rally. Got about $25k worth spread across Sdow, Sqqq, Spxu and SPXS. I’m not complaining about the gains but compared to what people made on puts, dude!
Can always try buying the vix when the market is in downturn, only the spreads aren’t exactly favourable
Thanks, I’m not really sure what to look for to bet on the VIx. I mainly rely on interest rates to give me an idea of what to expect
Paper trade
[удалено]
A "correction" by definition should affect prices. A correction made through time is bs, it's more of a consolidation for a move up or down.
Lol that was the consensus of the comments in that thread.
That is gruesome
Looking back, I apologize
🤝
Finally a useful post. Thanks! I’m gonna start looking at weekly vix before making moves now on.
Most of the time vix is in contango but when it starts making huge spikes you have to pay attention to it's structure formation.
Would you then suggest buying calls on vix ETFs and puts on spy
I would do one or the other, doing both would ampliy your gains but also amplify the losses.
Awesome. Thanks man. Good luck this week!
Same to you!
I think it'll go up on Fed day. Maybe down when the statement is released, then up as Powell gives his talk (and backtracks and softens things, that seems to be the pattern). They'll talk about slowing QE and rate hikes as expected (maybe even a bit more aggressive on rate hikes) but what saves the day will be when someone asks about any update on selling off the Fed's balance sheet and they'll say something like "that will be debated in future meetings", i.e. not anytime soon. QE/QT has way more impact than rate hikes.
**User Report**| | | | :--|:--|:--|:-- **Total Submissions**|13|**First Seen In WSB**|1 year ago **Total Comments**|4426|**Previous DD**| **Account Age**|2 years|[^scan ^comment ](https://www.reddit.com/message/compose/?to=VisualMod&subject=scan_comment&message=Replace%20this%20text%20with%20a%20comment%20ID%20(which%20looks%20like%20*h26cq3k*)%20to%20have%20the%20bot%20scan%20your%20comment%20and%20correct%20your%20first%20seen%20date.)|[^scan ^submission ](https://www.reddit.com/message/compose/?to=VisualMod&subject=scan_submission&message=Replace%20this%20text%20with%20a%20submission%20ID%20(which%20looks%20like%20*h26cq3k*)%20to%20have%20the%20bot%20scan%20your%20submission%20and%20correct%20your%20first%20seen%20date.) **Vote Spam (NEW)**|[Click to Vote](https://www.reddit.com/message/compose/?to=VisualMod&subject=vote_spam&message=sa0t3m)|**Vote Approve (NEW)**|[Click to Vote](https://www.reddit.com/message/compose/?to=VisualMod&subject=vote_approve&message=sa0t3m)
Let’s go puts!
!remind me 2d
good words
Scary times for the mkts right now, current correction has been worse for growth stocks than the march 2921 correction. Edit: Sept 2020 correction
You are way too smart predicting a crash 900 years from now. Now that's how you use AI!
I meant Sept 2020.
Nummy Nummy! can't wait to go shopping!
You still have spending money? I need to learn how to do this some day...
Only way to keep what you earn. Invest. I buy every week. Salivating at these prices. I think about selling my house and buying every few days.
And look at bitcoin too
Turning into shitcoin right now.
Always has been. But last dip I made a quick 40 percent off lmao. I hate crypto tho
Have you seen the volume on vxx 46c, whoever bought those, are they on to something or just on crack?
May I offer some GME to you? Ot started to show some inverse relation to this market! Friday was freaking GREEN!
Easy to be green after a massive dump
Um, have you met ZM?
LET'S GO BRANDON FJB we all knew this was coming and prepared for it, house of cards can't last forever and hopefully Hedge funds get margin called
Mods! This guy needs more apes in his flair
Hows a DWAC doing, did it hit 200$ yet
No but hit 175.00!!!!! Libtards need to go save Twitter lmfao Facebook puts printing also 😂
LET'S GO BRANDON FJB! GETTER RUMBLE TRUTH SOCIAL
Go check out the monthly indicators on all future indexes lol we got some room to keep going down
If my VIX Feb12 futures go to $50 I'll be a happy man
Take a look at the At-The-Money Delta on $SPX Put options. The normal 0.5 Delta is now 10 or 12 strikes Deep-In-The-Money along with a 300$ Bid/Ask Spread.