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1/11/24
#Stocks – $meta, $nvda
#Macro – $spx
Mike’s Reading The Markets Macro Subscription Service on Seeking Alpha
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YouTube Video:
Strange day, after a hot CPI report, stocks rose, then fell, then rallied back, and once again, it was the few leading the many. Anyway, the reflexive nature of the market tells us that what we are witnessing here is much more mechanical than anything and probably has nothing to do with what is happening in the real world.
I’m sorry to say that we have a few more days of this. The good news is that tomorrow is Friday, so Systematics can sell Vol all day ahead of the 3-day weekend, while the call wall at 4,800 can keep the S&P 500 pegged below 4,800. Then, on Tuesday morning, we can wake up to a higher VIX that gets sold all day. Then, we have VIX OPEX on Wednesday and can get on with our lives. Kinda
Make it an even longer weekend; take off tomorrow and Tuesday, too. 🙂
All of this flow stuff got me looking around at the positioning for some of these mega-cap names heading into OPEX next week. When I looked at names like Meta, I saw a lot of call delta due to come off next Friday. I summed up the 12 largest open delta positions, according to Bloomberg, and got $8.1 billion in call deltas expiring on Friday. I summed up the next 12 values and got another $3.2 billion positive deltas. I summed the 12 largest put deltas and got roughly $250 million.
It seems to suggest a lot of Meta will need to be unhedged after OPEX. 
(Bloomberg)
The problem is that this type of positioning also exists in other names, like Nvidia.
(Bloomberg)
Of course, it assumes that these in-the-money calls have all been bought, and the market maker was the seller and bought the underlying to hedge. It is probably safe to say they haven’t all been bought, and there are some covered calls out there. But still, I think given how much positive delta has been built in these stocks, there is going to be a lot that will need to be unwound flowing January 19 OPEX.
Of course, this comes when the 1-month Implied Correlation Index closed under 11, at 10.9 today. Can it fall further? Of course, it can. It fell below 10 in July, but the lower it falls, the more extremes it reaches, like January 2018, Fall 2018, and July 2023. All had some nice sell-off that took place.
Anyway, that is enough for today. My head hurts.
Mike
Charts used with the permission of Bloomberg Finance L.P. This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.Â
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Charts used with the permission of Bloomberg Finance L.P. This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.
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