“Do not become a mere recorder of facts, but try and penetrate the mystery of their origin.”
- Ivan Pavlov
I don’t think there’s much of a mystery left about why we keep seeing episodic-and-non-TRENDING Vol Spikes into US options expiration dates…
I’ve discussed this, at length, with many men and women at hedge funds this year. The way that running “neutral” really works is that many have to keep buying “protection” on the way up in order to stay or look “hedged.”
AFTER 4 straight all-time closing highs for the Iron QQQ’s, implied volatility has spiked, once again!
Back to the Global Macro Grind…
Pavlov was an interesting dude. He was a Russian psychologist who won the Nobel Prize for “classic conditioning.” Whether people on the bid/ask realize it or not, they’re constantly being conditioned – and often not in a good way!
For many, the most memorable Pavlov study was the one he gave to a hungry Hoodie (or back then, a dog). He’d ring the bell and the animal would start salivating. Kind of like a meme stock…
We’ll get the mother of all meme stocks, Gamestop (GME), to report reality after the market bell this afternoon.
Since my Partner, Brian McGough, was one of the original author’s of the bull case on Gamestop, I’ll let him try to handicap what the stock does from here on The Call @Hedgeye this morning.
For those of you who do not subscribe to the ONLY macro to micro Morning Research Meeting (i.e. The Call @Hedgeye), you’re missing out on what really happens on the buy-side. We’re constantly trying to fade the consensus conditioning.
Back to the Iron QQQ’s:
A) Yesterday’s all-time closing high of 15,374 was the 4th straight for the NASDAQ
B) Yesterday’s all-time closing high was the 9th by the NASDAQ since joining SPY all-time highs on AUG 23rd
C) All-time remains a very long time @Hedgeye and most places that keep score
You can hate on it. You can yell at it. You can bloody well say or do whatever you want about it. I’d prefer to stay long of it for as long as the #Quad3 Cycle Bell rings.
Alternatively, you can call for it to correct 10-15%, and eventually be right… especially if it keeps going higher, ha!
And on that implied “fear of a correction” and/or implied delta-hedging in the Iron QQQ’s:
A) Last night’s implied volatility on QQQ’s shot up to +72% PREMIUM vs. 30-day realized
B) That +72% was up from +44% on the day prior (from last Friday’s close)
C) That +72% was up from +40% 1-week ago and +51% 1-month ago
Never mind 1-week ago. Imagine that 1-month ago, you grossed up long QQQ or AAPL? How about Netflix (NFLX)? Hoo-wah! What a ride that sucker has been on alongside the likes of Facebook (FB), Google (GOOGL), Tesla (TSLA), etc.
Need some “color” on “why” those names have been ripping the eyelids off the bears? In addition to discussing the “fundamentals” of all these stocks on The Call @Hedgeye, I always push my analysts on the “quant factors”…
While ye Olde Wall and their silos of research people keep talking garrulously about the “valuation” of things and whatever cycle they think we’re in, we talk about where the Quad Cycle & Factor Exposures are relative to consensus.
I also publish daily Risk Range™ Signals for all of the aforementioned names (AAPL, NFLX, FB, GOOGL, TSLA, etc.). Many pros pay very close attention to those, especially when a TREND Signal shifts from Bearish to Bullish TREND.
When those Phase Transitions happen AND there’s an accelerating implied vol PREMIUM in the name, it’s bullish.
So what are you going to do with all of this “Quantamental” #process-driven information today? Well, let’s say we get an epic Day 1 of a correction in the QQQ’s and… wait on it… maybe a 2nd day too?
Buying “risk” and shorting defensive melting ice cubes like Verizon (VZ) at options expiration has been one of the great tactical risk management strategies throughout 2021 with the USA in #Quad2 and #Quad3.
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets:
UST 10yr Yield 1.26-1.39% (neutral)
UST 2yr Yield 0.19-0.25% (bullish)
SPX 4 (bullish)
RUT 2 (bullish)
NASDAQ 14,973-15,519 (bullish)
Tech (XLK) 156.19-160.71 (bullish)
VIX 15.01-19.67 (bearish)
USD 91.91-93.15 (bearish)
EUR/USD 1.172-1.191 (bullish)
Oil (WTI) 67.15-71.08 (bullish)
Nat Gas 4.18-4.91 (bullish)
Gold 1 (bullish)
AAPL 149-159 (bullish)
AMZN 3 (bullish)
FB 366-389 (bullish)
GOOGL 2 (bullish)
NFLX 553-621 (bullish)
TSLA 708-767 (bullish)
Bitcoin 45,809-50,311 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
