474 replies to this topic

[dTraderB]

Got to get this in... before we get to serious discussion on more important trading issues. There seems to be a growing acceptance of this ODTE madness.

"What in the current zeitgeist will make us cringe in the future?

In an article entitled Future Cringe, the New York Times recently queried a bunch of worthies from academe, media, fashion, the arts, and business about what will make them look back in anger, embarrassment, or disgust years from now. Various predictable but trivial items made the list, including Crocs, binge-watching streaming TV series, selfies, computer dating, and the incessant use of social media. The use of cringe as a noun, however, didnt seem to put anybody off, including the headline writer.

One respondent pointed to the YOLOYou Only Live Onceattitude as the root of a lot of the worlds problems, which is debatable. For the financial markets, YOLO was invoked during the lunacy of the so-called meme stocks a couple of years ago, which sent shares of nearly worthless companies skyward.

Now, insouciant speculation has returned in another acronym, 0DTE, which stands for Zero Days to Expiration options. Short-term calls and puts have long been favorites of speculative traders because they cost less than lengthier contracts. To help traders scratch that speculative itch, the exchanges have been offering ever-shorter options until they got to 0DTE.

And their growth has been explosive, so much so that their trading volume is swamping the turnover in the underlying securities, reports Doug Kass, who heads Seabreeze Partners and flagged the 0DTE phenomenon for us. He likens it to the speculative frenzy once seen in the trading of hot initial public offerings, when new shares would change hands several times on their first day, he said in a phone interview.

These short-term options have succeeded meme stocks as the Streets gambling vehicle of choice, adds Peter Tchir, the derivatives maven who heads macro strategy at Academy Securities. About 90% of his recent conversations are about 0DTE, he relates in an email. And Thursday saw record call-option volume, with the vast majority of expirations on Feb. 2 and Feb. 3. The SPDR S&P 500 exchange-traded fund (ticker: SPY), usually leads the most-active list; Tesla (TSLA) does the same among single stocks.

Not that the lunacy in the meme stocks has ended. Kass noted the jump in Bed Bath & Beyond (BBBY), whose shares soared by more than 18% Thursday, a day after the housewares retailer missed a Feb. 1 interest payment and weeks after it said it might file for bankruptcy, which could render its equity worthless. But it was just another part of the market frenzy that day, which also featured record call-option volume as the Nasdaq Composite soared 3.25%, he pointed out.

Theres another attraction to trading cheap 0DTE options, according to Julian Emanuel, chief equity and derivative strategist at Evercore ISI. Unlike the era of TINAThere Is No Alternative to equitieswhen interest rates were pinned to near zero, investors now can comfortably earn more than 4% in money-market funds. At the same time, after getting burned when the FAANG and meme-stock bubbles deflated, many individuals are wary of plunging back into the market. But they can get back into the action by putting just a few percent of their portfolios into 0DTE options, where only the small price of the option is at risk.

So an unintended consequence of the Federal Reserves interest-rate hikes has been to facilitate speculation in short-dated options while investors earn a reasonable risk-free return on the bulk of their money, Emanuel says.

After the steep declines in many tech and speculative stocks, investors had an unprecedented amount of tax losses to realize by the end of 2022, the strategist further notes. Once that selling was finished with the flip of the calendar, the losers were poised to rally. Tesla was up 52.8% as of Thursday from where it ended 2022, while the ARK Innovation ETF (ARKK) was up 42.2%.

Indeed, Bespoke Investment Group describes this years equity market performance as a dash for trash. In a client note published Thursday, the firm reported that the top 10% of the most heavily shorted stocks were up an average of 36.3% this year, while those in the lowest 10th of returns in 2022 had risen by 39.6%.

But the frenzied speculative activity in the very short-dated options also appears to have had a significant impact on the overall market. On the other side of the buying of bullish calls are typically market makers, who may purchase other, longer calls on a stock or on the SPY ETF to hedge their exposure, Emanuel says. And that further fuels the rise in the underlying stock and associated call option.

READ MORE UP AND DOWN WALL STREET

Job Numbers Keep Climbing, Sinking Chances of Rate Cuts

Tchir adds that this type of tradingaka gamblinghas become more pronounced, not just by individuals, but also among sophisticated money managers. This short-dated options activity exaggerates market moves. These options dont figure into the calculation of the Cboe Volatility Index, or VIX, however; that so-called fear gauge has slid below 20, a reading that signals a placid market.

But, Emanuel cautions, this frenzy is apt to end badly once evidence of a recession appears, which Evercore ISI expects in the next few months. Many economic measures seem to be rolling over, except for labor market indicators, he noted before Januarys blowout jump in nonfarm payrolls of 517,000.

Kass further warns that by ignoring and thus essentially sanctioning 0DTE options, the Securities and Exchange Commission is sowing the seeds for greater volatility and a possible flash crash. Even if the frenetic options trading isnt behind the equity markets recent moves, its at least a symptom of increased speculation. That might make investors cringe in the future."

Write to Randall W. Forsyth at randall.forsyth@barrons.com

https://www.barrons....ear-51675378038

[dTraderB]

Adam Mancini (@AdamMancini4) tweeted at 2:00 PM on Sat, Feb 04, 2023:
Have a great weekend! Charting 101: On Jan 26, #ES_F broke its downtrend line from 2022 highs at 4020. This week, it back-tested & squeezed

Plan next week: 4145, 4095=supports. Dip likely to 4095; as long as it holds, leg to 4220, 4260 in play. Multi-day sell only if 4095 fails https://t.co/Cko1I8NipG

[dTraderB]

Bull or bear, i just trade the darn thing. Mot wasting energy & precious time on bull/bear nonsense.

"So bear market over?

Adam Mancini (@AdamMancini4) tweeted at 2:33 PM on Sat, Feb 04, 2023:
It doesn't matter if it is or isn't from a practical trading perspective. Even if it is a "bull market" there will be long sells during which majority (as always) thinks is the start of the next bear market. Timing everything and ultimately just need to trade 1 leg at a time

[dTraderB]

Hate these WINDOWS & VIRUS UPGRADES so I keep on kicking them down the road until I cannot or should not. I do not disturb my 3 main desktop computers & the most important laptop.... no screenshots etc, nothing else except trading & upgrading software. Almost finished the first one in 2023.

McOsc was down much more than i expected on Friday, from 202 to 85.

https://www.mcoscill...adth_data/?s=03

[dTraderB]

Stopped trading GOLD since 2009. It appears to be a much more difficult market to trade:

https://www.mcoscill...gold_breakdown/

Hate these WINDOWS & VIRUS UPGRADES so I keep on kicking them down the road until I cannot or should not. I do not disturb my 3 main desktop computers & the most important laptop.... no screenshots etc, nothing else except trading & upgrading software. Almost finished the first one in 2023.

McOsc was down much more than i expected on Friday, from 202 to 85.

https://www.mcoscill...adth_data/?s=03

[dTraderB]

Allegedly, NICK appears to get stuff from FED contacts, allegedly.
Nick Timiraos (@NickTimiraos) tweeted at 10:02 AM on Sat, Feb 04, 2023:
Policy makers have to worry about the next inflation problem.

If the economy continues to add more than 200,000 jobs a month without a large increase in the labor supply, whatever labor market tightness you have now would look worse in six months. https://t.co/DEWaieCjCb

[dTraderB]

Nick Timiraos (@NickTimiraos) tweeted at 11:05 AM on Fri, Feb 03, 2023:
The nonmanfacturing ISM posted a 55.2 reading in January, up from 49.2 in December, solidly jumping back into expansionary territory.

After a huge drop in the new order component last month to 45.2, a big rebound in January to 60.4

The employment component rose to 50, from 49.4 https://t.co/4sIST8lLZ4

Allegedly, NICK appears to get stuff from FED contacts, allegedly.
Nick Timiraos (@NickTimiraos) tweeted at 10:02 AM on Sat, Feb 04, 2023:
Policy makers have to worry about the next inflation problem.

If the economy continues to add more than 200,000 jobs a month without a large increase in the labor supply, whatever labor market tightness you have now would look worse in six months. https://t.co/DEWaieCjCb

[dTraderB]

Nick Timiraos (@NickTimiraos) tweeted at 10:02 AM on Sat, Feb 04, 2023:
Policy makers have to worry about the next inflation problem.

If the economy continues to add more than 200,000 jobs a month without a large increase in the labor supply, whatever labor market tightness you have now would look worse in six months. https://t.co/DEWaieCjCb


Nick Timiraos (@NickTimiraos) tweeted at 11:05 AM on Fri, Feb 03, 2023:
The nonmanfacturing ISM posted a 55.2 reading in January, up from 49.2 in December, solidly jumping back into expansionary territory.

After a huge drop in the new order component last month to 45.2, a big rebound in January to 60.4

The employment component rose to 50, from 49.4 https://t.co/4sIST8lLZ4

Allegedly, NICK appears to get stuff from FED contacts, allegedly.
Nick Timiraos (@NickTimiraos) tweeted at 10:02 AM on Sat, Feb 04, 2023:
Policy makers have to worry about the next inflation problem.

If the economy continues to add more than 200,000 jobs a month without a large increase in the labor supply, whatever labor market tightness you have now would look worse in six months. https://t.co/DEWaieCjCb

[dTraderB]

Maybe. Or not. But in 2022 the market has made an IMPORTANT BOTTOM that can hold for longer than a few days.


History Tells Us We're Going A LOT Higher
Tom Bowley | February 05, 2023 at 11:50 AM


https://stockcharts....oing-a-112.html

History Tells Us We're Going A LOT Higher
Tom Bowley | February 05, 2023 at 11:50 AM
https://stockcharts....oing-a-112.html

[dTraderB]

Is he being sarcastic?

"J-Pow Throws In The Towel"

Inside This Weeks Bull Bear Report
The Bear Market Has Been CancelledJ-
Pow Throws In The Towel

How We Are Trading ItResearch Report 
 Is The Fed Trying To Wean Markets Off Monetary Policy

https://realinvestme...-in-the-towel/?