Your current location is:{Current column} >>Text
Market Faces Reality Check as Largest OPEX on Record Looms
{Current column}99713People have watched
IntroductionThe shocks continued to roll through the markets on Thursday as the and the pushed back on the mar ...
The Is MT4 platform for foreign exchange trading legalshocks continued to roll through the markets on Thursday as the and the pushed back on the market expectations for rate cuts. This creates more questions than answers as to why the Fed to show its hand now.
Unfortunately, we will have to wait ten more years to find out what happened because that is when the historical transcripts will be released and all the details of what took place, but we can speculate for now.
One thing that occurred to me today was that the reverse repo facility has largely blunted the Fed’s QT efforts, and perhaps the effects of telling the market it plans to lower rates will get money to finally move out of the facility so that the reserve balance can drain from the system. Instead, all this excess liquidity remains, is probably lent out, and finds its way back into stocks.
But now, with expectations for rates to go down, that could cause investors who have been playing the money market game to start moving that money out while Janet continues to issue Trillions in debt. If the estimates are correct, the Treasury is expected to issue $816 billion in the first quarter alone. The reverse repo facility, as of today, is $769 billion, down from over $2.2 trillion.
Many people may have missed that Powell mentioned the plan to reduce the portfolio and keep QT running to reduce reserves in the system and that once the reverse repo facility levels out, reserves will then be able to come down. Right now, reserves are rising and falling, kind of like the market.
The repo rate at the Fed changes with policy and is currently at 5.3%. So, if there is a fear that rates will be going lower, it would seem to make sense to see some of that money move into places yielding higher rates while they can.
Anyway, today is a very big option expiration. The biggest of the year, and there will be a lot of gamma rolling out of the market, 41%, which means some stability leaves.
Source: Gammalabs
Now, I don’t have the total amount of net notional delta due to expire, but visually looking at this chart, it would seem that a lot more call deltas are due to expire today than put deltas.
Also, I cannot see how the market makers are positioned, and we don’t know how many calls customers sold. Still, I’m guessing that the market makers will have a decent amount of futures and stocks to unwind following today’s options expiration, just for the of course.
Source: Bloomberg
I don’t have much else to add. Structurally, the rally feels to me like it is built on sand. Based on my work, it was a very negative gamma-induced rally that took the market initially higher, followed by systematic flows, which led to vol compression and volatility selling, being capped off by opex. So, until we get through today, it is very hard for me to know how much of the rally is real and how much is just mechanics.
I get that this may be difficult for some people to grasp, but I have a process, and unfortunately, sometimes it means getting things wrong. That may very well be the case this time. I’m just playing the cards I have been dealt.
Original Post
Statement: The content of this article does not represent the views of FTI website. The content is for reference only and does not constitute investment suggestions. Investment is risky, so you should be careful in your choice! If it involves content, copyright and other issues, please contact us and we will make adjustments at the first time!Tags:
Related articles
Gold steady, copper slides as markets digest mixed CPI reading By
{Current column}-- Gold prices steadied in early trade on Thursday, while copper prices nursed steep losses as data ...
Read more2月10日外汇交易提醒:美元下跌商品货币走高,静待美国公布CPI报告 提供者 FX678
{Current column}2月10日外汇交易提醒:美元下跌商品货币走高,静待美国公布CPI报告周三(2月9日)美元指数跌0.08%至95.54,基准10年期美债收益率下跌3个基点至1.93%;如果数据显示美国1月消费者价格涨幅 ...
Read moreBetter to normalise monetary policy step
{Current column}© Reuters. FILE PHOTO: Governor of the Bank of Finland, Olli Rehn attends a Reuters Newsmaker event ...
Read more
Popular Articles
- SpaceX rocket explosion illustrates Elon Musk's 'successful failure' formula By Reuters
- Neil Young takes aim at Spotify CEO, big banks By Reuters
- 国际油价持坚,尽管地缘局势缓和,但美国人痛点远未消除 提供者 FX678
- U.S. Futures Marginally Lower; Narrow Ranges Ahead of Key Inflation Data By
- 4 big analyst picks: Sherwin
- 大宗商品长牛将至?高盛:从未见过如此市场 我们什么都缺 提供者 财联社
Latest articles
-
Buffett set for 59th shareholder marathon as big questions loom By Reuters
-
Dollar Largely Unchanged Ahead of Key Inflation Release By
-
迪士尼Q1每股收益及营收超出预期 提供者
-
U.S. Inflation Charges Higher With Larger
-
Tesla succession plan, vehicle demand in focus at annual meet By Reuters
-
今日财经市场5件大事:美油跌破90美元 东欧局势缓和 提供者