Month: May 2023

By SpotGamma

New this Tuesday, the trading world now has a VIX1D (0-1 DTE) index. With HIRO, we give you a multi-day view under the SPX hood by showing how its zero DTE options are moving in real time. We also have this view available for hundreds of major stocks and ETFs. What this new index represents is a balance of zero-DTE and one-DTE options on SPX.

Nonstop 0DTE call buying all day (via @spotgamma) https://t.co/auzhlYZc7w pic.twitter.com/wyJASQj7SD

— zerohedge (@zerohedge) April 27, 2023

Let’s take a look at the first three trading days of the VIX1D.  First, on Tuesday, April 25th, call selling weighed down on the market, as indicated by the green line while the puts were not impactful. Then, on Wednesday, puts were more in control, leading the market up in the morning and then back down in the afternoon.  Lastly, starting with some call buying and then put selling for a doubly bullish lift on the index price, the market trended higher.  You can see the meaningful impact of the 0DTE tool throughout these three days.

Adding the new VIX1D as a datapoint to your trading arsenal can get you up to par. But if you combine that with our proprietary key levels, then this can really set your trading apart from the crowd.

One of over a dozen tools we provide specifically for analyzing index products is our interactive chart of Absolute Gamma, as shown here from Thursday night, which identifies call gamma in orange and put gamma in blue. This is across all option chains but you can also filter it down to zero DTE.

These high gamma levels are structural boundaries which have a statistically-significant influence over price action. The price tends to be attracted to these levels, but price movements also generally slow down near them and reverse direction.

Alternatively, here is a view of that same Absolute Gamma tool but restricted to the scope of zero DTE option structure. Although the bigger picture of all chains shows an important structural firewall at 4000 for the broader market, that 4000 level is too far away for zero DTE traders to take meaningful interest. What this more focused view clarifies is that zero DTE options have the heaviest market gamma between 4100 and 4150, which is where the market was taking its bets for Friday.

Below 4100, there are not enough puts to generate substantial gamma.

This structural backbone provides context which helps to make signals from VIX1D less noisy. We can use key gamma boundaries and levels to set up high-probability trades. In outlier events where the price breaks outside of these ranges, especially if the price is still below the Call Wall  or above the Put Wall, there is less gamma to slow down the price and there can be some very big moves akin to the price escaping from the bottom or top of a volume profile. If breaking above a new level, all the buyers are making money (rather than trying to get it back at resistance), and that trend can easily move beyond expectations.

As an example of a tactical application, if you see HIRO option flow moving up and leading the price, then you might want to open a covered call (long shares and short a call) to enhance your position and collect some yield if there is not much movement in the underlying price. Or if your outlook is directionally neutral, such as if the price is near our largest Absolute Gamma level and there is positive market gamma, then you could try a credit iron condor: short two options near the middle and long options further out-of-the-money as wingtips. This credit iron condor strategy harvests time premium if realized volatility remains low.

On the other hand, if you are neutral but you expect volatility to expand, then you could try something like a long straddle, which will have defined risk but uncapped potential profits if there is a large move in either direction. Data suggests that a breach to the downside of our Volatility Trigger would usually be a good time to do that.  

If you are serious about trading, then we invite you to be on the ground floor of this new VIX1D arena with us and to join us in the discussion on our members-only Discord.

Start a free trial now to see our daily analysis of these developments and also to have the best tools to get you a head start on this new frontier.

Last week, Republican presidential candidate Nikki Haley said that 80-year-old President Joe Biden is likely to die within the next five years, and that his supporters would have to assume VP Kamala Harris would take his place.

“He announced that he’s running again in 2024, and I think that we can all be very clear and say with a matter of fact that if you vote for Joe Biden you really are counting on a President Harris, because the idea that he would make it until 86 years old is not something that I think is likely,” the 51-year-old Haley told Fox News.

GOP presidential candidate Nikki Haley predicts Biden would not make it through a second term:

“If you vote for Joe Biden, you really are counting on a President Harris. Because the idea that he would make it until 86 years old is not something that I think is likely.” pic.twitter.com/4rMNo5O6gp

— The Recount (@therecount) April 26, 2023

No so fast, according to the Financial Times, which – citing actuaries, say an 82-year-old Biden wouldn’t be too ancient to start a second term, which he would of course finish at the ripe young age of 86.

According to UK actuarial firm Club Vita, Biden has a life expectancy of another 11 years, taking him to 91, while former President Donald Trump has 14 more years to look forward to.

The model’s inputs include affluence, marital status, and employment. These key demographics for both Biden and Trump put them in the same favourable categories for the main factors, including addresses in the top category for life expectancy: the analysts used Trump’s Palm Beach address and Biden’s Delaware home.

Erik Pickett, a New Jersey-based actuary for Club Vita, said a wide range of factors could prove its model wrong, from whether the candidates “are in significantly different health to the average of someone with the same characteristics” to the fact that presidents have “access to higher quality medical treatments” than the typical American. -Financial Times

The average American male born on the same day as Biden can expect to live another 8.5 years, according to the Social Security Administration. 

“I would say that both Biden and Trump are likely to have substantially higher life expectancy than the average, for their age, because they have high socio-economic status, access to the best healthcare in the US, and they do not smoke,” said Georgetown University senior research investigator, Dana Glei.

“The president will have access to the highest-quality medical care and will remain physically, mentally and socially active whilst in the job — all factors that improve lifespan,” said Pickett, adding that this will be “at least partially countered by a high-stress environment and possibly a greater exposure to external risk factors.”

And of course, Kamala Harris is ready for whatever might come…

SEN. CHRIS COONS: “The Vice President’s ready to run & ready to be President should that ever happen…” pic.twitter.com/NeQBd7RFHQ

— Breaking911 (@Breaking911) April 30, 2023

Comforting, no?

Submitted by Adam Andrzejewski, author of OpenTheBooks substack

Our auditors at OpenTheBooks.com recently determined from official Federal Freedom of Information Act filings that we pay Beltway bureaucrats in the federal executive agencies outside of the Defense Department and the U.S. Post Office some $576 million per day.

That’s more than $210 billion per year for the 1.44 million employees of 125 rank-and-file general administrative, civil enforcement and federal law enforcement agencies.

Economic uncertainty might surround many taxpayers, but for federal workers, we are funding lavish and perk-filled lifestyles.

In 109 of the 125 federal agencies in Washington, the average employee salary is more than $100,000.

According to the U.S. Census Bureau, the average real median wage for the average employee was $54,339 in 2021.

The average salary at the Census Bureau is $67,656. That’s just a small example of the ‘private-sector’ versus ‘public-sector’ pay disparity.

After working just three years for the federal government, employees have 44 days of paid time off. Can you skip work for nine weeks and still have a job?

The US Bureau of Labor Statistics reports that the average number of paid vacation days for U.S. workers is 11 days, or a day more than two weeks.

Furthermore, most federal employees worked from home for years due to the recently concluded Covid “emergency.” Congress incentivized this with a $570 million “paid-to-stay home” fund at Treasury. If your child wasn’t back to school, you could collect $21,000 over 15 weeks in paid family leave.

Congressional testimony shows Office of Personnel Management Director Kiran Ahuja still has no clue how many federal employees returned, or where the people we pay actually do their jobs.

(Watch the answer starting at 3:00.)

D.C. Mayor Muriel Bowser, normally a staunch ally of the Biden Administration, had to call for getting federal employees back to work to revive the city’s economy.

President Biden suggested he would soon ask workers to report for duty, but many desks remain empty because “flexibility” still prevails.

Then, President Biden asked for the biggest pay raise in more than 40 years. His 2023 budget includes a 5.2% pay hike for the 1.4 million executive agency employees.

We all had to pay our taxes when they were due a few weeks ago. For many federal employees, that rule is being flouted.

In March 2023, the Treasury Inspector General for Tax Administration found that “The number of delinquent Federal civilian employees has increased by 32 percent from Fiscal Years (FY) 2015 to 2021.” Some 149,000 federal employees owe $1.5 billion in back taxes!

In the private sector, pay is typically associated with performance. But in the federal government, performance appears not to figure into the compensation equation.

Take the Federal Deposit Insurance Corporation (FDIC). We were all reminded of its importance earlier this year with the implosions of Silicon Valley Bank and Signature Bank. The FDIC is there to insure depositors for up to $250,000, helping Americans trust that the banking system is reliable.

Well, there are 58,000 employees at the FDIC—many of them auditors. Average salary? $160,000. None of them seemed to notice stress on the banking system. The two banks that failed were highly regarded institutions. But in fact, they had veered away from solvency.

One might ask if we taxpayers – who will pick up the tab for this debacle according to the Administration’s plan — are getting what they we are paying for at the FDIC?

Such disparities between pay and performance, and they are legion, are making an impact in Congress. Senator Joni Ernst (R.-Iowa) has joined our organization at OpenTheBooks.com in demanding answers to three questions that should be simple: Who is working? Where are they? What on Earth are they doing for us?

As recent testimony by OPM Director Ahuja shows, the feds just don’t want us to know.

For example, unlike its predecessors, the Biden Administration has redacted key information on federal workers.

In the Biden Administration 2022 payroll, 350,861 worker names are redacted. Under the Obama Administration, in FY 2016, that figure was 2,300. Stunning.

The administration has also redacted 281,656 worker locations.

Our auditors estimate some $36 billion worth of taxpayer-funded salary, benefits and bonuses are hidden from Americans. Even worse, they are headed to mystery people in mystery locations.

That means no scrutiny of performance versus pay. It means no oversight by Congress. It means no chance to cut bloat during the budget process.

We don’t know who these workers are, what they do, where they work, or how much each of them makes.

Like Senator Ernst, we plan to find out. At $576 million per day, it’s time we knew.

Additional details found at Newsweek in a co-authored editorial “Where’s Waldo At Club Fed” with U.S. Sen. Joni Ernst and Adam Andrzejewski, CEO, OpenTheBooks.com.

By Eric Peters, CIO of One River Asset Management

“The Policy on Counterparties for Market Operations has been updated to clarify that, in addition to implementing monetary policy, broader policy goals including fostering financial stability and ensuring bank safety and soundness, are considered when reviewing a prospective or existing counterparty,” wrote the NY Fed on their website.

And of course, on the surface, that’s the most boring quote I’ve ever opened with. Truly. But how about this?

“SEC registered 2a-7 funds that, in the sole judgement of the New York Fed, are organized for a single beneficial owner, or exhibit sufficient similarities to a fund so organized, generally will be deemed ineligible to access reverse repo operations.”

More boring. For sure.

They concluded with this beauty: “These updates are intended to clarify the New York Fed’s existing counterparty management practices and do not impact the participation of current reverse repo counterparties.”

My favorite word here is “clarify,” which suggests their policy was misunderstood. In fact, it was perfectly understood.

So understood that the Fed needed to clarify to investors that accelerating the banking crisis is in nobody’s interest, especially not the Fed.

But to appreciate such subtleties you must waste decades of the most productive years of your life reading these intentionally mind-numbing statements. Like I have. Do it long enough, you succumb to Stockholm Syndrome.

So, to save you a life of torture, let me translate: The Fed introduced the reverse repo policy (RRP) in 2014 when they lost control of market operations at the zero lower bound. But after losing control of inflation, they hiked interest rates so fast it sparked a bank run.

Now, investors are pulling cash from banks to buy money-market funds that invest in risk-free high-yielding reverse repos.

This exacerbates the bank run, and contracts credit in the economy. Which scares investors into selling risk assets to park more cash in reverse repos.

And our central bankers wish they’d seen this coming and shut the program years ago. But they didn’t and it’s too late. So instead, they “clarified” their intent, and will probably build another complex program on top of something that should no longer exist. And/or slash interest rates. In the hope of regaining control.

Even as it slips away.

The northern hemisphere experienced higher-than-average temperatures this past winter, which helped alleviate energy crunches and sent liquefied natural gas prices tumbling from record-high levels. Now the world’s largest gas buyer expects another price spike this year. 

In an interview with Bloomberg, Yukio Kani, the chairman and CEO of Jera Co., expressed his concerns about another potential surge in LNG prices, attributing this to the increasing import capacity in Europe and China, along with potential severe weather risks.

Here’s part of the interview:

This winter, with import capacity in Europe rising and China potentially increasing demand after it ended pandemic restrictions, prices could spike again if severe weather strikes, he said. There’s no opportunity for buyers to “let their guards down,” Kani said.

Jera, a venture between Tokyo Electric Power Co. Holdings Inc. and Chubu Electric Power Co., announced on Friday that it agreed to a 20-year deal to buy LNG from Venture Global LNG Inc.’s proposed terminal in Louisiana. While the company expects Japanese LNG demand to decline over the next decade, it could surprise by staying flat as more data centers and semiconductor factories are built, Kani said.

“Those two facilities guzzle electricity, making it hard to read the demand outlook,” he said.

Jera is also working to support Japan’s plans to use ammonia and hydrogen to decarbonize existing thermal power plants. The strategy has gotten pushback from other countries, most recently at the Group of Seven energy and environment ministers meeting. –Bloomberg 

Kani’s comments come as Asian spot LNG futures are down 83.5% from last September’s high, touching lows not seen summer of 2021. 

On the other side of the world, US NatGas and European NatGas futures are hovering at multi-year lows. 

Kani’s prediction of severe weather could be linked to the likely return of the El Nino climate phenomenon this year, which may contribute to higher global temperatures and a subsequent rise in cooling demand, resulting in an increased need for gas. Additionally, as Europe rejiggers its energy supply chain away from Russia and relies more on US LNG shipments, supplies may face further tightening. Moreover, an uptick in China’s economic recovery could also boost LNG demand.