Robinhood and WS Bets gamers are pushing options like nothing I’ve ever seen over the last few decades. No experience people hitting it big is bringing in more to the join the option bandwagon.
It's a feedback loop. Speculators keep buying calls, dealers have to buy stock to hedge. Stupid "Rich" Skew in Apple Greed Breaks Things
Is "amateur" buying the main reason the "call" vol is jacked??? And Im talking names like AAPL and MSFT,not some biotech company
El Erian has been good recently. I remember at the start of the crash in March. He said he expected falls of around 30% in the indices. Only wished i had taken his advice and piled in at -30% down, not really im a daytrader so that level was not much good for me.
One theory it that it was Softbank with another brilliant move... Yesterday we explained that much of the bizarre market moves seen in recent weeks can be explained as an unprecedented gamma "cage match" between one or more funds who were aggressively loading up on gamma and bidding up calls to the point that VIX was surging even as stocks hit 9 consecutive all time highs, while dealers were stuck "short gamma" and in their attempts to delta-hedge the ever higher highs, would buy stocks thereby creating a feedback loop where the higher the market rose, the more buying ensued. And, as Goldman pointed out this morning following our own observations on the matter yesterday, "each new high for the SPX has come with a higher VIX, and at 26.6 [ZH: make that 32 now] the VIX is now higher than it was at the SPX peaks of March 2000." Ahead of today's market action, Larry McDonald's Bear Traps report made some follow through observations on this clash between gamma shorts and gamma long, saying that "as we learned with Lehman, greed breaks things. It’s "high-noon" – the only character missing is Gary Cooper. We are witnessing a battle of wills, high speculation where colossal call buyers are forcing the street to get long more and more stock to hedge their upside risk. It’s the March capitulation selling in reverse. Just the way the street had to BUY downside protection in late March (because put buyers outnumbered call buyers 10-1). Today, they are being forced to BUY upside protection in SIZE (call buyers outnumbered put buyers 10-1)."" SoftBank is the Bubble Era's "Short Of The Century." And if there is one thing that can salvage the Japanese VC titan's reputation it is a second tech bubble which blows out the valuation of his countless (otherwise worthless) investments which form the backbone of SoftBank's "AI Revolution" whatever that means. NEVER MISS THE NEWS THAT MATTERS MOST ZEROHEDGE DIRECTLY TO YOUR INBOX Receive a daily recap featuring a curated list of must-read stories. Yet as while we seek further proof about the identity of the gamma grabber, spare a thought for everyone else that jumped on the bandwagon only to see their "get rich quick" fortunes turn to smoke. Here again is Larry McDonalds with the anticlimax: It’s a high-stakes game of musical chairs, the ultimate greater fool theory moment. The colossal call buyer has thrown meat in the water and drawn in the sharks, but unfortunately thousands of Robinhood minnows at the same time. When the large players’ exit, the little guy and gal will be left holding the bag. As my first boss told me at Merrill Lynch in 1990, "In options Larry, they show it to you (lush $$ green premium), and then they take it away." One final thought: the HFT(s) that frontrun Robinhood traders giveth and taketh away, and today's elevator down action demonstrates just how furious the selling is - and will be - courtesy of the algos who sense that a tidal wave of retail selling is about to hit.