Moral of the story is never buy 3000 puts when the market is down big because DEMTDAYBOYZ will rip your f$ckjng head off when they go green
You should definitely watch this video! Thanks ZBZB you are a great member of ET! I just want to point out a few things here. If you have read my posts on ET you know that I am a big proponent of understanding index arbitrage and how it is affecting price levels in the market. I don't have time to quote this guy Danny Riley, who is running a desk, so I will just paraphrase a few of the things he said. First off, when he said that they are doing "sell programs" in mini's to execute 10-15,000 contracts at a time, well, this is what is causing index arbitrage. The program is aggressively taking liquidity and measuring the adverse price movement it is having on the market. This is all done with very fast and adaptive pacing algorithms. If you start watching these execution algo's you can put yourself one step ahead of retail. [note how he said it is against the law for him to tell anybody outside his desk what he is doing] this is why you will have an information advantage if you get on top of this shit. You just have to watch how aggressive they are and in which direction they are leaning on the market. You do this by charting the arbitrage spread that HFT trades in order to facilitate these desks running execution algo's. That spread is the differential of the tradable instruments (SPY, ES, NQ, etc.) and the listed index value (SPX, NDX). I will give you the spreads I use here. Note: Really you should volatility adjust the spreads so that you can combine them into a single spread that aggregates this order flow information. (e.g. double the SPX instrument weights vs. the NDX instrument weights.) The symbol combo's to chart the spread are provided here. ThinkorSwim NQ + 40*QQQ - 2*NDX + ES + 10*SPY - 2*SPX IBKR TWS ("virtual security") "NQ MAR20'20 @GLOBEX"+"ES MAR20'20 @GLOBEX"+10*"SPY ARCA"+40*"QQQ NASDAQ.NMS"-2*"NDX INDEX"-2*"SPX INDEX" This stuff is awesome and is really worth learning about. HFT index arbitrage is what you are watching if you figure out how to use this stuff. This is the most important thing to know about market structure in the US equity space. The only other thing you really need to know is that the rates market is constantly driving these index execution algorithms. It is all automated and run on colocated servers. This is where the real players are (Virtu, Citadel) and the prime brokers Morgan, Goldman, Barclays, UBS, Merril, ect...
Risk on / Risk off. Rates track bond valuations, and bonds trade inversely to stocks when they take risk off. They are both hedging instruments, and compete on relative performance. You can trade a rate / index spread to front run the risk on risk off trade. Example Long UB / Short ES to trade risk off, Long ES /Short UB to trade risk on. Basically, the funds are competing to rebalance their books, and unwind their hedges (rate and index futures). All this stuff is happening as the valuations change in real time.