US Stock Intelligence Officer | Eli, Zoe
Monday's slingshot rebound is usually a product of short-term extreme negative sentiment combined with extreme reversal of gamma exposure below the zero benchmark. We will get this kind of result when buying again in the same place. Sometimes this type of market will continue for a day or two, and there will still be room for further growth in momentum.
In yesterday's market, institutional investors changed from being strong at the beginning of the market. As momentum increased, the initial concept of economic restart also extended to the target of high growth and high speculation. The vast majority of order flows are focused on short-term exercise of power, indicating that institutional players are currently focusing more on speculative earnings than on longer-term market trends.
The emotional aspect
Short-term sentiment has risen in response to the recovery in the general market, and has now broken out of the bullish signal zone (opposite attribute).
Gamma Exposure Corresponding SPY Trend Source: sentimentrader
As mentioned at the beginning of the article, the short-term extremely negative sentiment combined with a downward trend in gamma exposure can be judged to be a short-term rebound in the market.
Gamma Exposure Review: Today, I would like to briefly explain the forward-looking nature of the GAMMA exposure trend in the market corresponding to the general market trend. GAMMA EXPOSURE (gamma exposure) refers to the sensitivity of existing options contracts in the market to price changes in the S&P 500 index, and what this indicator can tell you is how options market makers may hedge their transactions to balance the balance of options trading book assets based on changes in options trading. For example, if GAMMA EXPOSURE currently has a reading of $6 billion, when the price changes to +/- 1%, then this indicates that 6 billion shares will be traded by market makers in the market to push the price in the opposite direction from the current trend. Therefore, the highest value of this reading often appears when the price peaks, and the corresponding lowest value often appears when the price bottoms out.
The likely script now is: if this momentum can be recognized by “real” buyers in the market, then even if the market stagnates at a short-term high level, we can still see institutions continue to attack major pullbacks and some lagging targets in the market. Second, Monday's market also had the feeling of hedge fund purchases. Just like in the early stages of a bull market, major market participants smelled the smell of blood and used funds to support the rapid stabilization of the market. Assuming that they are currently involved, any subsequent market where they use the momentum to continue to increase their exposure and fall deeper and deeper, it will also instantly cause the market to change (more institutions turn empty). Therefore, at this point, Sister Hua will continue to pay close attention to the main market sweep activities of market institutions to determine whether the next player to take over this momentum is a weak hand or a strong hand to determine the future pricing trend of the market (especially before the Federal Reserve's monetary easing trend narrows in the middle of the year).
Changes in large-cap ETF options on March 1
The trading volume of the options market reached 37.6 million contracts on Monday, 16% lower than the previous average transaction level. Among them, the subscription volume was slightly higher than the sell volume (12:7). ETFs and futures products have a relatively high volume of trading volume, while the flow of individual stocks is moderate.
Changes in individual stock options in various sectors on March 1
The most active sectors include finance, industry, and energy, while trading volumes in the basic materials and medical sectors are relatively calm.
Of the 3807 stocks with only listed options, 3,262 (86%) closed higher and 457 (12%) closed lower. Of the 500 single stocks with the highest liquidity, 69 had the highest implied volatility on the 30th, and 379 had the lowest implied volatility. Individual stock transactions detected include:$DraftKings Inc (DKNG.US) $，$Rocket Companies (RKT.US) $，$Enterprise Products Partners LP (EPD.US) $，$Target (TGT.US) $und$Farfetch Ltd. (FTCH.US) $etc.
Technology stocks
Industrial stocks
Cyclical consumer stocks
Financial stocks
Communications Unit
Health Care Unit
Energy stocks
Real estate stocks
Building materials stock
Defensive consumer stocks
Public Utilities Unit
The options tool is flexible and easy to use. It is considered to be the most perfect trading tool in the financial market so far. Small funds can quickly accumulate wealth through accurate judgment using nonlinear leverage, and large funds can obtain stable returns across bullish and volatile markets through the comprehensive application of various strategies. But we also need to look at the risks of buying options (ordinary investors are careful as options sellers, profits are limited, losses are unlimited):
1. Massive nonlinear leverage faces huge losses if you do it in the wrong direction.
2. Volatility decreases, and you may lose money by doing the right direction.
3. A volatile mentality can easily be unbalanced. ：
4. Time is the enemy of option buyers.
5. Stock thinking is serious. The stock mentality is that they only want to go long; they don't go short. If they fall too much, they want to cut to the bottom; if they hold back, they ignore the rebound; there are even people who increase their positions to reduce costs. As a result, they fall deeper and deeper until they return to zero. If you don't change your mindset, it's dangerous to trade options.