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Nomura’s McElligott Outlines The Gap Higher ‘Force-In’ As Risk ‘Foams At The Mouth’

Don't fade the risk rally just yet.

Don't fade the risk rally just yet.
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1 comment on “Nomura’s McElligott Outlines The Gap Higher ‘Force-In’ As Risk ‘Foams At The Mouth’

  1. If they (PBoC + Fed) are able to convince markets that can to reflate the cycle brent will be back to 70 (Wti 62-64). Such a rebound can be explained with delta/gamma in my opinion. I think some big oil companies hedged oil mainly with puts, option dealers were short puts (long delta therefore) and hedged with shorts in futures (offsetting the long delta with this short delta). The more it goes up and the more they rebalance closing shorts in futures.

    For sure what happens is also one of those typical misinterpretations by algos, that can’t detect hues. They see oil up, high yield/junk goes up (shale oil is responsible for lot of junk credit) and voilà since corporate credit risk indexes are lowering they buy ndx/spx. At some point it becomes impossible to understand what leads what. Usual dog/tail waging dilemma.

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