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‘Fierce’ Mechanical Buying Could Turbocharge A Post-Election Stock Rally
If we can make it through the US election without "incident" -- and I'll let readers define "incident" however they see fit -- US equities could benefit from a "fierce" mechanical bid.
That's according to Nomura's Charlie McElligott, who on Wednesday made the case for a potentially outsized reallocation from the vol-control universe contingent on rVol migrating lower, which it will as long as no fresh downside shocks "spoil" the math as August's "growth scare" days drop out of the three-month l
Just to add some color to this article, specially for those who might think of trading it, there’s significant negative gamma below the 5800 level which could exacerbate any move to the downside before November 5th. This being the last hurdle before the post-election skew compression that could fuel this rally. Tread carefully.
Yeah, but if you know that, you also know there’s a lot of insulation around spot, hence the trivial daily moves. You’d need a “significant” downside catalyst to get through that insulation. Not saying there aren’t plenty of good downside catalyst candidates (there obviously are between mega-cap earnings, NFP and the election), but unless and until one of those hits, you’re going to get that programmatic, at-the-money vol-selling.
Spot on. Pun intended
The straddles are cheap for a reason and have dragged down the rest of the surface with them. I’m sure dealers are not enjoying this sub-2% RV. The messianic spotup volup trade seems to finally be taking shape, taking into account the elevated levels of dispersion.
Speaking of elections and volatility (in other words I’m about to shoehorn something off-topic in)…
The past week has featured DJT on the wildest clown car ride I’ve seen since Gamestop mania.
Not that it merits attention, but I figured the denizens of the Duly Noted comments section would find it amusing.
Please remind me why we all waste so much time parsing earnings and macro factors.