‘They’re Still Extremely Leveraged’: ‘Crowded Unwind’ By CTAs Could Exacerbate A Rates Selloff

“However, a large beta of CTA returns to the Bloomberg Treasuries Index suggests that CTA positions are still extremely leveraged”…

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Why We’re Vulnerable: CTAs’ ‘Oversized Loss’ Betrays Extreme Positioning

“Recent oversized loss in response to a relatively minor sell off suggests a substantial overweight: A 20bp rise in rates has produced comparable losses as a 50bp sell off across the presidential elections in November.”

‘The Real Fun Is Just Beginning’: Quants Stare Blankly At Worst Losses In 10 Years

It’s been a long time coming, but the week(s) of reckoning have finally come for CTAs and the risk parity crowd. Of course the “serious people” reading this will say the “day of reckoning” bit is hyperbolic. After all, we haven’t seen a sustained vol. spike of the sort that would probably be required to…

A Nightmare On Wall Street – Updating The Feedback Doom Loop

Remember “Investigating The Market’s ‘Nightmare Scenario’”? Of course you don’t. That post is from May and you’ve been drunk slept since then. But it was an important piece. Essentially, it outlined the potential consequences of the feedback loop that’s embedded in markets thanks to the proliferation of VIX ETPs and systematic strats that lever up…

Investigating The Market’s “Nightmare Scenario”

Right, so one thing people are becoming increasingly concerned about is the extent to which modern market “innovations” could end up backfiring in spectacular fashion in the event the current low vol, BTFD regime were to suddenly slam into reverse. I wrote about this a couple of days ago and this is probably a hyperbolic,…

Hellz Yeah! European Stocks Explode, US Set To Rally As Market Celebrates Macron

The final tally was Macron 23.75%, Le Pen 21.53% and to say markets are relieved would be an understatement. One peculiar thing is that it seems completely lost on everyone that Marine Le Pen did indeed make the second round. So it’s not exactly like populism just fell flat in Sunday’s vote. Rather, the enthusiasm…

“This Is No Different” From 1987: Is Marko Kolanovic Right?

“When an institution allocates to a momentum strategy in the hope of cushioning itself from stock market downdraughts it is really commissioning someone to sell stocks on its behalf into a falling market.”