Gamma Whale?
I hope you are all enjoying your Labor Day holiday weekend. This weekend marks the unofficial end of the summer. While the US is on holiday today, the rest of the world is trading. I wanted to get this out according to my regular schedule. This post is a little less market info than usual, but I am including a few more long form articles and podcasts this week. The ‘Best of the Week’ is a collection of articles around some wonky options trading last week. It’s noting nefarious, but it is moving the markets. There are no other focused sections this week.
Last week started and ended with news for Telsa (TSLA.O). As many predicted, the split was an interim high. While the stock saw some strength on Monday, it was mostly under pressure for the remainder of the week. The real move negative came after the close on Friday when it was announced that the company would NOT be added to the S&P 500 for the Q3 rebalance. Apple (AAPL.O) responded similarly with a down week. Actually, many assets were lower last week. Only Treasuries and the Dollar eked out small gains, but other supposed safe havens like Bitcoin and Gold were down.
Earnings Reports
My earnings watch from last week, Crowdstrike (CRWD.O) was a very frustrating stock to follow. It ran up into the report, crushed the report as expected, then sold off massively the next day. The selloff looks like some profit taking.
This week we’ve got some popular companies reporting and some of them are definitely going to need to be watched moving into their reports. I’ll be digging into Lululemon Athletica (LULU.O) and Peloton (PTON.O). They have big predicted surprise for their EPS reports, smaller predicted surprise for Revenue, and decent positions short against them. Both also have a large portion of their analysts not being counted in the Starmine SmartEstimate because of a recent wave of updates by a group of analysts. In LULU.O, nine of the thirty-two analysts updated their numbers last week and those are ~25% than those that haven’t updated. The SmartEstimate is 18% higher. Peloton is similar with ten of twenty-two being counted for the SmartEstimate. Their EPS predicted surprise is almost 30%. The options for both are pricing in decent moves.
Best of the week:
I’ve been sharing a lot about the increased options trading, dealer gamma, and how it has been driving some of the shorter term market moves. Last week we saw that positioning move markets a bit. Below are a bunch of articles covering the option positioning from multiple sources. Many of these links tell the story of abnormal option buying by both retail traders and big asset managers. In addition to this call about SoftBank, I’ve heard a few podcasts that speak to traders talk about other big asset managers selling out of their positions in stocks, but buying options to keep upside exposure. If you really want to understand all this, I highly recommend the last link. Benn Eifert does an amazing job explaining it all.
An Epic Battle Is Raging Beneath The Market Surface
STUPID “RICH” SKEW IN APPLE, GREED BREAKS THINGS
SoftBank Identified As Mystery Marketwide Call Buyer
SoftBank’s Bet on Tech Giants Fueled Powerful Market Rally
One Day After Zero Hedge, FT "Unmasks" SoftBank As Call-Buying "Nasdaq Whale"
A Speculative Feeding Frenzy Like We’ve Never Seen Before
Sentiment Trader - "It's not just Softbank."
Thought I'd clarify a few different mechanisms that are getting confused somewhat
Best of the rest:
Expanding on the content above, but with a different view. Wayne Himelsein is the founder and CIO of Logica Capital. Wayne works with one of my favorite shares of late, Mike Green. Aaron’s line of questioning helps grab a few more points that I haven’t heard from Mike on Logica. The basic idea of the investment style of Logica is something you should be aware of. Wayne also reviews his background, trading behavior and modelling.
Wayne Himelsein – Betting Against Stability - Listening time: 65 minutes
One of my favorite writers stops by to be interviewed by one of my favorite interviewers. Morgan joined Barry Ritholtz on the Masters in Business podcast this week to talk about his career and how he is able to write so much quality material.
Morgan Housel on the Culture of Finance Listening time: 64 minutes
Michael Batnick does great work for the team at Ritholtz Wealth. Some of his backstory is similar to mine, and you’ll hear a little bit about that here. Michael also asks; do market narratives really matter? Does the market drive the news or does news drive the market? Does persistent skill actually exist in portfolio management? I loved this conversation, because Michael is not afraid to say, “I don’t know”. This is not a common answer in the finance industry.
Invest In A World That Is (guests: Michael Batnick, Kuppy) - Watch time: 129 minutes
Dr. Ben Hunt joined the team at Resolve on Friday afternoon to shoot the breeze. Great conversation especially on what’s going on with the virus. I think Ben’s opinions on how leadership is screwing this up in the US are spot on. Basically, the GOP doesn’t want to address it, because it will show how bad it was originally messed up. The Dems don’t either, because they feel The President will be able to use it to his advantage come the election.
ReSolve's Riffs with Ben Hunt - The Three-Body Problem - Watch time: 100 min
TC is short for the anonymous Twitter personality, @TESLAcharts that highlights many of the absurdity of the ongoings at Tesla. He’s recently started a podcast too and his last guest was Tesla whistleblower, Karl Hansen. Some of the coincidences that happen in TC’s life after he’s been publicly bearish on Tesla is crazy. If you’re interested in how Friday’s non-inclusion in the world’s most widely followed index may be the spark, I recommend listening to all the underlying possible aggressive accounting and maybe even fraud going on in the company.
The Grant Williams Podcast - TC - Listening time: 104 minutes
I found this reference to a previous paper that might be a decent call on SmallCaps. Michael’s original paper, which he bubbled up last week with the performance of Lumber. I also wanted to see how that played out. In the DataStream charting package, I broke out the performance of the Russell 2000 between the times of Lumber and Gold out-performance using the trailing 13-week performance of Lumber vs. Gold, which is what the paper was based on. You can see that the vast majority of the performance comes when Lumber is stronger. That said, we’ve seen Lumber stall. The November contract, which is the most active, has traded limit down for the last three days.
Either Lumber Is Wrong, Or Small Caps Are
Lumber: Worth Its Weight in Gold Offense and Defense in Active Portfolio Management
I’ve been of the opinion that some of the dislocations of late may have been impacted by the large amount of retail, most famously Robinhood, traders dabbling in markets. Nick Maggiulli has dug into some of the Robintrack data around the equity holdings and is making an argument against that view. Nick’s work shows that there are some stocks (right side of the chart below) that have a higher correlation between daily Robinhood activity and price change, but many of the big boys driving this market actually have none.
No, Robinhood Traders Aren’t Affecting the Stock Market
Seth Klarman is a legend in the investment world. His book ‘Margin of Safety’ is one of the most famous ever. It might be because many Amazon listings can hit north of $1,000 for an actual hard copy. I’ve read this downloaded as a PDF. Even the best lose their luster for periods. Think of Warren Buffett’s reputation during the tech bubble. Well, Institutional Investor did some digging and apparently people aren’t beating down the doors of Seth Klarman and Baupost as hard as they once were. This article highlights some of the conversations the magazine had with multiple allocators about the legendary investor.
‘I Can’t Believe I’m Saying This, But I’m Passing on Seth Klarman’
This is a great podcast for those of you that might be studying for the CFA, but also an MBA, CMT, or really anything big. I read Scott's book, Ultralearning, this year trying to help myself with learning coding. The problem is that, I’m having trouble because I’m not spending enough time with the actual coding for it to become a habit. Scott’s approach works, and this podcast episode covers some clever ideas in under a hour.
Scott Young & Steve Curley, CFA: Ultralearning: Fast Track the CFA, MIT Degree, or Second Language - Listening time: 50 minutes
I have to go through the cards in my attic again. I may be rich. There are about 6 huge boxes of sports cards that are probably worth a total of a $100-200 now, but maybe. Yes, maybe someday they’ll be worth more. I doubt it, but I spent a lot of my money from 8 through 14, then again in my early 20s on sports cards and I don’t want to admit I was an idiot. It’s unbelieve to see them having crazy value again.
The team at Refinitiv has shared 100 of the top social (Twitter & LinkedIn) influencers in finance. There are a lot of people I follow on here, but so many more that I’ll need to go through to find out what they’re about. The article gives some highlights about each of the individuals on the list.
When will the machines actually take over? Amazon announced another step in the process last week. I have to say these things look super cool, and I’m hoping that there is someone behind these things.
Amazon gets closer to drone delivery with FAA approval
Here’s Amazon’s new transforming Prime Air delivery drone
Thanks for reading,
Michael
Comments
Post a Comment