Mike – Page 29 – Red Pill Quants

0 What Happens Next

It’s very easy to emotionally get sucked into the floating dumpster fire that is the 2020 presidential election, for we are all human beings and thus have our own respective political leanings and opinions. That said I’ve always made a point about ignoring politics as they detract from the core mission of this blog. I’m also a firm believer in that we are all responsible for our own success or failure in life. But no matter who will arise as the winner in the end, there are a few immutable realities that we will be facing in 2021 and beyond:

0 Maximum Confusion

The big day of political reckoning has come and gone but as I suspected we are no closer to a final resolution than we were ahead of the election. Even worse, given what I am currently seeing across social and the mainstream media our nation may face many more days if not weeks of uncertainty.

0 The Day Before Tomorrow

I hate election years with a passion in general but have to say that 2020 definitely took the cake. The good news is that the big day has finally come and it’s fair to say that November 3rd will be one of the most pivotal elections in our lifetime for each of us. I don’t care which way you swing politically, but you owe it to yourself to go out there and place your vote. If you fail to do so you be advised that you have lost your mandate to bitch and complain after the fact if you happen to dislike the outcome. If I can do it all the way over here from Spain then everyone else can.

0 Expect The Unexpected

I’m going to lead today’s post with some of the weekly stats I shared with my subs on Monday which do a great job in shedding more light on this week’s wild gyrations. In a nutshell: On the surface week #44 had the potential to be the 2nd best earning week of the year but it came with a twist, which was that its positive Sharpe ratio was mainly due to large outliers. As a whole the final trading week of October is volatile mess with a positive SKEW – meaning that it is distributed toward the bearish side.

0 It’s Gonna Be A Busy Winter

The situation is increasingly turning more dicey as markets are shifting into pre-panic mode with only six days to go until an almost assured presidential election train wreck. You wouldn’t really think so just looking at the price action over the past week but under the hood pre-election hedging activity has left tell tale signs of a busy winter in the making.

0 Bonfire At The End Of The Tunnel

With the presidential elections drawing near the worrywarts are beginning to hedge their bets, may this be in real life by boarding up your storefront or virtually/financially by protecting your assets from a potential wipeout. In normal times – meaning pre 2020 – investors and speculators would usually look at ways to protect against election day whipsaw. This is what we saw in 2016 for example where conflicting reporting plus misinformation caused equities to push wildly in both directions. However everything I am seeing points toward this time being different.

0 Drama Exhaustion

I watched a post debate panel this morning and the one big take away after hearing comments from undecided voters from both sides of the isle was that people are sick and tired of the non-stop drama. Exhaustion runs high and if there is one sentiment that everybody shared is that they just want to get back to work and their respective lives for that matter.

0 Dollar Versus Stimulus

With another ‘stimulus’ bill inching its way through Congress the Dollar has taken yet another tumble while 10-year treasury yields jumped 0.81% in anticipation. I’m just thinking out loud here but wouldn’t it be more honest to simply call it the ‘Big Tech Pump Up’ bill and then to transfer the money directly into Amazon’s corporate account. Just the other day I was talking about shorting big tech if Trump gets his 2nd term but now I am not so sure anymore.

0 Presidential Election Pre-Analysis

For all intents and purposes 2020 has already been the most contentious and violent U.S. election season in living memory. With a nation in a state of a cold civil war one would assume that the financial markets would take note. And under the hood they did indeed respond by keeping implied volatility elevated throughout the year. However, with the exception of a much overdue correction earlier this month we currently seem to be in a pre-election holding pattern. What should we make of that and where are we heading next?

0 Wild Gamma Friday

The past four sessions turned into a wild ride but as of the Friday open the SPX has been getting nowhere fast and finds itself almost exactly where it started the week. This puts us in a very interesting situation for one main reason: With a monthly and a weekly contract expiring this morning, a 70 handle EM range, and quite a bit of gamma risk there is potential for a significant move today.

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