Last Friday, when the market was down only 2%, we presented readers with a note which promptly became the most read piece across Wall Street trading desks, which was written by JPM's head quant Marko Kolanovic, who correctly calculated the option gamma hedging imbalance into the close, and just as correctly predicted the closing dump on Friday which according to many catalyzed Monday's "limit down" open.
Given that the market is already down ~2%, we expect the market selloff to accelerate after 3:30PM into the close with peak hedging pressure ~3:45PM. The magnitude of the negative price impact could be ~30-60bps in the absence of any other fundamental buying or selling pressure into the close.
We bring it up because Kolanovic is out with another note, one which may be even more unpleasant for bulls who, looking at nothing but price action, were convinced that after the biggest two day market jump in history, the worst is behind us.
In the just released note, the head JPM quant warns that a large pool of assets controlled by price-insensitive managers including derivatives hedgers, Trend Following strategies (CTAs), Risk Parity portfolios and Volatility Managed strategies, which is programmatically trading equities regardless of underlying fundamentals, is about to start selling equities, "and will negatively affect market in coming days and weeks." For good measure, he casually tosses the word "crash" in the note as well.
By way of reference, JPM notes that a good example of how price-insensitive sellers can cause market a disruption/crash is the price action on the US Monday open. It says that technical selling related to various hedging programs, in an environment of low (pre-market) liquidity indeed caused a ‘flash crash’ on Monday’s open. S&P 500 futures hit a 5% limit down preopen, and then a 7% limit low at 9:31 and 9:33. The inability of hedgers to short futures spilled over into large cap stocks that were still trading and could be used as a proxy hedge.Had it not been for the futures limit down event, the selloff would likely have been worse as indicated by the price of the index implied by individual stocks. The figure below shows the S&P 500 futures, SPY ETF and S&P 500 replicated from
the largest stocks that were trading near the market open.
Kolanovic correctly takes credit for his prediction and notes that "in our Friday note we forecasted end-of-the-day selling pressure due to option gamma hedging. We saw similar price impacts on Thursday, Friday, and Monday (pushing the market lower into the close) and an upside squeeze on Wednesday. Our estimate is that up to 20% of market volume was driven by hedging of various derivative exposures such as options, dynamic delta hedging programs, levered ETF stop loss orders, and other related products and strategies (note that levered ETFs have gamma exposure of only ~$1bn per 1%, i.e., much smaller than that of S&P 500 options). We estimate the cumulative selling pressure from options hedging during the market selloff to be ~$100bn. Options gamma is expected to remain substantially (in excess of $20bn) tilted towards puts while the S&P 500 is between 1850 and 2000.
The figure below shows Put-Call Gamma assuming current open interest and different spot prices. JPM expects high volatility to persist (should we stay in this price range) and cause quick intraday moves up or down, particularly towards the end of the trading day.
According to the quant, it is not only derivative hedgers who are pushing the market around like a toy with barely any resistance: :in fact, there is a much larger pool of assets that is programmatically trading equities regardless of underlying fundamentals."
It is these investors who, "in the current environment" are selling equities and "will negatively impact the market over the coming days and weeks."
Trend Following strategies (CTAs), Risk Parity portfolios, and Volatility Managed strategies all invest in equities based on past price performance and volatility. For instance, in our June market commentary we showed that if the equity indices fall 10%, these trend followers may need to subsequently sell ~$100bn of equity exposure. These types of ‘price insensitive’ flows are starting to materialize, and our goal is to estimate their likely size and timing. These technical flows are determined by algorithms and risk limits, and can hence push the market away from fundamentals.
This is where it gets scary for the bulls who thought we may be out of the woods, and that the crash was behind us. If Marko is right, as of this moment we are merely in the eye of the hurricane:
The obvious risk is if these technical flows outsize fundamental buyers. In the current environment of low liquidity, they may cause a market crash such as the one we saw at the US market open on Monday. We attempt to estimate the amount of these flows from three groups of investors: Trend Following strategies (CTA), Risk Parity portfolios, and Volatility Managed strategies. These investors follow different signals and have different rebalancing time frames. The time frame is important as it may give us an estimate of how much longer we may see selling pressure.
So, how much longer may we see the selling pressure?
1. Volatility Target (or Volatility Control) strategies provide the most immediate selling as a reaction to the increase in volatility. These strategies adjust equity leverage based on short-term realized volatility. Typical signals are 1-, 2-, or 3-month realized volatility. Volatility target products are provided by many dealers, index providers and asset managers. Volatility targeting strategies also became very popular with the insurance industry. After the 2008 financial crisis, many Variable Annuity (VA) providers moved from hedging their equity exposure with options to investing directly in volatility target indices (e.g., 10% volatility target S&P 500). It is estimated that VA issuers have ~$360bn in strategies that are managing volatility; some of these use options to manage tail risk, some buy low volatility stocks, and some invest in volatility target strategies. We estimate that strategies that are targeting a particular level of volatility or managing to an equity floor could have $100-$200bn of assets.
Assuming that, on average, these strategies follow a 2-month realized volatility signal, we can estimate their selling pressure. 2M realized volatility increased over the past week from ~10% to ~20% (i.e., doubled), so these strategies need to reduce equity exposure by up to ~50% to keep volatility constant. This could lead to $50-$100bn of selling, and it likely started already this week. There is often a delay of 1-3 days between when a signal is triggered and trade implementation, and positions are often reduced over several days. We think this could have contributed to the ‘unexpected’ selloff that happened in the last hour of Tuesday’s trading session. While these flows may continue to have a negative impact over the next few days, they would be the first to reverse (start buying the market) when volatility declines.
2. Trend Following strategies/CTA funds have an estimated ~$350bn in AUM. We modelled CTA exposures in our May and June commentaries, and estimated flows under different scenarios for asset prices. In particular, under a 10% down scenario in equites we estimated CTAs need to sell ~$100bn of equities. In our model, the bulk of selling was in US markets, some in Japan and relatively little in Europe. S&P 500 futures did underperform Europe (by ~3%) and Japan (by ~2%) over the last two trading sessions (European hours), which may indicate that CTA flows have started to impact equity markets. The rebalance time frame for CTA strategies is typically longer than for volatility control strategies. CTA funds may act on their signal in a period that ranges from several days to a month. We believe that selling from CTAs may have just started and will continue over the next several days/weeks.
3. Risk Parity is one of the most popular and (historically) successful portfolio construction methodologies. Risk Parity allocates portfolio weights in proportion to assets’ total contribution to risk (a simplified version, called Equal Marginal Volatility allocates inversely proportional to the asset’s realized volatility). In a survey of quantitative investment managers (~800 clients in US and Europe), we found that ~50% prefer a Risk Parity approach (vs. 15% for traditional fixed weights (e.g., 60/40), 20% Markowitz MVO, and ~20% active asset timing). Estimated assets in Risk Parity strategies are ~$500bn and ~40% of these assets may be allocated to equities. Risk Parity portfolios may also incorporate leverage, often 1-2x. Risk parity funds often rebalance at a lower frequency (e.g., monthly, vs. daily for volatility target) and use slower moving signals (e.g. 6M or 1Y realized volatility). The increase in equity volatility and correlation would cause Risk Parity portfolios to reduce equity exposure. For instance, 6M realized volatility increased from 11% to 15% and a modest increase in correlations would result in approximately a ~20% reduction of equity exposure. Based on our estimate of Risk Parity equity exposure, this could translate into $50bn-$100bn of selling over the coming weeks.
In summary, JPM estimates that "the combined selling of Volatility Target strategies, CTAs and Risk Parity portfolios could be $150-$300bn over the next several weeks. Rebalancing of these funds may appear as a persistent and fundamentally unjustified selling pressure as these funds execute their programs. In addition, there may be a positive feedback loop between all of these sellers – Gamma hedging of derivatives causes higher market volatility, which in turn leads to selling in Risk Parity portfolios, and the resulting downward price action invites further CTA shorting. All of these flows pose risk for fundamental investors eager to buy the market dip. Fundamental investors may wish to time their market entry to coincide with the abatement of these technical selling pressures."
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In other words, if JPM is right, yesterday and today are merely the eye of the hurricane - enjoy them; tomorrow is when the winds return full force.
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실시간으로 전체 시스템의 축소 : "음식의 부족으로 인해 ... 절망이 엄청나 다"
https://www.youtube.com/watch?v=_dIBL4tYQPI
80 세 여자 베네수엘라 슈퍼마켓 스탬피드에서 죽음에 짓밟 함께 Venzuelans의 30 %는 하루에 두 개 이하의 식사를 먹고, 사회 불안 대통령 니콜라스 마두로의 사회주의 유토피아에 신속하게 장착되어있다. 월스트리트 저널 보고서로서, 군인이 지금 만연 식품 밀수 막기 위해 배포 된 마두로는 트리플 자리에 대한 비난과 가격 투기를, 인플레이션과 부족. "때문에 음식의 부족에 ... 절망은, 거대한 없다"지역 야당 정치인 안드레스 Camejo 말했다와 아무 이상이 더 분명하다 국가 보조금 슈퍼마켓 밖에 80 세 여자의 짓밟고 죽음 .
베네수엘라는 징후는 '기아'말과 starvatiion 항의 ... 정부 통제 식품을 구매할 때 구매자는 손가락 인쇄입니다 ...
미제스 연구소의 카르멘 엘레나 Dorobat 세부 사항으로 , 수백만, 수십억, 수조 : 사회주의의 재해, 다시 한번 . 베네수엘라의 거의 완전한 사회주의 다시 한 번 뉴스를 만드는 국가의 경제 위기가 빠르게 전개되어, 지금은 약 2 년 동안 : 제품의 증가 부족과 감가 상각 통화에 의해 연료 가격 상승이, 가져온 가격 통제, 다음되었다 더 높은 가격과 더 부족에 대한. 이러한 화장지로 상점에서 누락 된 기본 상품의 목록은 점차 식용유, 옥수수 가루, 설탕, 위생 패드, 배터리, 관, 심지어 오일 (국가의 주요 수출 번) 포함하도록 확장했다. Cendas 조사는 식품 3 분의 1 이상의 슈퍼마켓 선반에서 찾을 수 없음을 보여 주었다; 또한, 야채가 32 % 이상 매달 비싼 고기 가격은 매월 22 % 올라가고있다, 그리고 콩 130 %로 급증한다. 사람들을위한 대기열로 기본 베네수엘라 쌀을 포함하는 요리와 콩 따라서, 고급되었다 8 시간 주 , 평균, 기본 제품을 구입합니다. 이번에는 볼리바르했다, 그것은이 8 월 5월 300 볼리바르로, 작년 달러로 82 볼리바르에서 하락하고, 비틀 거리는 670 볼리바르에로, 헤드 라인을 만든 베네수엘라의 통화.베네수엘라 정부는 2014년 12월 (연간 인플레이션이 68 %에 도달 할 때)에서 인플레이션 수치를 게시 중단하기 때문에, 일부 경제학자들은 Arepa (치즈 즉, 옥수수 가루 케이크) 설계했다 인플레이션 지수 약 400 %의 현재 물가 상승률을 제안합니다. 기타 추정 연간 인플레이션 율은 실제로 8백8%입니다. 치즈 과자 (보유 냅킨으로 2 볼리바르 지폐를 사용 베네수엘라의 사진 엠파 나다는 ) 최근에 갔다 바이러스 : 지폐가 암시장에 하나 미국 센트의 세 번째보다 가치가 팩의 가격 동안 냅킨의 약 500-600 볼리바르입니다. 사진은 빛에 사용되는 독일어 지폐 주도 도매 물가 지수 월 1923 년 이상 2,500% 7 월 1922 년 100 %에서 뛰어 바이마르 공화국 인플레이션 에피소드, 연상 화재 (오른쪽 사진). 하나는 순간이 에피소드는 베네수엘라 저축 떠나 손상의 정도에서 추측 할 수 있습니다. 그러나 역사는 어떤 표시가있는 경우, 우리는 곧 자신의 학생, 베티 그의 강의에서 기록 미제스의 지인 중 일부의 사람들 (유사한 이야기를들을 수 있었다 비엔 - 경갑) :
통해 오는, 하나는 도움이되지만 공포의 특정 감각을 느낄 수 계속 베네수엘라의 고통의 소식. 모든 정부는 통화 공급에 필수적으로 마두로의 관리가 수행하는 것과 동일한 정도를 제어 할 수 있습니다. 전 세계에 우리는 국가의 통화가 단독으로 정치 권력이 적용됩니다 화폐 사회주의를 보유하고 있습니다. 하나는 도움이되지만 수없는 경이 (공포)은 모든 모양, 크기 및도 사회주의, 실현 불가능한 참을하고 용서할 수없는 것은 분명되기 전에이 걸리는 더 많은 등 경제적 인 재해. Total System Collapse In Real Time: “Due to the Shortage of Food… the Desperation Is Enormous”80 Year Old Woman Trampled To Death In Venezuela Supermarket Stampede With 30% of Venzuelans eating two or fewer meals per day, social unrest is mounting rapidly in President Nicolas Maduro’s socialist utopia. As WSJ reports,soldiers have now been deployed to stem rampant food smuggling and price speculation, which Maduro blames for triple-digit inflation and scarcity. “Due to the shortage of food… the desperation is enormous,” local opposition politician Andres Camejo said, and nowhere is that more evident than the trampling death of an 80-year-old woman outside a state-subsidized supermarket.
Venezuelans protest the starvatiion with signs saying ‘hunger’… Shoppers are finger-printed when buying government-controlled foods…
As The Mises Institute’s Carmen Elena Dorobat details, Millions, Billions, Trillions: The Disaster of Socialism, Once Again Venezuela’s nearly full-blown socialism is making the news once again. For approximately two years now, the country’s economic crisis has been rapidly unfolding: rising prices, fuelled by increased scarcity of goods and a depreciating currency, were followed by price controls, which brought about even higher prices and more shortages. The list of basic commodities missing from stores, such as toilet paper, has gradually expanded to include cooking oil, corn flour, sugar, sanitary pads, batteries, coffins, and even oil (once the country’s main export). The Cendas surveyshowed that more than a third of foodstuffs cannot be found on supermarket shelves; moreover, vegetables are 32% more expensive every month, meat prices are going up by 22% every month, and beans are surging by 130%. Basic Venezuelan dishes containing rice and beans have thus become a luxury, as people queue for 8 hours aweek, on average, to buy basic goods. This time it was the bolivar, Venezuela’s currency, which made the headlines, as it tumbled from 82 bolivars to the dollar last year, to 300 bolivars in May, and to a staggering 670 bolivars this August. Because the Venezuelan administration stopped publishing inflation figures in December 2014 (when annual inflation reached 68%), some economists have designed an Arepa (i.e. cornmeal cake with cheese)hyperinflation index, which suggests a current inflation rate of around 400%. Othersestimate the annual inflation rate is actually 808%. A photo of a Venezuelan using a 2 bolivar banknote as a napkin to hold a cheesy pastry (an empanada) has recently gone viral: the banknote is worth less than a third of one US cent on the black market, while the price of a pack of napkins is about 500-600 bolivars. The photo is reminiscent of the Weimar Republic hyperinflationary episode, where the wholesale price index jumped from 100% in July 1922 to more than 2500% in January 1923, which led to German banknotes being used to light fires (right photo). One can only speculate at the moment the extent of the damage this episode will leave on Venezuelan savings. But if history is any indication, we could soon hear stories similar to those of some of Mises’s acquaintances (recorded from his lectures by his student, Bettina Bien-Greaves):
As news of Venezuela’s suffering keeps coming through, one cannot help but feel a certain sense of dread. All governments control the money supply to essentially the same extent that Maduro’s administration does. All around the world we have monetary socialism, where national currencies are subject solely to political power. And one cannot help but wonder (and fear) how many more such economic disasters it will take before it becomes clear that socialism of all shapes, sizes, and degrees, is unrealizable, unbearable, and unforgivable. |
첫댓글 JPM이 옳다면 즉, 어제와 오늘은 태풍의 단지 눈이다 바람이 전군을 반환 할 때 내일입니다.
오늘밤 미국주식이 하락하고 내일 코스피가 하락하면 진입하지마세요
폭력판매?
이 친구는 뭐잉~~~~
도대체 자기입장에서만 이야기하고 상대방에 대한 배려가 조금도 없는 xxx 아닌가?
지 잘 난체만 하는~~~~~~
정신적으로 문제가 ㅋ