HEF and OPEX Pins
Updated
In a market both pinned up and down,
A trader did furrow his brow.
He juggled his stocks,
And outsmarted the clocks,
As the market danced like a clown.
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This idea highlights the pinning / magnetic nature of dealers hedging options.
HEF or Hedged Equity Flows is a term I coined to describe how a large prime bank, JPM, hedges 20+ billion in assets using quarterly SPX options strategy.
OPEX is Options Expiration that is the third Friday every month. This is when monthly equity options, index options, and options on exchange-traded funds (ETFs) expire.
My Indicator that tracks HEF options delta and gamma is now available privately through the following link.
https://www.tradingview.com/script/qgdeagNc-SPX-Put-Spread-Collar-Delta-Gamma-Indicator/
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Missing in this chart is continuation pins that instead of a reversal after the pin is released a continuation to higher or lower ranges after the pin expires.
There are also some big traps after a pin is released. September 1 - 12 was a good example of a bull trap in 2022 and Nov 1 - 9 was a good example of a bear trap in 2022.
Now more important than ever to be protected at both ends of the tail.
From a Bulls perspective.
After April first a bull is expecting a continuation higher, being mind full of a Bull trap attempting to close gaps at 4200s.
From a Bears perspective.
After April first will be the point in markets when HEF is weakest and OPEX Vanna, Charm are just ramping up.
A Bear looks to take advantage of this weakness for a drive lower. Look to Jan1 2022 how after JHEQX expires, it takes 1-2 bad days to drive it into negative gamma.
Macro head winds are strong but VIX showed us again this morning SPX is king. For now.
A trader did furrow his brow.
He juggled his stocks,
And outsmarted the clocks,
As the market danced like a clown.
-----------
This idea highlights the pinning / magnetic nature of dealers hedging options.
HEF or Hedged Equity Flows is a term I coined to describe how a large prime bank, JPM, hedges 20+ billion in assets using quarterly SPX options strategy.
OPEX is Options Expiration that is the third Friday every month. This is when monthly equity options, index options, and options on exchange-traded funds (ETFs) expire.
My Indicator that tracks HEF options delta and gamma is now available privately through the following link.
https://www.tradingview.com/script/qgdeagNc-SPX-Put-Spread-Collar-Delta-Gamma-Indicator/
-------------
Missing in this chart is continuation pins that instead of a reversal after the pin is released a continuation to higher or lower ranges after the pin expires.
There are also some big traps after a pin is released. September 1 - 12 was a good example of a bull trap in 2022 and Nov 1 - 9 was a good example of a bear trap in 2022.
Now more important than ever to be protected at both ends of the tail.
From a Bulls perspective.
After April first a bull is expecting a continuation higher, being mind full of a Bull trap attempting to close gaps at 4200s.
From a Bears perspective.
After April first will be the point in markets when HEF is weakest and OPEX Vanna, Charm are just ramping up.
A Bear looks to take advantage of this weakness for a drive lower. Look to Jan1 2022 how after JHEQX expires, it takes 1-2 bad days to drive it into negative gamma.
Macro head winds are strong but VIX showed us again this morning SPX is king. For now.
Note
The SPX Option I'm watching closely over the next few days is the JHEQX call.SPXW31Mar23C4065.00
Yesterday High 4.64
Yesterday Low 2.0
IV 20%
Opened at 4 dollars
Gamma 0.0046
Delta 19
IV 14%
My assumption is a lot of dealers are long on this call. CTAs are net short the market but dealers want higher. Market is usually right.
You know the saying. "Never fight the Fed."
Well, the Market is saying. "Hold my beer"
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