7/10/24 - $iwm - setup to repeat '21s RIP??? o- look at SPY/SPXEW to get a sense of the weighted AMEX:SPY (tech-heavy led by 10 companies) vs. the equal weight SPY ( INDEX:SPXEW ) to get a sense for how rarely we reach such extremes. these are MONTHLY bars i'm showing
- when the general start to fade THIS DOESN'T MEAN THE MARKET TANKS. it could mean a 5-10% pullback. but what happened last time this occurred in '21 after a big rally of quality out of the covid lows (tech... remember? then everything else) was AMEX:IWM (the yellow line)... the "everything else market" got massively bid.
- history often rhymes and doesn't repeat. RATES WERE GOING TO ZERO HERE. And now they're not. that's a MASSIVE wrinkle to be aware of. however, if the expectation is lower rates, at least in the 6-12 month context, small cap that is getting decimated because of a. funding/ cost of capital b. lack of bid and c. more economically sensitive... will get bid, sooner
- in order to not over extend myself and buy some time in developing this thesis, i've gone WAY out and bought some ATM (at the money) AMEX:IWM 200C for Dec 18, 2026. 28% implied volatility is too low given what we've seen in the past and given how much money could theoretically rotate from these generals into small caps.
- still developing this view, but have made these C's 2% of my book which means the gross value is about a 10% position. i'm willing to neck out here even into extended territory here (on general risk mkts) bc 1. the IV on these options remains sub 30% 2. the expiry is SO FAR out and 3. i remain very cashy - so this is a way for me to get more gross exposure without necessarily deploying a lot of cash.
LMK what you think. will be developing this thinking over the coming months.
V
