Zero Day Options (0DTE) now account for half of total SP500 options volume
Source: Barchart
NASDAQ's 1999 analogy chart isn't perfect but given the amount of shorting by hedge funds and short gamma selling by dealers, a squeeze in Q4 (the historically strongest quarter) is a possibility
Source: TME
Is the US equity market ripe for a short squeeze?
As highlighted by Goldman Sachs PB: "the amount of shorting in US equities since mid-August is the largest in six months and ranks in the 98th percentile vs. the past decade." Meanwhile, the level of short gamma is the highest in a long time. Dealers have been forced to sell deltas as we have moved lower (chart by Tier1Alpha). This has pressured the market. But we need to keep in mind that gamma works both ways, so a possible bounce from here would force dealers to buy back all that delta they sold recently. Source: The Market Ear
Chinese property stocks tumbled the most in nine months as concern over a possible China Evergrande Group liquidation added to fresh signs of stress across the industry
A Bloomberg Intelligence gauge of developer shares fell as much as 6.4% Monday, taking its loss in valuation this year to $55 billion. Evergrande, which scrapped key creditor meetings at the last minute and said it must revisit its restructuring plan, dived 25%. China Aoyuan Group Ltd. was the biggest drag on the gauge, slumping by a record 76% after shares resumed trading. Sentiment has worsened dramatically in recent days as investors brace for years of pain from the ailing sector, with policy support failing to resolve liquidity woes. While developers are pinning their hopes on the upcoming Golden Week holiday period to revive home sales, a rapid cooling of a late-August rally in property shares shows any relief may be short lived. Source: Bloomberg
$100k invested in the S&P 500 ETF 30 years ago would be worth over $1.7 million today
Was the road to 17x growth a straight line? Far from it as shown on the chart below by Charlie Bilello.
Here’s a look at how Arm $ARM, Instacart $CART, and Klaviyo $KVYO traded from their IPO pricing over the last week
Big opens then lots of selling. Source: Bespoke
The main driver for stock returns
Source: BCG, Morgan Stanley Research thru Compounding Quality
According to Bloomberg chief economist Anna Wong, online betting markets see a 69% chance of a federal government shutdown starting Oct. 1st
So what could be the effects on the US economy and job market? Below chart shows the effects on GDP depending on the duration of the shutdown. - According to Goldman, a government-wide shutdown would reduce quarterly annualized growth by around 0.2% for each week it lasted after accounting for modest private sector effects. Goldman's baseline is that a shutdown could last for 2-3 weeks (the Trump government shutdown, the longest in history, lasted 35 days, from Dec 22, 2018 to Jan 25, 2019). - Meanwhile, Bloomberg also speculates that in an extreme tail event, the maximum hit to 4Q GDP would be a drag of 2.8% if the shutdown lasts for the entire quarter. Source: Goldman Sachs, Bloomberg, www.zerohedge.com
