WSJ's repeat warning: it's a market on Zoloft

Comments

• BaluBalu

  March 26 edited March 26

  Thanks.
  
  Not sure how large a position forum members are carrying in JEPI vs HELO type strategies. I think the latter kind are popular here. It would be useful for WSJ to bring detailed conversations about specific option strategies than broad brush “be forewarned” alerts. Hopefully, Devesh can jump in to separate facts from …
  
  P.S.: I happen not to have meaningful option positions.
• David_Snowball

  March 26

  Hi, BaluBalu.
  
  "Specific option strategies" is probably outside of the ambit of a daily newspaper, even a very good financial paper. A bit more likely in its sister publication, Barron's, I'd suspect.
  
  David
• BaluBalu

  March 26 edited March 26

  I understand. I was being polite but my statement applies to any one inclined to pile on because if we are saying something negative we should try to be helpful to members who may be carrying meaningful position size.
  
  WSJ had recently ran a similar alert. The current one constitutes a pile on, unless they go specific. Of course, they are after eyeballs!
• Devo

  March 26

  I dread to get into this discussion because derivatives have been and always be a complicated beast. There is listed, Over the counter, and multiple types of instruments. There is the one thing we can see (because its easy) and the 99 things we can't see.
  The FT Alphaville had an article:
  
  https://www.ft.com/content/d9b964f0-7cc2-4684-b75d-80f47359d8a5
  
  "JPMorgan blames JPMorgan for suppressed volatility
  Once more unto the Vix discourse"
  
  It should be free for those who sign up for FT Alphaville (its a free section of the FT).
  
  Doing a thorough analysis needs something of this sort. One needs to measure (and continuously measure) the evolving greeks from derivatives funds to have any measurable market call.
  
  Maybe its helpful to some...
  
  
  
• BaluBalu

  March 26

  Thanks, Dev. Hopefully, fund managers are providing regular commentary to shareholders of evolving benefits and risks. May be fundholders can post here any such commentaries.
• WABAC

  March 26 edited March 26

  @BaluBalu, DIVO offers monthly commentary.

  From an options standpoint, we were active and tried to capture premium as volatility picked up periodically throughout the month. We sold new calls during the month on Apple (AAPL), Caterpillar (CAT), Cisco (CSCO), Goldman Sachs (GS), Marathon Petroleum (MPC), Merck (MRK), Microsoft (MSFT), Procter & Gamble (PG), Visa (V) and Walmart (WMT). While most of those calls expired during the month, we were partially called away on Cisco (CSCO) and JP Morgan (JPM).
  
  The portfolio held a total of three covered calls2 at the end of February 2024: Microsoft (MSFT), Procter & Gamble (PG) and Visa (V). At the end of the month, approximately 2.1% of the portfolio was covered.

  Is that what you had in mind?
• BaluBalu

  March 26 edited March 26

  @WABAC, Thanks. Yes, that is a good commentary.
  
  I can not believe it is the $67B (small relative to the size of the market) in covered call ETF strategies that could be the catalyst for any catastrophe (as the headline reads) but the general (robust / excessive?) option activity in the market place and the corresponding institutional counter parties' activities. If the market goes down, DIVO will go down as well (as should be expected) with or without its covered call activity. (Some strategies probably write calls on SPY (naked calls) rather than on individual holdings.) There are a lot of nuances and without each strategy being dissected it is very difficult to know which ones are taking excessive (or untested) risks or if the gun powder is $67B or $67K size. Hopefully, fund managers are providing good commentary of benefits and risks of their funds and owners of funds are reading those commentaries regularly.
  
  Interestingly, JEPI and JEPQ have $50B AUM between them. May be owners of those can share their thoughts.
  
  Re covered call ETFs, OP says, '[A]ssets in such funds has topped $67 billion, up from $7 billion at the end of 2020.] I must be missing something as JEPI and JEPQ are new and JEPI assets in 2020 were not much.
• David_Snowball

  March 27

  Reddit doubles since debut, arguably driven by the options traders: This from Quartz, 3/26/2024

  Reddit’s share price surged even higher Tuesday morning trading after a big rally the day before. The stock rose to a new high of $74.80 after market open — more than double its initial public offering (IPO) price of $34.
  
  The reason? Analysts say the launch of options trading is giving bulls a chance to get extra bullish about where Reddit’s stock price will go — and that’s boosting its share price in real time. About 90,000 options changed hands on Monday, according to Reuters. (Laura Bratton, "Reddit stock has more than doubled from its IPO price after options trading started"

  Quartz is a really solid news and analysis operation. Quartz launched as an offshoot for The Atlantic magazine in 2012, targeting mostly upscale consumers worldwide. It has, of necessity, reinvented itself several times. The staff describe themselves as "nerdy and creative." That works. It's a fascinating tale of journalism in a digital "I ain't payin' for nuthin'" age, with Quartz partnering with Facebook and making money, drifting away as Facebook's model changed, getting bought by a publicly traded Japanese firm, buying itself back, then getting bought by G/O Media. G/O as in "Gawker and the Onion."
• WABAC

  March 27

  Speaking of G/O, they're having a fire sale.