1/xThe party’s almost over. But you’d never know it. Nobody wants to go home...It’s been a hell of a party, but I won’t be sticking around much longer. As discussed, the window for weakness officially opens on Tues after the open somewhere near my 2 objectives of 3770.5 & 3811.25

2/x Election Resolution, Vaccine success, Fed support, Stimulus, TSLA inclusion, & the Santa Claus rally is complete. All of these themes that we have been riding now for 3.5 mths have 1 by 1 been resolved exactly as expected. And so, here we sit @ ATH as predicted w/ extremely

3/x overextended sentiment & positioning by both HF & Retail w/ speculative signs of exuberance in products like Bitcoin & breadth divergences flashing bright RED...Vanna flows have driven the expected rally & commensurate Vol compression to an illogical extreme. But their work

4/x is nearly over, w/the indomitable flows of the BOY Jan Effect waiting patiently around the corner, their terminal point is within reach. The 1/5 GA primary is nearly here with the election 1 day straddle sitting at a minuscule $42...As stated earlier, this pinning of index

5/x IVol tells me the largest moves from the GA runoff will likely 1st come from factor rotation b/c when SPX IVol's are pinned, it not only still allows for idiosyncratic risk & moves in constituents, but it FORCES extreme noncorrelation & rotation..As such, Dispersion continues

6/x to be a great play here w/ the prospects of continued Index IVol compression & remaining elevated idiosyncratic risk still on the horizon for names, particularly as it relates to owning IVol in the growth complex relative to SPX given the coming regulatory/antitrust news/

7/x duration trade funding risk, NTM the retail-driven dealer short Vol positioning present in that complex in names like TSLA, as the REAL (underpriced) risks of policy uncertainty finally creep into the market. Structural vanna/charm flows should continue to increase until 1/11

8/x making it dangerous to fade this structurally positive Jan effect period yet. But soon the final hedges from the ‘election hump’ in Nov will expire with the Jan monthly options. Once this support is gone there will be little protection left behind... Sometime soon, b/w 1/6

9/x morning and 1/15 we should see a IVol buying opportunity...& as I’ve mentioned, from that point, It’ll be time to be on the look out for the pain trade.This looks more & more like it will be some kind of impending rally post GA runoff into 1/11-15, eventually paired w/ rising

10/x Ivol most likely near our 3811 objective. @ that time the window for an attempt at a correction will open. The risk/reward trade here will be to ride deltas w/long calls, for what would likely become an upside Squeeze from 1/6 into 1/11-15 regardless of outcome. This would

11/x confound a lot of those preparing for a pullback (especially in the case of a dem sweep), causing dealers to throw in the towel abandoning long Vol positions. It’d also allow the market to stretch the rally to unexpected heights, allowing for a slide to too low fixed strike

12/x Ivols, forcing a squeeze for IVol & allow for an unpinning of IVol...So, continue to ride The market long delta into 1/5, increasingly substituting long gamma for hard deltas into a rally, taking gamma profits @ our levels. It will not be easy, it never is,to bet against the

13/x market, especially w/other growing parallel calls for a correction to cause the most pain to the greatest # of investors. But the time for caution is quickly approaching. Keep your head on a swivel, & when all seems lost & it seems least likely we will look to pivot...

14/x How big a correction we will get is the big question... & the answer to that will, largely depend on the outcome on 1/5 & the rhetoric in the weeks following inauguration. Whatever kind of correction we do get’ll tell us a lot about the market action b/w now & the fall.

15/x If we don’t get rising iVol & the correction that we’re hoping for in price, & the market instead simply corrects in time, by 1/25 we won’t be dogmatic, quickly turning long delta again...To free this market from this scale of Vol compression will not be easy. But we’ll walk

16/x through this Vanna & seasonal window of weakness knowing that this Ivol compression may be strong enough to tether this market through this difficult window regardless. Use a closing stop on longs @ the 1 stdev down of the 20 day & look to take profits @ 2 stdev up of 20 day

17/x &/or our objectives of 3770.5 & 3811 until 1/11. We will be on the lookout for extreme signs of retail exuberance (p/c equity), significant NDX weakness, & rising Ivol. & will be adding long gamma positions behind post 1/11 when I see these signs at our levels...Good Luck!

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