The Dominos Are Falling

[Gregmal]

Melvin and the #metoo NYC funds and their brilliant short positions, Achegos---->Nomura, ARK offloading liquid positions for illiquid positions. How many funds are levered big to SPAC pipes or units?

As Ive said plenty in prior weeks and months, I think short the high growth covid fads is finally a sound proposition and have short positions in the ARK funds. Puts on ARK + spac ETFs as well. Still have some SPAK short but was bought in on about 1/3 of the position I have at one firm a couple weeks back. Looking to put it on again but also starting to feel post deal close spac are going to start getting ugly and good shorts here. I also think its a good time to be hedging with VIX calls. Leverage is a fun thing and like with Archegos, who knows where and who it blows up!

Who's seeing the matrix? How are people playing this?

[alpha]

Should be an interesting week, sounds like there are still large blocks of stock Achegos has to liquidate.

[UNF2007]

Should be an interesting week, sounds like there are still large blocks of stock Achegos has to liquidate.

Anyone planning on taking advantage of forced selling in the names?

[Spekulatius]

Should be an interesting week, sounds like there are still large blocks of stock Achegos has to liquidate.

Anyone planning on taking advantage of forced selling in the names?

Do we know what Archegos owns? I think Tencent Music was mentioned.

WhaleWisdom.com comes up empty handed.

Maybe the bigger issue is that many other funds run similar L/S strategies with a high gross exposure?

[dpetrescu]

Archegos doesn’t have to disclose their holdings in US holdings because most of their stocks are swaps. But it’s concentrated in:

TMT and media like Viacom and Discovery

Asian tech like Baidu

Asian education names like GSX (Carson block accused them of leveraging up just for the short squeeze - muddy waters accused GSX of using bots for their enrollment)

I think how it was able to lever 5:1 was because they also owned SPY puts as hedges. There are rumors that some more blocks of Viacom need to be sold this week. But if anything it will be a boost to the market if they still ha e to unload the SPY puts - banks have to buy the index to get rid of the puts. That’s likely why the markets had such a rise in the last two hours of trading Friday.

But the next leg is Nomura could be down a bit ~15%. And I think credit Suisse and maybe others to a lesser extent. Hopefully everyone’s still wearing shorts as the tide dips a bit on a few names.

Either way, today morning will be interesting to see how the market opens.

[dpetrescu]

Do you still own puts on the SPAC ETFs that are pre-merger? What is your reasoning there?

They already got decimated. The median SPAC last week was ~ 1.5% under asset value. So that’s like shorting a pile of cash that’s on the market for 1.5% less than the value of that pile of cash.

Maybe you meant post-merger. But the -1.5% median, this includes names that have deals.

Melvin and the #metoo NYC funds and their brilliant short positions, Achegos---->Nomura, ARK offloading liquid positions for illiquid positions. How many funds are levered big to SPAC pipes or units?

As Ive said plenty in prior weeks and months, I think short the high growth covid fads is finally a sound proposition and have short positions in the ARK funds. Puts on ARK + spac ETFs as well. Still have some SPAK short but was bought in on about 1/3 of the position I have at one firm a couple weeks back. Looking to put it on again but also starting to feel post deal close spac are going to start getting ugly and good shorts here. I also think its a good time to be hedging with VIX calls. Leverage is a fun thing and like with Archegos, who knows where and who it blows up!

Who's seeing the matrix? How are people playing this?

[Gregmal]

Do you still own puts on the SPAC ETFs that are pre-merger? What is your reasoning there?

They already got decimated. The median SPAC last week was ~ 1.5% under asset value. So that’s like shorting a pile of cash that’s on the market for 1.5% less than the value of that pile of cash.

Maybe you meant pre-merger. But the -1.5% median, this includes names that have deals.

Melvin and the #metoo NYC funds and their brilliant short positions, Achegos---->Nomura, ARK offloading liquid positions for illiquid positions. How many funds are levered big to SPAC pipes or units?

As Ive said plenty in prior weeks and months, I think short the high growth covid fads is finally a sound proposition and have short positions in the ARK funds. Puts on ARK + spac ETFs as well. Still have some SPAK short but was bought in on about 1/3 of the position I have at one firm a couple weeks back. Looking to put it on again but also starting to feel post deal close spac are going to start getting ugly and good shorts here. I also think its a good time to be hedging with VIX calls. Leverage is a fun thing and like with Archegos, who knows where and who it blows up!

Who's seeing the matrix? How are people playing this?

No, no. Im mainly short SPAK which is predominantly post deal close. Look at the holdings there! Such a beautiful basket of poopoo.

Shorting pre deal is dumb because whats you're downside...5-10%, maybe in best case scenario? I still think pre deal spacs are somewhat interesting, especially on a case by case basis. Pre deal, pre announcement names you can once again pick up units pretty universally below 10.2 and a lot sub $10. Post deal announcement but pre close is actually probably one of the better ways to play market volatility right now, at least that I can think of. If you can snag something near $10 that was trading mid teens pre blow up and then use  the redemption deadline as your backstop you're probably going to do ok trading it. I wouldnt touch anything post deal close with a 10 ft pole though. Right now many are breaking $10 and then everything that works for them pre close works against them post close.


Edit: I'd also add....guess what else is looking pretty good right now as a store of value, especially in the face of big banks once again reminding everyone that you never quite know whats lurking on the books?

[JRM]

I'd be lying if I said I won't get some satisfaction out of watching some of the momo tades blow up.  I can only sit quietly and listen to people I know brag about how much they are up in their 401k by converting the entire balance to Tesla stock along with people I know who are looking to quit their job to be a full time day trader with nothing more than a buy-the-dip strategy and no stop loss.

I shouldn't care what other people do, but I do care.  My psychological bias\weakness is a need to be right.

[KFS]

From what I've read on this forum lately, it appears I might currently be the only person here crazy enough to directly short Tesla.  I have been adding long-dated OTM puts on TSLA as the risk vs. reward on these options is absolutely beautiful, in my humble opinion. 

[MattR]

From what I've read on this forum lately, it appears I might currently be the only person here crazy enough to directly short Tesla.  I have been adding long-dated OTM puts on TSLA as the risk vs. reward on these options is absolutely beautiful, in my humble opinion.

I am also directly short tesla, but  it is just a 2% position of my portfolio

[fareastwarriors]

From what I've read on this forum lately, it appears I might currently be the only person here crazy enough to directly short Tesla.  I have been adding long-dated OTM puts on TSLA as the risk vs. reward on these options is absolutely beautiful, in my humble opinion.

I am also directly short tesla, but  it is just a 2% position of my portfolio

For a "value investor" community, I think being LONG Tesla is More crazy.

[Viking]

It is interesting to see how leveraged this one fund was and how, when stressed, it impacted not only specific stocks and sectors but also the overall market. Let’s hope this is an isolated case :-)

Hard to understand how more transparency would not be beneficial.

[rkbabang]

From what I've read on this forum lately, it appears I might currently be the only person here crazy enough to directly short Tesla.  I have been adding long-dated OTM puts on TSLA as the risk vs. reward on these options is absolutely beautiful, in my humble opinion.

I am also directly short tesla, but  it is just a 2% position of my portfolio

For a "value investor" community, I think being LONG Tesla is More crazy.

While going long Tesla at these prices is pretty crazy, shorting a stock with what can only be described as a fanatical cult-like following isn't exactly sane either.  Pretty crazy to touch Tesla in any direction.  Although if I still owned it I would be selling, in fact I would (and did) sell a long time ago.

[shhughes1116]

It is interesting to see how leveraged this one fund was and how, when stressed, it impacted not only specific stocks and sectors but also the overall market. Let’s hope this is an isolated case :-)

Hard to understand how more transparency would not be beneficial.

To be honest, I hope it is not an isolated case.  The pricing disruptions caused by this forced unwinding of positions is great for those that are patient and hold some cash.  Nice option premium on VIAC for instance. 

And I hope that the end result, as people see this blow up, is a reduction in leverage across the entire system.  I think this would be healthy for the financial system, and to my point above, lucrative for my portfolio. 

[Gregmal]

I doubt these are isolated at all. Perhaps even this is the beginning of the pendulum swing back to normal as we've had a decade long run of increasing leverage to the point where nobody thinks there is risk anymore and the short interest vs market basically non existent. Saw a neat chart the other week comparing levels of short interest and currently there is nothing even remotely comparable to the short capitulation we ve been seeing outside of the period just prior to the tech bubble bursting.

I mean we've seen all this shit unfold in basically 2 months...and many of these WS chumps run the same books and utilize the same strategies....one falls they are feel ripples. Theres some talk out there that the GME saga had a role in how this played out.

The volatility is great though. Bring it on.

[stahleyp]

It is interesting to see how leveraged this one fund was and how, when stressed, it impacted not only specific stocks and sectors but also the overall market. Let’s hope this is an isolated case :-)

Hard to understand how more transparency would not be beneficial.

To be honest, I hope it is not an isolated case.  The pricing disruptions caused by this forced unwinding of positions is great for those that are patient and hold some cash.  Nice option premium on VIAC for instance. 

And I hope that the end result, as people see this blow up, is a reduction in leverage across the entire system.  I think this would be healthy for the financial system, and to my point above, lucrative for my portfolio.

I'm with you. I'd love a 50%+ drawdown. Probably won't happen but a guy can wish. I will say that if we get a 50% drawdown that probably means the government has lost control of things...would be an interesting environment for sure.

[djleeam]

https://www.marketwatch.com/story/here-are-the-complex-bets-at-the-heart-of-unprecedented-archegos-linked-30-billion-margin-call-11617051940

[muscleman]

I've been making the case for a replay of the 2000 dot com bubble top in 2021 for a few months. But it is usually not this easy (March 2000 and exactly March 2021?). I think we are building a bottom here for one last strong leg up before we get that kind of bubble top.

[Spekulatius]

If the Domino’s are falling, they are not falling where I am not looking. In have extensive watchlist and other than VIAC and DISCK I don’t see much that is falling out of the now normal Momo tech rut. Even VIAC and DISCK are just going back where they were a couple of weeks ago. I guess that trade is close to unwound but I don’t see the great bargains here.

I am not sure what I am missing.

[Viking]

https://www.marketwatch.com/story/here-are-the-complex-bets-at-the-heart-of-unprecedented-archegos-linked-30-billion-margin-call-11617051940

The European/japanese investment banks can’t seem to catch a break. $1 billion here, $1 billion there and pretty soon you are talking real money...
————————————-
“ CFDs aren’t legal in the U.S. but their usage in other regions, particularly Europe, may be something that regulators weigh as they monitor this margin-call situation, Amy Lynch, a former SEC regulator and president of FrontLine Compliance, told MarketWatch in a Monday-afternoon interview.

“Extremely risky,” is how she characterized CFDs.

“[u]It’s kind of like being able to go into a naked position[/u],” she said, referring to naked bets where investors use derivatives to gain exposure to an investment without owning the underlying asset. to gain exposure to an investment without owning the underlying asset.

[Spekulatius]

https://www.marketwatch.com/story/here-are-the-complex-bets-at-the-heart-of-unprecedented-archegos-linked-30-billion-margin-call-11617051940

The European/japanese investment banks can’t seem to catch a break. $1 billion here, $1 billion there and pretty soon you are talking real money...
————————————-
“ CFDs aren’t legal in the U.S. but their usage in other regions, particularly Europe, may be something that regulators weigh as they monitor this margin-call situation, Amy Lynch, a former SEC regulator and president of FrontLine Compliance, told MarketWatch in a Monday-afternoon interview.

“Extremely risky,” is how she characterized CFDs.

“[u]It’s kind of like being able to go into a naked position[/u],” she said, referring to naked bets where investors use derivatives to gain exposure to an investment without owning the underlying asset. to gain exposure to an investment without owning the underlying asset.

It is really like buckets shops are legal again, just at a grander scale.

[Gregmal]

I dont know if I'd expect a total repeat of 2000 and expect a precipitous crash, theres probably too much liquidity for that. But I think its clear the top is in for certain popular themes....do folks really see ARKG getting back to $115 any time soon. Personally I would think you just see a gradual bear market type decline. Rallies get faded, new lows put in. Similar to what we've already been seeing. There's also, a large segment of stuff that I wouldnt expect to be effected at all, IE BRK and the like. Its a good market for the fundamental investor IMO.

[muscleman]

I dont know if I'd expect a total repeat of 2000 and expect a precipitous crash, theres probably too much liquidity for that. But I think its clear the top is in for certain popular themes....do folks really see ARKG getting back to $115 any time soon. Personally I would think you just see a gradual bear market type decline. Rallies get faded, new lows put in. Similar to what we've already been seeing. There's also, a large segment of stuff that I wouldnt expect to be effected at all, IE BRK and the like. Its a good market for the fundamental investor IMO.

That's exactly why I think the top will be in this August, not now.  ;)

[TwoCitiesCapital]

On 3/29/2021 at 10:54 AM, KFS said:

From what I've read on this forum lately, it appears I might currently be the only person here crazy enough to directly short Tesla.  I have been adding long-dated OTM puts on TSLA as the risk vs. reward on these options is absolutely beautiful, in my humble opinion. 

I've owned puts on it twice - first in early 2020 and again in early 2021. Lost money both times despite damn near catching the tops just because the erosion of time value happened faster than the decline in each instance. Might have broken even on my 2020 puts had I held them into March, but closed them before I even knew covid was going to be a threat. 

I keep wanting to do it again, but at some point I have to cut my losses no matter how ridiculous the valuation appears

Edited April 1, 2021 by TwoCitiesCapital

[RichardGibbons]

I think it's just much harder to make money from puts than from calls. The advantage of puts is that the market seems to go down faster than it goes up. But three things related to the mechanics of puts makes them harder.

First, as the put moves into the money, the premium gets crushed much faster than it does with calls.

Second, the premium on a put that is X% out of the money is higher than the premium on a call that is X% out of the money.

Third (and this is probably a cause for the first and second) when shares go down, an X percentage move becomes smaller and vice versa. So if the stock falls from $100 to $50, and your plan is to sell your puts when it falls to 25, then you need another 50% drop to hit that level. In calls, if your stock goes from 100 to 150, and your plan is to sell your calls when it goes to $175, you only need another 17% gain.  In a sense, it becomes "easier" for the stock to reach a target profit level with call than puts.

These factors make me much less likely to buy puts than calls.