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      Manage your risk dynamically - the Apple example

      Frequent readers of TME know we have written extensively on using options to enhance yield, especially for people that "must be long a certain name".

      Apple has been one of those. On September 1, Apple ATH close, we wrote:

      "The point is not trying to guess the top in Apple, but from a risk management point of view Apple overwriting strategies make a lot of sense.

      Retail armyhas been buying tech calls en masse, leaving dealers short gamma. Since the FAANGs have exploded, short gamma dealers have found themselves in a lot of trouble, chasing deltas higher, and at the same time seeing vols explode making "real hedging" even more expensive.

      Dealers tend to be reluctant to buy back higher vols as they have a big belief in their "theoretical" models. Since volatility is mean reverting, dealers tend to sell more and more volatility as "it must revert".

      In the meantime, retail army buys more and more options, dealers chase deltas higher and higher etc. Of course, the same works on the way down, but inversely. When the stock goes through the strikes on the way down (if ever) all those chased long deltas must be sold again.

      We can write a book about the above "dynamics", but the main point is, Apple vols have exploded due to the above, and anyone that is getting a bit "nervous" about their Apple longs, but must be long, should look at overwriting strategies here."

      Manage your risk dynamically - the Apple example
      Source: Refinitiv
      Apple vs VXAPL
      You are here

      VIX seasonality is about to kick in right now...

      You are here
      Source: Equity Clock
      VIX speculators mania

      Slightly simplified way of looking at things as there are many offsetting positions in the volatility world, but still worth taking a look at the great VIX spec short.

      VIX speculators mania
      Source: LSEG Workspace
      The VIX shorty

      Dealers running big VIX call shorts..."VIX total Vega to buy in a +10 shock now at 91% btwn ETNs and Dealer options positioning".

      The VIX shorty
      Source: Nomura
      AI mania - seriously overbought

      AIQ at the most overbought levels since July 2024...just before markets crashed.

      AI mania - seriously overbought
      Source: LSEG Workspace