Good afternoon my esteemed friends and fans. Not a bad week. Equity markets both here and in the US were up and the global economy keeps powering on.
On a personal note, I had two trading triumphs (I would like to thank my esteemed friend ProfessorBeta_Male_in_new_timezone for pointing out my successes, thats the least I would expect from him after making him famous on the TTT forum).
Firstly, my US500 short on the FOMC night was a master-stroke. The whole world was prancing about yelling 'green', the legendary Clarkie said 'Red', and red it was. The next day, I made the obvious US500 long trade, and wasn't I pleasantly surprised by the ensuing Wall St melt-up? But I cannot take credit for this trading idea. We need to talk about The Indian Bloke.
The Indian Bloke was introduced to Hotcopper by @redbacka in this post : Introducing The Indian Bloke In that famous post, The Indian Bloke suggested that the direction of the market near Opex dates is dictated by the Principle of Loss Minimisation for the Option writers (mainly Institutional dealers) and Maximum Pain for the Option buyers (typically retailers). He applied this principle to the Indian Nifty 50, so I says to myself, why not apply it to the ASX? All you need is Index Option Open Interest data which is readily available. So I downloaded the data and I produced this on 8 September 2023 (exactly one year ago) three days before Opex in the Australian Market, in this post: Goodness Gracious Me
Lo and behold, in the following 3 days XJO dropped 200 points to close at 7065, lending credence to The Indian Bloke.
I then said to myself, 'Lets go global Clarkie, lets go Global!" So 3 days ago (prior to Friday Quadruple Opex, I downloaded the SP500 Index Option Chain Data and I repeated the exercise (because I can). This was the result:
As you can see, my friends, the MAX Pain Level on OPEX day would have been 5545. It was however obvious by Wednesday that this particular boat had sailed, with SPX at 5650, 5545 was not on. With the Index level higher than Max Pain, the normal Delta and Gamma Hedge flows would be supportive of the market, i.e. Option writers would be buyers of the equity markets. This spelled Green, and thus ends the story of my second trading triumph of the week.
(20min delay)