Making the Bridge
Vol # 178 : May 10th, 2024
Holidays are a national pastime in France.
The month of May is riddled with both official and unofficial closings. Victory in Europe. Ascension. Pentecost. Between weekends and Wednesdays off, for elementary school age kids there are only 11 school days.
If one of these days happens to conveniently fall on a Thursday, Friday is of course absorbed into the weekend. The verb for this is to “make the bridge”. Today is le pont. There’s as much activity as the Friday after Thanksgiving. Theta decays both faster and slower.
As I spend the holiday doing a greatest hits tour of my favorite restaurants (DM me for recommendations), I want to share with readers new and old the best of The Till.
I’ve also included two unlocked pieces from my research focused publication “Portfolio Design”, where I review more technical options market dynamics and analyze what the proprietary indicators developed at TheTape are saying.
Over 177 issues strong, we’ve covered a lot of ground here. Writing this is one of my favorite parts of the week, and it’s all thanks to the comments and support I get from readers like you.
Happy Trading.
The Till
Walk through a typical day in the life of an equity options market maker. Risk calls, defending open outcry, and the obligatory lunch print.
While PFOF might feel a bit icky, waving your customer flag is not only a great way to get a fill, it also helps support tool and infrastructure development for retail brokers.
Volatility pricing is an attempt to combine everything from known knowns to unknown unknowns. How should we think about it when it seems like it’s just one constant news cycle?
Every trader needs a reason to interact with the market. For equities being passive is a fantastic edge, but options strategies require a little bit more adjustment.
Portfolio Design
VRP + Liquidity, Where Go Thee?
Volatility risk premium is the closest thing options have to an inherent edge. It’s also a good metric for measuring market efficiency. In this piece we investigate the relationship between liquidity and predictive power of VRP both across and within issues.
GARCH is a useful framework for thinking about the ebbs and flows of volatility. A stock’s historical range as well as present context will influence future behavior.