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Strategies & Market Trends : ajtj's Post-Lobotomy Market Charts and Thoughts
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Lee Lichterman III
To: Qone0 who wrote (83249)12/21/2023 1:23:25 PM
From: Real Man1 Recommendation   of 97926
 
I am also in the camp that options control the underlying. Not options buyers but options sellers. This explains perpetually low vix while liquidity is easily available from the Fed. Options market makers can borrow o/n from the Fed, they are also ones who have high RRP balance at the Fed. They simply use that cash to drive the market to max pain roughly speaking. Roughly speaking because rolling expiration dates eliminated maxpain for everyone else. It’s now in random walk mathematics, and signals are not easily generated. The math just results in trading profits every day for them, losses for everyone else. Put it bluntly, options sellers drive the market where they need it to be, they have access to infinite liquidity and infinite leverage to do so.

When liquidity is low like December 2018 or March 2020 crashes (mini crashes) tend to happen. Then the Fed opens the floodgates again. Options controlled markets are characterized by extremely low vix because sellers sell every spike like it is free interest, which in a way it is - Black scholes has vix squared as a correction to interest rate. While the market is overliquified like that it can’t crash or even decline, so it continues to march forever higher despite negative fundamentals. Then 2008 type of crash breaks that march
higher because the fundamentals get too far detached from price. If the Fed does not come out and stop
something like 2020 crash by printing money it will quickly become 2008-2009 type crash with accompanying economic disaster
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