Imran Lakha | Options Insight

Pro Options Trader & Educator
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[Imran Lakha | Options Insight @options_insight]

https://t.co/a8U6l4ik1j

[Imran Lakha | Options Insight @options_insight]

@njrookie My own internal dashboard

[Imran Lakha | Options Insight @options_insight]

June and July downside better offered yesterday in fixed strike vol. Keep an eye on those vols if we head lower again because they will be a guide to how deep this correction can run...

[Imran Lakha | Options Insight @options_insight]

@t1alpha @Hedgeye So not out of the woods yet it seems.

[Imran Lakha | Options Insight @options_insight]

@AndreOpcoes Insane !

[Imran Lakha | Options Insight @options_insight]

The semis ETF rallied something like 80% off the lows in a few months. Most people remember that move.

The bit they don't see is what 40% out-of-the-money 3-month calls were worth at the start of it. $2.

By the end of the move, those same options were worth $140.

That's 70x on your money on a 3-month option, not a 0DTE option.

I didn't buy them unfortunately because they looked expensive on my vol screeners.

Every reasonable framework I had said those options were overpriced lottery tickets. Way OTM, decent time to expiry, low intrinsic chance of finishing in the money.

The lesson I take is to consider a small allocation in way-OTM mid-dated tails even when the framework tells me they're dead premium, because in this market the 1-2 month moves can really surprise you.

[Imran Lakha | Options Insight @options_insight]

@The_Chartpunk That’s quite a big DTE gap 21-45, no?

[Imran Lakha | Options Insight @options_insight]

Ever tried to earn theta with iron condors and got your face ripped off by a sudden move?

This might be for you.

The flyagonal. 10-15% return on margin in a week, no 0DTE stress, no screen-staring. 15 min walkthrough 👇

[Imran Lakha | Options Insight @options_insight]

People buy bond vol because the implied looks cheap. Vol percentile in the bottom decile, surely a steal.

The catch is bond vol only really spikes when yields go up. Not when yields go down. Especially in this sticky inflation world.

You can sit on delta-neutral TLT vol for a year and watch yields trend without any meaningful vol expansion. The market just doesn't tend to bid vol as bonds rally. The asymmetry is one-sided.

For me, the better way to own bond vol is as puts or put calendars on TLT so you have some negative DELTA. The VEGA bid mostly only shows up when yields rip higher.

Worth knowing if you're trying to get some "cheap" rates vol in the book.

[Imran Lakha | Options Insight @options_insight]

A stock rallies 20% in two weeks. Call skew runs from neutral to 7-8 vols into calls. Fixed strike vol bid only across the surface.

The instinct is that this is bullish positioning. The market wants more upside. The surface is "leaning in."

Seeing this as a foolproof bullish signal is wrong.

Deep call skew plus fixed strike vol bid only is also what peak positioning looks like. Everyone who wanted to be long the rally has already positioned for it. The marginal buyer is gone. The next move in this name could be backwards, in which case the extreme call skew melts off.

When the surface goes parabolic alongside the spot, that's NOT asymmetry. You're paying top dollar for the move that already happened if you're bullish but also fading crazy high momentum and short gamma positioning if you're bearish. The high vol is telling you that big moves are likely either way.

Just look at what the Semis names did last week for a real world example. $MU, $AVGO, $INTC

Learning to read options markets isn't just about predicting where the stock will go based on options flows. It's about knowing when there is clear edge to lean against or when you should conserve your chips.

[Imran Lakha | Options Insight @options_insight]

True, but that front leg VEGA is also decreasing day by day and you earn more THETA from the higher vol if you hold the position.

In reality the backwardation will only come and persist if the market really pukes and doesn't recover fast at which point you'll be stopped out anyway

[Imran Lakha | Options Insight @options_insight]

The honest answer about most macro headlines is I don't know what happens next.

Two countries striking each other. Ceasefire on, ceasefire off, ceasefire back on. I've stopped trying to call which version is real on a given day. It hasn't made me a worse trader. It probably made me a better one.

The edge I have isn't predicting the headline. It's reading the surface response when the headline lands. Did vol go bid or get offered? Did skew move or stay flat? Did carry expand or compress? Those are answerable questions. The headline itself usually isn't.

Giving up on the macro call probably made me a better vol trader, not a worse one. I'm not smart enough to figure out the geopolitics. I am paid to read what the market does about it.

[Imran Lakha | Options Insight @options_insight]

In a regime like this one, the front stops rewarding long-vol bets. Vol won't go bid on the downticks. VIX doesn't move on headlines. The roll down on the curve is steep.

The safer play is to push out maturity. Sep, Oct, longer. The further out you go, the less the front-month dynamics eat your premium, and the more time you give the regime to actually break.

Yes, longer-dated options have higher absolute premium. They also have far lower decay as a percentage of value, and your breakeven sits further away from the spot moves that aren't happening anyway. You can also structure short vol of vol trades that offset the decay completely and still give leverage to a vol spike.

Sure it won't be as explosive if the move happens right away, but it allows you to be patient while you wait for risk premium to return.

[Imran Lakha | Options Insight @options_insight]

VIX beta dropping isn't a reason to be long vol on its own.

A falling beta only matters if you've got independent conviction the downside will trigger a vol bid. Without that, you're paying carry into a regime that has stopped reacting.

Here's the actual test. Wait for a 1% sell-off in spot. Watch what fixed strike vol does. If it gets offered into the move, the regime is telling you positioning is comfortable and the next pullback won't bid vol either.

You're not only long vol. You're paying the roll-down.

For me, low VIX beta right now is less of a buy signal for VIX and is more signalling how entrenched this low vol regime has become.

[Imran Lakha | Options Insight @options_insight]

@TgMacro Looks ominous 4 sure!

[Imran Lakha | Options Insight @options_insight]

@LordPos3idon Bond vol has been cheap for ages and owning it hasn't really worked. Commodities different matter for sure.

[Imran Lakha | Options Insight @options_insight]

@AndreOpcoes Yes diagonals can work well, but the short gamma might hurt you if the drop is too quick.

[Imran Lakha | Options Insight @options_insight]

Looking at the skew dashboard right now...

Bonds skew put biased. Gold skew put biased. Equities put skew cheap as chips. One of them is wrong.

Bond put skew is sitting around the 75-85th percentile. Gold put skew is 85th percentile. Investors are loading up on downside protection outside of stocks.

Equity put skew? Near bottom-of-range.

Three asset classes, three reads on the same macro. One of them is probably mispriced. I don't know which way it resolves, but it doesn't tend to sit like this forever.

For me, I kind of think it gets resolved by equity skew catching a bid rather than the other way around. Stocks ignoring what bonds and gold are pricing usually ends with the put skew waking up.

Doesn't mean short stocks. Could mean owning a few equity puts before the rest of the surface catches up makes sense.

[Imran Lakha | Options Insight @options_insight]

Hedging your long-only book sounds simple until you've been doing it for 3 months and the market has only gone up.

Your hedges have bled. Your long-only has made money. Your brain starts whispering "I'm wasting premium."

That's the moment you have to zoom out.

step 1
Decide upfront that hedging is a system, not a vibe. If you only hedge when you're scared, you'll always hedge at the worst price.

step 2
Accept the months where hedges bleed and long-only delivers. That's the design. The hedge is the cost of being able to stay long without panicking on every pullback.

step 3
Roll up, don't unwind. When hedges go out of the money on a rally, roll them to higher strikes so the protection actually means something at the new level.

step 4
Lighten the gas when conviction is high, but don't kill the engine. Reduce the hedge ratio if you really don't fancy paying premium. Don't go to zero.

The worst version of this trade is quitting in month four right before the drawdown that justified the whole framework.

[Imran Lakha | Options Insight @options_insight]

I agree volatility provides opportunity BUT without risk management skills it can also stop you out of a good trade.

[Michael Saylor @saylor]

Capital markets are funding the AI buildout at historic scale: ~$400B over 6 months. Bitcoin ETFs have seen ~$4B of outflows since May 14, pressuring $BTC. This is a capital rotation, not a Bitcoin impairment. Volatility creates opportunity.

[Imran Lakha | Options Insight @options_insight]

I’ve said it once and I’ll say it again….

Risk reversals people!

[The Kobeissi Letter @KobeissiLetter]

It's official.

MicroStrategy, $MSTR, is now facing its biggest unrealized loss in history, at -$10.8 billion.

In other words, after 6 years of buying Bitcoin, the company is now down -17% on its position.

By comparison, the S&P 500 is up +116% over this same timeframe.

Since MicroStrategy sold 32 Bitcoin at $77,135 per coin, their positions has lost -$11.8 billion in value.

This puts MicroStrategy's stock, $MSTR, down -77% since its record high.

Bear market is an understatement.

[Imran Lakha | Options Insight @options_insight]

10-day realised vol at 7. Front-end implied at 13. That gap is called variance risk premium aka Carry.

Carry is sitting near 45% in NASDAQ and S&P. And the market hasn't moved much on the nastty headlines this week.

The setup pays you to be patient and short some gamma. Not big. Not hero size given the risks out there. Just enough to harvest the gap between what vol is implying and what the tape is actually doing.

It won't last forever. So you need an exit plan, or some in-built protection.

That's why I'm loving the flyagonals (or other calendars) so much right now. Allow me to earn theta but with some peace of mind.