Market On Open - Friday 21 July

Today Is The Singularity

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Just Because He's An Options Guy Doesn't Mean It's Not True

Options people will tell you that legacy equity people have it wrong, and that equities are in fact derivatives of options.  They base this on two things, both of which have some power to the argument.  (1) The way-larger quantum of capital sloshing around the options market vs. the equities market and (2) the notion that an option represents a probability field and and when, to misquote Cem Karsan, equities are merely what happens on option expiry dates when probability fields collapses to brief singularities (a result of the closing price of the underlying equities that day) before evaporating forever.  

Well, it might be hard to take if you are an equity investor more concerned with earnings and interest rates and such, but there is plenty of truth to the above.  And the next 2-3 days in the market is mostly about watching the impact of July monthly options expiry, which happens today.  If you missed our note explaining why this is important, take a look at this link.  Today's close sees the singularity and from today through Monday, maybe Tuesday, we will see the impact of market makers unwinding the delta hedges they have in place to balance their options books.

Then next week we have FOMC, but that is some days away so we will deal with that particular pending crise du jour as it approaches.

For now? Onto our usual analysis.  For our paying members only we walk through the shorter- and longer-term outlooks for the S&P500, the Nasdaq, the Dow and the Russell.  If you've yet to sign up to the paid plan here, you can do so right from the link below.