Daily Plan 3/7
JP Morgan Freefall
Hello traders,
Main news today was JP Morgan raising an alarm about 0dte options causing a 25% market sell off.
”Such a scenario could occur if the S&P 500 fell 5% in five minutes, triggering $30.5 billion in 0DTE option-related trading that would tack another 20 percentage points onto the index's decline, the bank’s analysts said.
If the S&P 500 fell between 1% and 5% in five minutes, it could lead to an unwinding of positions in the range of $6.6 billion to $14.2 billion, translating to an additional 4 to 8.1 percentage points of decline, JP Morgan's analysts said.
"The estimated market impacts from unwinding of 0D option exceed the original market shocks in all scenarios, highlighting the reflexive nature of the 0D options and their potential risk posed to market stability," JPM analysts Peng Cheng and Emma Wu wrote in a note.”
I do not have an informed opinion about this concern raised by JPM but I will read up on it this week and write my comments in the weekly newsletter.
We had another excellent Sunday evening-Monday end of session with us capturing the longs from 44.5 on Sunday evening to 62 and then shorting 60 through 44.
This morning longs paid from 57s but I got stopped on the 78.75 short due to a very tight stop. Some folks with a 2 tick wider stop got the 20 pt fall. But that is why we call it trading and not “sure shot money making machine”.
In other trades, our CL levels worked to inch perfection.
Moving on.
Levels for tonight and tomorrow.
ES: