by Eli, Tommy
Another big gap and go session Tuesday. Institutional hedgers got punished again, which translates back into RISK-ON mode. The sweeping activity was bullish once again as well, players going from forced selling just a couple days ago, to forced buying everything they just sold. Selective protection in major ETFs, some earnings plays per usual but nothing aggressive.
On the sentiment front
Short-term sentiment elevated cautions us to be on the lookout for green to red fades intraday even it still has room for further upside. Hedge funds had to take down risk at the end of Jan by covering over leveraged shorts and by selling the little long exposure they actually had in equities, now guess what, they don't have much of anything and likely have been playing chase the past 2 days.
So far, so good this earnings season, FAANG and big tech which have been a recent laggard, have performed well off earnings. We still have around a week to go before flow cleans up a bit from the earnings positioning.
This ferocious snap-back rally rained on our parade and ruined our perfect post-earnings set up, but what else is new. There are still good looking names out there, in quite a few sectors which are off recent consolidation. We just need to get some earnings out of the way and IVs back to normal.
Notable bettings toward broader market indices ETF on 2/2
Market-wide option volume of 40.3m contracts was 5% below recent average levels, with calls leading puts 15 to 8. ETF and Index products saw relatively heavy volume, while single stock flow was moderate.
Individuals breakdown by sectors (2/2 notable bets)
Most active sectors included Health Care, Consumer Cyclicals and Utilities while Telecommunications and Energy were relatively light. Of the 3,728 stocks with listed options, 2,780 (75%) closed higher, and 850 (23%) lower. Among the 500 most liquid single stocks, 30day implied volatility was lower for 409 and higher for 52. Unusual total option volume was observed in $AMC Entertainment Holdings Inc(AMC.US)$, $Sundial Growers Inc(SNDL.US)$, $DraftKings Inc(DKNG.US)$, $Pfizer Inc(PFE.US)$ and $Inovio Pharmaceuticals Inc(INO.US)$.
Tech
Industrial
Consumer Cyclical
Financial
Communication Services
Healthcare
Energy
Real Estate
Basic materials
Consumer Defensive
Utilities
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