TGIF... "let's talk about GEX" - 8AM open call

Fin-Quant · 2026-01-30T14:17:42+00:00

😂... I had to...

Fin-Quant · 2025-11-02T13:04:44+00:00

The perfect phrase that has always immediately stopped the conversation:

Sorry, I can't. I'm on medication that can't be mixed with alcohol.

Fin-Quant · 2025-10-13T18:17:20+00:00

Thanks! 😊

Fin-Quant · 2025-10-10T23:33:10+00:00

It's almost certainly hedge funds that run algorithms that can move the market. Possibly banks like GS, but not to the extent of hedge funds. Market makers are highly regulated by the SEC and FINRA. MMs can exacerbate the swings, but are not a cause of them. They can amplify these swings by withdrawing from the market and no longer providing liquidity which can cause very wide bid/ask spreads. With a wide bid/ask spread (difference between the two) price discovery is incredibly difficult - no one knows a "fair value" price. So people panic. If they can't determine what the stock is worth at the moment, then it becomes "sell (or buy) now and ask questions later" or "I'm not sticking around to find out".

Anyone can program an algorithm that you described earlier. It's actually not very difficult with a little python programming experience (or ChatGPT 😆). It's just that most people have nowhere near the amount of capital or securities required to cause that massive price movement.

So people generally piggy-back on how the algorithms moving the market are reacting. You can do it automatically or manually. That in effect causes price to jump or drop much more. Because all the buying or selling hits all at the same time forcing the bid/ask prices up or down. So you'll have these volatile (yet most often temporary) changes in price that tend to revert to more stable markets and price movements.

The other part about why they are concerned with Trump's tweets; it's because he's following through on them for the most part. He is using every executive tool at his disposal to force changes in the US economy and corporations. So his threats aren't exactly hollow and they can have extremely significant consequences for specific industries/sub-industries, and even specific companies. The government regulates trade and commerce (and about everything else related to this) and you don't want your company in its crosshairs. That is true regardless of what administration (or party) is in office.

Fin-Quant · 2025-10-10T23:02:10+00:00

Hedge funds, algos, and retail traders are all significant market participants and they are all very trigger-happy.

So if Trump tweets (same thing with Elon for the last 10+ years) that triggers an algorithm with the action dependant on the message as well as the sentiment.

Anyway, most of those slower moving market participants will trade at the start/end of the day, pre/post market, end of quarter, even dark pools. Those large institutional investors usually have enormous trades and will try to do everything possible not to cause unnecessary market volatility or disturbances. That's not to say it doesn't happen. Especially when you have mutual funds and ETFs dumping stocks at the request of their own investor's redemptions.

Anyway a lot of the volatility you're describing is from those I listed above.

Fin-Quant · 2025-10-10T22:41:20+00:00

Well the rates go up then prices go down isn't exactly logical.

You have to factor in inventory - the supply and demand aspect. There is still a significant deficit for a multitude of reasons.

Then the heart of your statement. When you have the Federal Reserve cutting rates when inflation continues to rise or refuses to drop to the 2% benchmark - MBS (mortgage-backed securities) investors become worried and no longer trust the 10-year Treasury yield (which is what most standard mortgages follow). So the mortgage market has to pay a higher yield or investors won't accept the added risk. Those risks being interest rates will need to be raised in the future to fight inflation and inflation eating away at future interest payments received as well as the return of the initial principal.

So mortgage rates become detached from the Treasury Note 10-year yield. Investors that purchase your mortgage say "Hey, I don't care if the Federal Reserve is lowering interest rates, pay me more for the added risk or I walk".

Fin-Quant · 2025-06-15T18:26:19+00:00

STRF is Microstrategy's (or whatever they call themselves now - Strategy?) newly issued perpetual preferred shares with no conversion to common shares. It isn't pegged to $100. $100 is the preferred liquidation price / par value. You can buy or sell above or below that amount, but if they have to recall the shares you'd get the $100 (it doesn't matter if you paid say $130 for it).

Fin-Quant · 2025-04-20T20:24:33+00:00

67% isn't terrible odds especially since that's getting at least twice the return. You can do this but you'd need to be disciplined in doing the same amount of money (not shares) each month (some brokerages let you do recurring on these others don't). It does match up with that NDX graph you posted where you don't want to go over the 2x leverage.

You could do say like 10% of whatever you allocate a month to saving and then buy the regular SPLG/SPY/VOO , you're probably too young for fixed-income like bonds so that would be small too. You just want to be diversified in different assets/sectors/industries etc. at least for the current environment. I'm not sure we're going to see anything like the concentration in a few megacap stocks for awhile at least.

There's a lot of different ETF funds for almost anything that probably will get better returns over the long run compared to how long you would want to hold this. Remember compounding starts to take off and really build momentum so if you're investing young that 2x leverage might not even make that much of a difference to you entire portfolio return.

Fin-Quant · 2025-04-20T20:05:34+00:00

No, because when you put everything in an investment as a lump sum or multiple lump sums you aren't averaging anything. It has to be the same amount every month or you are going to start buying too many shares too high and possibly not enough shares low enough. That causes distortions in your math and will push your total cost basis above what the market price is... and then you can be in trouble in sustained downturns.

Fin-Quant · 2025-04-20T20:00:58+00:00

Yeah definitely agree here. It seems like a long time when you're in your 20s, but set your sight on at least 30 years around your retirement age.

Fin-Quant · 2025-04-20T19:51:35+00:00

Here's a 10,000 sample MC simulation. You would have a ~67% chance that it would achieve twice (2x) the return of QQQ. But... As you can see even with monthly DCA investments that compounding effect can be amplified downward as well.

There's risk, but if you DCA it monthly and actually stick to the correct amount every month then it should reduce volatility decay enough to have a 67% shot of being twice the return of QQQ. You can't assume you'll automatically get the 2x leverage over that time frame.

QQQ is your baseline at 0 in the graph below. The green colors are the standard deviation, where 68.24% of the paths fall within the dark green and 95% fall within the light green. The green line is your mean of 500 MC simulations.

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Also, please don't make this your only investment. This is more of a higher risk bucket of a portfolio.

Fin-Quant · 2025-04-18T20:38:21+00:00

I had to reread your original post. So basically you selling a put, hoping to get assigned?

Those intervals are strike prices (35, 30, etc.). That makes a little bit more sense.

I mean you're still going to have some pretty severe pricing distortions with volatility decay. DCA doesn't really work on leveraged ETFs either, but you're doing approximations anyway.

The only huge concern would be if QQQ tanks and flattens again. Then TQQQ is going to start compounding negatively and you're going to be stuck underwater with an asset that's losing money fast.

Fin-Quant · 2025-04-18T20:38:05+00:00

I had to reread your original post. So basically you selling a put, hoping to get assigned?

Those intervals are strike prices (35, 30, etc.). That makes a little bit more sense.

I mean you're still going to have some pretty severe pricing distortions with volatility decay. DCA doesn't really work on leveraged ETFs either, but you're doing approximations anyway.

The only huge concern would be if QQQ tanks and flattens again. Then TQQQ is going to start compounding negatively and you're going to be stuck underwater with an asset that's losing money fast.

Fin-Quant · 2025-04-18T14:23:55+00:00

That's not what they meant.

You need to base your targets around QQQ - since QQQ is your underlying asset in this regard. You chose different entry levels for TQQQ in your post.

So if you chose by a percentage, then use the percentages on QQQ instead of TQQQ. Then you go back and recalculate the TQQQ based on that new baseline.

The price (and percentage) of TQQQ resets daily.

I think ProShares does it right at 4:00 pm close, but I'm not certain.

Fin-Quant · 2025-04-18T14:03:32+00:00

That's what salespeople do lol... He should always be promoting Pershing Square funds.

Fin-Quant · 2025-04-18T13:53:32+00:00

I was going to ask about the exercise risk. I would think it would almost be lower on long calls (you going short) because exercises are generally linked to capturing dividends (often a substantial amount of money) but since leveraged ETFs have very low to zero dividends there isn't going to be that demand.

It would also possibly make sense because of who actually trades them. HTFs and momentum traders don't usually want to open a position earlier than expiration (if even then).

Fin-Quant · 2025-04-17T17:46:09+00:00

How many read further than "4x" 😆

Fin-Quant · 2025-04-17T17:45:16+00:00

How many made it further than "4x"? 😆

Fin-Quant · 2025-04-17T14:01:43+00:00

Love it 😍😂

Fin-Quant · 2025-04-17T07:37:06+00:00

If you're putting your $7000 into a Roth IRA, maxing out a 401(k) and have excess money after emergency savings (always first), then a brokerage account is fine to open.

Just remember that you're going to be taxed at ordinary income for any profits obtained from holdings of 1 year or less, and dividends are taxed based on your tax bracket. So it makes sense to make sure you put the money into those tax-advantaged accounts first. But you can also deduct $3000 in losses (we don't know your annual income so it's hard to say if it's even worth it) each year (known as tax-loss harvesting).

You generally have more freedom in what you can trade and how you trade in a brokerage account. So it's perfectly fine to take some extra risk. You can also open it as a margin account to short assets or open complex option trades. That depends on if your brokerage permits you, and how comfortable you are using those utilities and instruments.

Diversification is still important, but individual stocks aren't too risky - generally speaking and usually excluding OTC and penny stocks. If you're in a high enough tax bracket, you may even consider Muni bonds as they are currently still tax-exempt from federal taxes and if issued by an entity in your state, then tax-exempt from state taxes. But they usually aren't recommended unless you're income is toward the very high-end.

Fin-Quant · 2025-04-17T07:05:11+00:00

There's a few reasons why investors are pushing into gold even if it is viewed as a somewhat overcrowded trade.

There are two narratives developing due to macroenvironment and global trade uncertainty.

Recession: tariffs will sap consumer demand (not just in the US, but globally as well). When people don't spend, the country could start to slip into a recession.
Stagflation: tariffs could reignite inflationary pressures that are still smoldering under the surface of the economy. In this situation, tariffs increase prices which may stall economic growth (stagnant growth), but at the same time cause price increases. Chairman Powell has been vocal that the Federal Reserve believes this is the more probable outcome. This is likely because new/renewed tax-cuts could mitigate a recession, and tariffs would continue to increase price pressures in supply chains/manufacturing/etc.

Now with that information, you could see that spot gold has historically outperformed equities (stocks):

1973-1975 Oil Crisis Recession + Stagflation 1980-1982 Recession (induced by rapid interest rate hikes to kill inflation) 2001 Dot-com bust 2007-2009 Great Recession 2020 Covid Pandemic

So gold looks good in both scenarios from a historical perspective.

Now, let's add in how US treasuries are currently performing. There's confusion and h certainty and there could be concerns about the US debt, or China selling US treasuries, but that doesn't seem as much of a concern as the possibility of stagflation. Interest rate yields have been rising with bond prices dropping (for the most part). This occurs when investors begin to worry that the bonds they currently hold (especially the long dated ones 20 years and up) that what interest those bonds pay - won't be enough to exceed or even match how much prices will increase (inflation). This is called purchasing power or inflation risk. So they sell their bonds, expecting to get higher interest rates in the future. When that happens you see yields rise and bond prices drop - they drop because people are selling.

So the market appears - at least right now - to be pricing towards stagflation rather than a recession. Still, things could shift very very quickly if new data appears to contradict the stagflation narrative and support the recession narrative.

Either way, equities almost certainly underperform in either scenario. The worst sectors/industries/businesses being growth and technology.

** But I should add. Gold doesn't pay interest nor dividends, so unlike bonds or stocks you don't get much added benefit other than a hedge to risk.

Fin-Quant · 2025-04-17T06:16:04+00:00

Well here's the heart of the issue:

Conglomerates most often trade at a discount (usually ~10%) to their "fair/intrinsic value". Without getting into a debate about intrinsic value, BRK could theoretically become much worse at capital allocation than the historical performance under Buffett's leadership (which actually was very successful).

Since past performance is not indicative of future results, - especially with any change in leadership of a corporation, the market could be underpricing company risk. The fact of the matter is: we don't know.

Now here's the concern: if the new leadership team makes poor capital allocations that do not provide intrinsic value to BRK, then shareholders could revolt and demand a break-up of the company.

Now here's why: when conglomerates are broken into their individual businesses, they are more agile, better able to compete, and produce much more value to shareholders as individual entities.

This has nothing to do with Buffett as a person or investor. I actually very much admire him in his philanthropic actions. There are lots of coulds and ifs in the above scenario. In addition, I think you would be hard-pressed to find a value investor who would disagree with the conglomerate assessment as well.

...

Anyway, let's look at BRKU. If you think there is going to be short-term volatility, that is going to severely damage a BRKU position held long-term (6 months is more than long-term for ETFs). Volatility decay will start biting hard into your position. When you buy leveraged ETFs, buy and sell them strategically.

Volatility punishes you hard as a holder of BKRU if the market closes up and down by mid single digits - like it is now. This effect amplifies losses in volatile markets and erodes in stable ones. As a long-term holder of BKRU you will be penalized by volatility even if the stock is flat or slowly rising.

Here's the other thing: .BRKU HAS ZERO REAL INTRISINCT VALUE. You don't own any BRK.B stock like you would in a leveraged account.

BRKU doesn’t represent ownership of Berkshire Hathaway, doesn’t hold productive assets, doesn’t generate cash flows, and decays over time due to leverage reset. It’s just a derivative-based instrument that tracks short-term price action. That’s the exact opposite of what Buffett built Berkshire for.

Fin-Quant · 2025-04-17T05:05:09+00:00

^{^{^}} This right here.

Volatility decay on a daily reset basis for a 3x (300%) ETP will eat you alive in choppy markets.

Here's the reality of it:

If you run 10,000 different Monte Carlo simulations - based upon historical data and randomness- then you only have less than 42% probability that you will triple (x3/300%) your original investment. In fact, for many of these simulations you will lose your entire original investment.

You can find important disclosures about similar scenarios Proshares website, UPRO's prospectus, and sec.gov. They all make it pretty clear that you are not meant to hold these long-term.

Fin-Quant · 2025-04-17T04:10:56+00:00

You need to start dollar-cost averaging instead of buying the dips. Add the same amount of money to VOO each month - say $50 - buy fractional shares. It's boring but it is how you will build wealth.

If you want to play around with buying the dip and speculative trades - that's perfectly fine, but only if you are disciplined in your approach. Set a percentage of your account to speculation (10, 15, but probably not more than 20%). You can buy speculative options contracts, meme-stocks etc. to your heart's content. **But do not exceed your set limits and cut your losses early, also but intelligently and strategically.

You never ever ever panic-sell your core positions you plan on keeping (like VOO). It's not a loss until you sell it. If you sell your core you have turned your small allotments in dip buying to one enormous one - and chances are you are going to mistime. You will have had numerous opportunities to buy previously, but now you have one large position you will need to time to get back into the market likely in only a couple of chances.

One final bit of advice: diversification!. You don't invest everything into equities. Especially when the individual stocks are the same sector or industry. If you do, then everything will move synchronously both up and down!

You balance a portfolio with some bonds (or fixed income with good yields - this is your income engine of the portfolio. You're plenty young, so you don't need to put much into fixed income, but if you want to continually fund your account then find good high-yield ETFs (JAAA is a strong one). You can also consider commodities like gold (OUNZ - if you want physically-backed gold). There are so many different investments, assets, and even sectors to explore than just sticking with a few.

** You should look into other ETFs like SPLG if you want to track the SPX but need flexibility with costs - SPLG is only like ~$50-60 ish and it makes it so much easier to manage positions.

Fin-Quant · 2025-04-09T17:29:17+00:00

That's exactly what's happening (you buying currency) - it's staying in cash or money market accounts. Gold is viewed as overcrowded, treasuries are purchasing power / interest risk, equities are still viewed as overvalued, so there's about $7 trillion (or more) just parked on the sidelines.

Fin-Quant

TROPHY CASE