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Strategies & Market Trends : CFZ E-Wiggle Workspace

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From: skinowski12/4/2021 4:18:01 PM
2 Recommendations

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rcksinc
tntpal

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Just like call buying squeezes markets up — put buying pushes it down, since dealers hedge their positions. They buy futures to hedge calls - and sell futures to hedge their outstanding puts. Here’s a nice description (see thread). There is a record number of outstanding puts out there (which are subject to dynamic hedging). He thinks that by Dec 17 - at expiration - dealers may find themselves with huge excess of short futures (since expired puts no longer need hedging).

A grain of salt is advised. I’d expect that their algos may start unhedging the positions due to expire before Dec 17.

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