REAL OPTION TRADERS DON’T GO TO DINNER PARTIES (Guest: Bohan Jiang)

Summary

• Crypto Options Inefficiency: The guest highlights persistent pricing dislocations in crypto derivatives, contrasting CME-listed options with offshore venues like Deribit and detailing how event risk and skew can be mispriced.
• Ethereum Trade Example: Around the Ethereum ETF approval speculation, he bought a 25-delta ETH call and sold a 25-delta ETH put (risk reversal) to exploit skew that priced a bearish modal outcome despite upside surprise risk.
• Energy Positioning: He favors being long Brent crude for roll yield but notes elevated vol makes structures attractive; proposes zero-cost 1x2 WTI put spreads to express limited downside on a peace/de-escalation scenario.
• USDJPY Structure: Recommends costless 1x2 USDJPY call ladders near 160, expressing a grind-higher view capped by potential intervention and positioning, seeking muted realized vol around the defended level.
• Portfolio Barbell: Advocates a balanced book long crude (escalation hedge) versus selective long risk assets (e.g., S&P), with tight sizing as front-end rates have already repriced meaningfully.
• Options Discipline: Emphasizes trading volatility not delta, managing gamma/theta P&L, and adapting delta-hedging frequency to market regime (trending vs mean-reverting) and asset class microstructure.
• Market Structure Insights: Draws on experience at Goldman Sachs and FalconX to explain OTC FX options, interbroker markets, and why limited dealer balance sheets and participant mix can create crypto vol surface dislocations.

Transcript

Hit it. It's Friday, April 24th, 2026, episode 289. I'm Patrick Szna. And I'm Kevin Mure. This week, we welcome Bohan Jiang, senior derivatives trader at Falcon X. We learn about how institutional option marketmaking works, how the crypto option space can be less efficient than more traditional markets, and why some of the best traders use options to help express their views. Then it's time for Patrick's Talking Charts where we check in with the Squiggle Master himself and find out what the charts are saying about this crazy market. And folks, uh, stick around. Uh, we're going to drink some beers along the way. I normally would ask Danny to jump on and describe a beer, but uh, Kev, I'm just drinking a Corona. It's I feel shame for a thing, but like it's all I had in the fridge. I, you know, we I I've dropped the ball on getting uh some of these new beers out there. It's a shame anyway. Nothing wrong with the Corona though. It's quality beer. Let's just get to it though. Yeah, let me do the side effect. >> Nothing in this podcast should be viewed as investment advice. Listeners should consult an investment professional before making any decisions regarding topics mentioned in this show. Side effects of too much hidle may include the tweet driven regime disorder. Something we suffer from that. >> Yeah. The momentum chase compulsion. Again, something we're all suffering from. And then finally, this is the one we can all relate to. the narrative whiplash fatigue. >> Oh, unbelievable watching them play a game of chess uh against each other and we eat up every headline. Anyway, uh let's uh let's get to the guest. >> All right, it's my pleasure to welcome to the show someone who just admitted to me that he watched the first market huddle, which I I'm I'm honored, but I'm a little embarrassed about. Um I'm it's my great pleasure to welcome the show Bohan Jiang. He is a senior derivatives trader at FalconX. And for those who don't know, FalconX is the largest crypto derivatives market maker out there. But have no fear, Bohan is actually um an old hand from the currency option market making at a very prestigious bank. We're going to learn all about that. We're going to talk about options. I figured in this day and age, there's so much option trading going on. We're going to get just a a a real great crash course on options. Bohan, welcome to the show. >> It's great uh it's great to be here, Kevin. >> Yeah, I'm I'm looking forward to this. We I've had the good pleasure to chat with you before. Um he's a subscriber of mine and when I was stuck with trying to figure out how, you know, correlation trades and stuff worked. I I I reached out and we had a good conversation. I thought, "Oh, you know, these are really important, great conversations to have. Why don't we do it on the show?" And you were kind enough to to uh to agree. Why don't you tell us a little bit about yourself? Like, where are you from? Where did you grow up? Uh what did you study? A little bit about your kind of life trajectory. >> Sure, sounds good. So I was born in China. Uh was there about for about until I was two years old. >> Then I my parents moved to Singapore. Lived in Singapore for about a year and then we immigrated to Canada. So I basically lived and grew up in Quebec City. Um, so there's a very part of me that's very much French Canadian. Um, >> the the Chinese French Canadian. I love it. >> Chinese French Canadian. Exactly. >> And then uh for I think during high school we moved to to Ottawa. Um, and then from there uh went to university in Canada as well. Went to Western University. I studied computer science as well as business. Um and then from there started my career um directly uh in New York uh at uh Goldman uh at the u on the currency options desk. >> Wow. Okay. So first of all that is quite a a life trajectory. Um so English is your third language. That's the part that I find amazing. >> Technically there's a bit of English in Singapore. So by sequence it would be second, but you know when I was eight, I was way more familiar with French than English. >> So growing up in uh Quebec City and then moving to Ottawa, when you're rooting for a hockey team, who are you rooting for, the Habs or the Senators? >> Habs, for sure. >> You didn't even you didn't even pause there, buddy. Like there was no no even hesitation. >> No, I uh I learned how to skate in in in Quebec. I grew up with the, you know, it's it's there's no there's no affiliation with the >> with Okay, I got it. All right. So, you moved to New York City. You get a job at Goldman on the currency desk. Um, you know, is that uh something you always wanted to do? How did how did you pick that? >> Actually, it was entirely by chance. Um, I was very much actually interested in in sort of computer science. Um and I always thought I was going to be an engineer and that was what I wanted to do. I was got into programming very very young. Um when I would say I chose to go to business school. So um Western University has kind of dual degree program where you can spend bit more time and get you know both a computer science program and sort of their business uh a business degree as well. I thought you would learn about trading in business school. So, I was interested in trading because I traded a lot like I was learning about this or reading things on the side. I was learning about fundamental analysis and and reading about Warren Buffett and how he did things and I got interested in in trading and options. I thought you would learn about this in business school. >> Yeah. >> Um it turns out you don't really learn about trading in business school and so um I guess through I guess by chance through a variety of internships. I did intern with Goldman uh one summer. One summer I sat on the >> uh I actually started with the Delta 1 equities desk. >> Oh wow. With um electronic market making program trading, >> right? >> And then I thought and that was very interesting and then I thought I wanted to do something more macro, more hightouch. Um so the FX options decks seemed very cool. Uh they yelled at brokers all day and uh I thought it was very old school, very hightouch, very like a very cool it was sort of very intellectually stimulating as well because it was you know they were trading ball all day with trading options. >> Yeah. >> Um so I you know I got interested from there. >> All right. And so you you go there what do you at first are you just like a research assistant? what what's the progress like in terms of these days when you start off on a desk like that? >> Yeah. So, when you start off uh on a on that desk, you're an analyst, you're expected to learn about the product, but you don't actually take any risk and no one's going to give you any risk to take. So, first of all, you learn how to book things. >> Okay? >> Um and you learn how to, you know, you talk to people and you figure out how things work on the desk, right? What the product is. is the FX options market is a very sort of unique market. It's very much uh still a broker driven flow driven OTC market. >> Okay. Why do you explain to people when you say broker driven uh because some folks might not understand that. So explain what what you mean in terms of the difference between a broker and a sellside dealer and the ultimate client. >> Right. So what what I actually mean in this case is um I think most of us will be familiar with electronic interface. you log log into your Robin Hood or brokerage account, you can see the screens. It's all electronic. You see, you know, the bid offer of an option and in the FX options market, this is very much all driven in in chat rooms, most of them on Bloomberg with an intermediary um that is the interroker market. So, for example, Goldman is a prime broker. It services clients. It takes um the other side of client trades. So that's it's it takes principal risks on these trades. But it also participates in market making in the interbroker market which is which is effectively a broker market between banks but but they have to have an intermediary to facilitate these trades. And these are the brokers who quote in chats and are able to to display that information on electronic screens. But all of this is over the counter and none of it is at least most of the volumes are not on electronically displayed. Although there are some like on CME you can trade future options on yen, euro, CAD etc. >> Right. And so these are the broke like is that the caners of the world and and is it still the same you know group of uh you know in my day those were the absolute biggest parters like if you were a social guy that just wanted to have a good time you went and worked at one of these brokers. Is that still the case? >> Still the case. Very small market just a few players but they take they're the entire market share and you have to go through them. >> Right. So um when you have a client come in to Goldman and and says okay I want to buy six month at the money yen calls uh you're you're you're dealing directly with them but the what you're what you're saying is that the if I understand correctly that the market the the central clearing part like the quote that everyone sees is a combination of everyone posting markets in this kind of room where there's the brokers are executing. Is that correct? >> Yes. >> Like will the client see that or is that a broker only market? >> So there's there's two sort of trading venues, right? One is the client has an has a bilateral ISDA. Yeah. Um with Goldman and they come in for for a quote. Yeah. >> If I'm quoting them um and they trade, then in in New York at least, it has to be reported to a swap swap repository, right? And people will see the flow there. um the information is not perfect. Yeah. >> But what I was referring to was more the interbroker market. Okay. So broker in which uh the the market in which banks used to hedge uh and and effectively market make. So this is where most of the information >> uh occurs in terms of price discovery, right? >> And where there's a lot of trading u for hedging between banks. So you would communicate via voice or via chat with the broker sort of like your caners of the world. >> Okay? And you would make rates, you would get market information and you would be able to trade and then whenever you trade they will tell you the bank you traded with. >> Okay. >> And everyone will see what level trade at, what volume, who wants to buy, who wants to sell. Um that becomes public. >> Okay? And so in my day when and and I'm old when we used to trade um we would trade against the spot often meaning that we would go if somebody came and wanted to buy um the Canadian uh future we would say okay against this we offer and bid the vault the the the option here. >> Um I'm assuming that's how at least at the broker level it trades. Is that also at the client level how it trades? like will you is is most of them and and why don't you explain to people how that actually works. So you're quoting VS as opposed to actual prices. Is that correct? >> Yep. So the first thing uh that gets ingrained into you when you start a desk is that we are not delta traders, >> right? >> We don't take directional risk. We are vault traders and we do not care, right? We need always need to delta hedge everything. Y >> and we don't really care. Uh we trade on vault, right? You think of everything in vaults. That's how you learn to see the world. >> Okay. >> And so when a client comes in, they might ask, they can choose whether they're they want to delta hedge the option as an exchange delta with you. >> So they want to buy a 20 delta euro call. Y >> um I can sell it to them and then we exchange the hedge, >> right? So we are delta neutral at inception. >> Okay. >> These are vault clients, hedge funds. They'll typically do that. But you can also have directional clients who come in who need to buy a live option. When I say live, I mean not delta hedge. >> Okay. >> And what happens is um the sales or the the sales or us the the trading team will execute the hedge for our own desk, right? >> So we'll go out in the market and we'll get the hedge off and we'll adjust the premium based on the the hedge level we have. >> Right? Okay. And so I just want people to understand that because when we see things like the JP Morgan option whale that everyone loves talking about and I know you're a currency trader, but I'm sure you're aware of that huge monster trade. And what people need to remember is that when they're negotiating that trade all day, they're not negotiating the deltas. the delta is actually the client takes care of in that case I believe and they're doing the the the levels upon which they're willing to do the package. So they might be saying we'll buy your call at a 12v, we'll sell you the uh first part of the put at uh 30 v and we'll buy the far dated put at a 40 vault. And then that package is what's negotiated in terms of going back and forth in terms of bidding offering. Is that would is that would that be a good explanation of how it would work? >> Yeah, I'm not too specific with that trade, but you know, in general, yes, the negotiation is about the VSS and how how wide it is uh versus a a spot ref or a delta ref that we will exchange, >> right? Okay. And then so you're you're sitting here and let's just talk about option trading in general because uh you know as I mentioned I think it's become more and more important. Uh in my day you know very few people traded options. Now you just pull up your as you say your Robin Hood account and everyone's trading options. Um I I turn around all the time your your cab driver your Uber driver is is punting on you know S&Ps. the zero DTE. There's just it seems like everywhere you look, there's just options, options, options. First of all, um do you find yourself like when you go to a a dinner party or end up somewhere that that you're kind of shocked at how many people want to talk to you about like option pricing? >> I I wish I was that popular at dinner party. >> I I So, real options traders don't go to deal dinner parties. So I I'm not sure but yeah I mean it I have seen that broadly it has become way more popular right over the past few years it's just become much more accessible right >> and there's I guess there's a lot of people who are out there pitching them um Wall Street Bets obviously has this large phenomenon where everyone is effectively gambling on options. >> Yeah. Um I will say there's a lot of misinformation or or it's it's really hard or it takes time I would I should say to to to really grasp um what really you are getting exposed to but for most people uh who are looking to use options to express a directional view I think they can be very um very useful as long as you know the the risks that you're taking >> right what what walk us through like your evolution in terms of understanding and and because there are so many levels of this and and I I can remember all of a sudden one day waking up to the fact that I'm not betting on V in general. I'm betting on V around that strike when I'm when I'm doing different trades. So, walk us through some of kind of your big uh light bulb moments that you had along your evolution in terms of understanding options. >> Yeah. So I think most people would think about options as a specific structure. At least when I started learning about options, I learned about, hey, this is a call spread. This is a straddle, this is a strangle. And you know, people would associate them with strategies, but those are not strategies. Those are just a structure, and they're used, think of them as tools in a toolbox um to express a certain view that you want on the underlying. So the first thing you learn sort of on an option desk is to look at your Greeks broadly and not your individual traits. So you have to learn about the individual Greeks right and how how they are at this current time but also in terms of scenario analysis. So that's a big thing in sort of institutional options trading which is really how does if spot moves what are my assumption with how ball moves or what is what is my gamma profile how does that change as spot moves how does that change as v moves so these are things that you kind of learn um to to to manage and to think about a as sort of a trading u institutionally uh in in options >> one of the things that always shocked me is how few people understand how much the decay at the end, right? In terms of the the theta monster, as I call it, that that theta just accelerates at the end. And and when people are sitting there trading, they're they're not thinking about ah they're they're sitting there too often and they're thinking about an option and they're either today when they're buying the option or at expiry and they're not thinking about how it's going to behave. along the course of of that uh time frame of owning the option. Do you remember that kind of moment where you realized that oh my god like owning those those uh um shortdated options at the end was just so brutal? Like do do you have particular times when you were market making and you were like oh my gosh look at this. I got absolutely crushed on that. Walk us through kind of some of your moments that you had where you you learned the hard way about different the way options work. >> Yeah, for sure. So I think in general what you're what you're brought up was is basically that this principle of you want to be long options where spot doesn't end up there and you want to be short options where it does. >> So effectively you you you want to be able to be short the option where you think spot will go. Right. Because the the the issue with the theta the theta as you mentioned is that the the you paid the most data at the strike. Yeah. Right? And but for that you get compensated because you have the most gamma at that strike as well. So effectively what you want to realize is you want spot to move through the strike as fast as it can and you can take advantage of the gamma but you're not actually you haven't paid um that data during that moment in time. Right. Okay. >> So when you think about we we there's this concept we think about in terms of realized P&L on daily basis which is this concept of theta gamma. So how much we're paying in in theta and decay versus how much we made in trading our trading our gamma route. So in effect this this this phenomenon is basically the um how much the the sum of how much gamma you have versus how much realized exceeded implied but the waiting is weighted by by the by the gamma at your strike. Right? So that is that's the concept at which you know this this this phenomenon lies is that you don't want to be you don't want spot to end up near your long strikes you want you wanted to go through that >> right um by the way what learning all these things in terms of figuring it out like did you when you went to Goldman did you know anything about option trading or did they like how how what was the process like >> yeah so I I learned it like I learned it by reading books in terms of I I learned about structures, right? That's where most people learn about things. You learn about theory, you learn about the black shells formula. >> Yeah. >> You learn about how to price it. You learn about all the different structures like straddle like a strangle work. And then I went there >> and then I was taught to think about options in totally different manner. Um there are there are different structures that are useful but broadly we don't think about structures. We we do think about structures as tools in a toolbox that we can use to an express view, >> right? >> Yeah. Or you think about structures that you can sell to your clients so you can that are mispriced, right? Um by the way, you're talking about books you learn from books. Why don't we, you know, go do this one right now in terms of what are your favorite books out there? What was the the kind of the you the bible to you in terms of uh if someone is interested in learning about trading more options, what would you recommend? So the green book is what they got everyone to read when you were interning which is Natenberg by Sheldon Nenberg. It's called Options Volatility and Pricing. >> It's Sheldon Nenberg by the way and it is a green cover and I didn't realize you guys called it the green book. It's a terrific book. >> Yeah. And then uh the other book that you know is more specific to FX options but has a different a lot of heristics. Yeah. Is this book called Volatility Practical Options theory. >> Okay. >> By Adam Mcbal. Yeah, >> it's >> I effectively used to work for him. So >> Oh, okay. He was at he was at our at Goldman Sachs. >> He was Yeah, he was at Goldman Sachs um for a period of time and he was he was running uh G10 currency options, >> right? >> Trading correlation exotic products as well. And then yeah and then I would say things if you go want want to go more deeper into theory things like dynamic hedging by Nim Taleb and then the volatility smile by Emanuel Dur which is very very famous quant um all very very helpful if you want to go into deep end. >> Okay. when you watched um your different clients at Goldman come and trade with you, what was the what did the better clients do? Like what do good option traders do versus the bad ones? Like what you know like walk us through kind of the the people you admire the most? What what did they see the in in terms of how they traded options? >> Right. So I I think there's two types of clients, right? one is the the people who are more relative value inv focus. So what they do is their entire edge or premise of their strategy is to identify where the wall surface is mispriced. Um and by mispriced I mean they effect effect effectively try to reconstruct um the the surface through various modeling techniques and they you know effectively use trade expressions uh to put on a view that where you know a dislocation might occur by either supply and demand or an event or something like that. So it's entirely it's it's it's a it's about modeling better. It's about structuring better and it's really about it's really about expressing views uh in on the VA surface in relative terms. >> Okay. So that would be an example of there's uh a big client out there that really likes the 105 calls uh you know 105% calls and just because he keeps buying that over and over again there ends up being a kink in the curve and so they in essence find a way to sell that more that richer option against buying something else. That's one type of client. What's the second type of client look like? >> So the second type of client is a directional client. So they use options as a structure to express their directional view, but they structure it in in a very asymmetric way and they're good because they they have a view on on sort of a real world probability that's different than what the market implies. >> So this thing to there's this thing about options that it can be it's not a zero- sum game, right? You can win and the dealer can win as well, >> right? because a dealer can hedge at the risk neutral probability which which is effectively um saying you know I I can let's just take an example if there's a stock at 100 that can go to 150 or 50 and a binary and it's a binary event then the risk mutual probability is the price um is what makes the forward price of the stock equal to today right and that's 50%. >> Right? because it can either go to 150 or 50. >> Right. >> Right. So, if you if there's a 100 if there's a 100 strike call on that stock, um the payoff is either going to be $50 or zero, right? In either event. So, as a dealer, you can sell this call above $25, buy 0.5 shares of the stock, and you can be perfectly hedged and you can make money, >> right? But someone let's say a biotech firm comes in and their distribution of their estimated real world distribution of the of the stock is 70% chance it goes to 150 and 30% chance it goes to 50 then they also experience positive EV by buying this. Right. Right. They're they can get a payoff of $35 um on this option or at least in their eyes the option should be valued at $35. Right. So that's where the edge comes in. >> So one of the things that I've been kind of amazed at as I've learned more about some of the especially in the stir world, this short-term uh interest rate futures, some of those uh hedge funds are just so great at creating structures that are, you know, where they have a true edge. Um and and I think that's what you're talking about is that people study it and they think about things and they and they kind of try to imagine what is the proper um you know distribution of returns and you guys on the on the sell side are sitting there and you're just trying to you know saying this it's normal and they're saying I believe the distribution is different and that's why they can go in and do these trades that are in essence where they have an edge. Is that would that be a fair um assessment? >> Yeah, that's that's a fair fair assessment. >> Yeah. Um All right. So, those are the two different kinds of clients. What about when you're you're the retail side? What what what do you what advice would you give the average Joe that's just trading retail that's punting around things? Like I'm sure you've seen throughout the years like this is something you specialize in. People make a lot of mistakes in options. What do you think the number one mistake is that people should avoid? >> I think I think people, you know, in terms of short data options, I think people underestimate how much that can bleed and how fast that can go against them. >> Yeah, >> I think that's the number one mistake, especially as a beginner. Um people think about you know buying a call to express a view but they don't realize if it's a short very short data call or it's a what's very normalized I feel like today on the internet is buying out of the money options >> right very wingy options you're going for that 10 to one payoff or I mean or that a thousand% move on one day right >> but those are wingy options for a reason right they they're they're rich and they're winging I think people forget that you can buy not the money option as well and sort of limit you. Yes, you spend more premium but typically that is typically that is the cheapest option on the curve. >> Yeah. Um they it is kind of cracking me up how there's just so many tens out there. Um let's go a little bit and talk about your next move at Goldman. you moved to crypto and uh you you were attracted because it was like the early days of crypto and and the market wasn't as as as well developed. what you know first of all tell us why you went there and then let's talk about your movement to Falcon X and then eventually I want to really specify and get into those moments where you said that the market was inefficient because I think that explaining to people why it was inefficient would really help them understand uh how efficient other markets are. >> Yeah. So uh I started at Goldman. I initially was on the vanilla desk. So I was quoting G10 I G10 options. I was quoting CAD. Um that was the main book I was trading at the start. Uh and then I moved on to trade correlation exotic products there. Okay. >> And then Iman they were always trying to get involved with cash settled um derivatives on Bitcoin. Obviously the bank couldn't touch physical. Um so at the time CME had just started with Bitcoin futures and uh and options on futures and Goldman effectively was looking to create an OTC business where you can get a cash settled uh non-deliverable option on Bitcoin for their clients. So I was always trading you know Bitcoin and interested on this it was interested in the the technology trading that on the side and I said hey I I'll do this as well. Okay. So I was also trading you know Bitcoin, Ethereum effectively cash out options for for Goldman. Um it was very risk tight risk limits. A lot of it was basis trades and then otherwise it was very much sort of more relative value trades that were put on the book. Um but the larger crypto derivatives market was on derivit which is entirely an offshore um offshore market. >> Okay. option options market and I was looking at sort of the discrepancy between CME options on crypto and then derbid options and they were entirely different. One because the the the structure of the options were a bit different but two the players were entirely different. Um those were offshore players. the market makers had limited balance sheets and and and on CME it's obviously you can have banks and you know your classic prop shops and so what led me got me interested was really that I thought there was a lot of sort of all relative value opportunities and there's sort of an opportunity to make money in in crypto crypto derivatives particularly on that offshore market >> right so you eventually go to Falcon X who's one of the like you the largest um derivative uh crypto market maker out there. Why don't you talk about some of those initial inefficiencies that you used to see in the market? And one of the things I thought was just fascinating was you said, "Oh, there wasn't any skew. There wasn't any uh uh event risk in there." Explain to people what that meant and how you could take advantage of it. >> Yeah. So um as you know in in other asset classes um whenever an event happens the market price is an extra extra variance or assigns extra volatility to that specific day. An example is, you know, an earnings for for a stock or the FOMC announcement for currencies >> in in crypto. People aren't really sure, right, what drove um what drove what affected the returns of Bitcoin and Ethereum. So like for example, we people weren't sure if the next CPI report was going to move Bitcoin or not. >> Okay, >> that that's entirely that's entirely a question mark. one, we didn't have a lot of data series, and two, Bitcoin has only recently become more mature as a macro asset, and it just did not have the same beta in the early days. I'll give an example of a trade um that happened. I think this was May 2024. Um I think two Bloomberg analysts were effectively speculating on whether or not the Ethereum ETF would be approved. The IBID one, Bitcoin, just got approved and basically they were saying there was a very low chance of approval. maybe 20% chance it would get approved and the market was pretty bearish like it was it was you know it the spot was trading like crap and this was basically because the SEC hadn't you know responded to any of the filings um from all the ETF issuers >> right >> the interesting thing was the skew in Ethereum so the the the risk reversal so >> explain to people what skew is in terms of we have to go back just to make sure people understand what they what that means. Go go just let's take a step a moment here to explain skew. >> Yeah. So skew um is effectively the premium that um one would pay for let's say let's say an an option um that trades richer involved um than than um than than the um the other side of surface. What I mean by that is for for for example an in S&P the the return distribution is not um is not normal right S&P time tends to grind high grind higher and have sharp moves down so the skew in S&P is for puts is for S&P puts right so S&P puts will trade at a richer V than S&P calls and it's because of this effect where everyone is long um and everyone is looking for hedges and from a supply and dem demand demand dynamic you'll have this moldal outcome of S&P goes higher every day and has large moves lower >> right okay >> right >> so as an example in in in in riskoff and currencies most most of the times for example in euro um the skew will be for dollar calls right so euro puts dollar calls because that's the that's the riskoff scenario >> right another one is gold gold trades with a higher skew to the upside because in a in a catastrophic event, gold is going to hopefully go higher. So people pay more in terms of volatilities, implied volatilities for calls, out of the money calls that they do than the puts, >> right? Except for when everyone's longing and people need to do the stop lines to >> That's right. >> Except when they're wrong and then they when they've been paid too much for it. Okay, so let's go back to our Ethereum. We're at this situation where there's speculation that there or there there's some speculation that there they might make an ETF and yet I'm I suspect you're about to tell me there's no skew in the in the Ethereum option market. >> No, actually uh I will say with the pre the preface that the in back in the the you know the wild days of crypto Yeah. >> skew in crypto was for was for the coin. What I mean was it was for Bitcoin calls, Ethereum calls, dollar puts, >> right? Oh, okay. I see. Yeah. >> Because what people wanted, right, was they were using these options as leverage, >> right? >> So, the supply and demand dynam demand dynamic was entirely for leverage and was really for for these crypto calls, especially on in a bull market, right? Okay. Especially in a bull market. But in this case, right? In this case, in early 24, um, skew and Ethereum was actually for downside. It was for ETH puts and and dollar calls and it was about seven to nine balls in in the one month tenor. Seven to nine malls the the put was trading richer than the call. Right. So the the the mispricing lies in the fact that what I thought was that the ETH ETF was effectively priced in to not be approved. The Bloomberg analyst literally came out and said we think 75 80% chance SEC is going to have to delay this or this is not going to be approved. there's been no no deadline. So really, you know, if you think about the the skew, the the motoral outcome for this event, particularly during that event day, is it's it's priced in that, you know, ETH is not going to get an ETF. And what's going to happen is after this event comes out, after the deadline, the VSS come lower and maybe spot sells off a bit, but what's what the bet was is that the V will not, you know, the V will not materially um repric higher on a sell-off, >> right? >> And that's what that's what the risk reversal is is is trying to express, right? The risk reversal is trying to express um it's a measure of skew first of all, but it's a it's a measure also of spot v correlation. So how does spot how does v move when spot moves? So the trade here was to really sell an ETH put and buy an ETH call um let's say 25 delta, you know, for for simplicity, right? and bet on the fact that you know actually the the distribution here is is mispriced. The modal outcome is spot sells off a little, it doesn't get approved and the tail scenario is actually ETH rips higher and you have a surprise approval. That's how the event skew should have been priced. >> Oh, I see. Okay. Yeah. And it was in fact priced the other way the other way. >> It was actually the other way. Yeah. So, um at that time I already left Goldman so um I wasn't able to take advantage of it. So I I bought it at one month, you know, a 20 20 delta ETH ETH risk risk reversal. So I bought the ETH call, sold the ETH puts. Yeah. >> And I mean the timing was lucky because within a few days like there was a surprise announcement that the SEC moved on it and spot literally ripped 25%. because everyone's short in instant >> and and so this was an example of the uh der the crypto derivative market being uh less efficient like that like let's let's face it if that had been a currency that wouldn't have happened right has has have you found that it's gotten a lot better since then like are there more players talk to me about like what what does the the crypto option market look like now nowadays >> yeah so it's evolved a lot I think Um, one is at the time there's a lot of balance sheet and risk constraints, right? It was a it was an that's number one. The dealers were not able to facilitate a lot of flow. A lot of the players, the early players entrance in the market were not very sophisticated. So for example, whenever they got traded an option on one specific tenor, um they would buy the same option back and try to buy it electronically on screens instead of looking for, you know, smarter ways to hedge it on another tenor uh or to kind of carry the position, >> right? >> So that was that was effectively one aspect of what drove this um these dislocations. The other one is the lack of sophisticated players, your V RV hedge funds or you know um uh or pods who who didn't have access to this offshore market or it was too small for them to even explore. Nowadays you are starting to see more um more people getting involved and purely from a VA relative value perspective and that's made things a bit more efficient um you know for sure in Bitcoin but also somewhat in the top you know top tokens uh in this market. >> Okay. Um, I'm going to hit you with just some general questions that I have uh that I hopefully you a young guy in the option world can help me with. Um, because in my day this stuff didn't move as fast. We didn't have zero DTE like um like literally the that the we had once a month if we were lucky where it was it was we traded with a one day expiry. Now every single day we get up and there's zero DTS. How do you guys price? Like do you do you price the options based on hours and how does it work in terms of uh like is it is it is it 15 minutes 5 minutes like like in terms of when you're dealing with that those shortdated options how does all that work? I would just love to understand that a little bit better. So we we don't we currently do not quote a lot of zero DTS but I can I can sort of guess uh that the people quoting this have a very robust electronic infrastructure to be able to to manage something like this right because at the end of the day um on a very very short time frame it's all gamma exposure and it's all strike exposure right and that is >> particularly significant when you want to think about managing your X-RE risk um especially if it's something physical where you know for example S&P 0DT um go get settled settles in the future um when it's physically delivered like that or you know in terms of your gamma exposure how are you thinking about delta hedging over a very short time frame when do you do that what are the techniques for you to monetize that um so I think that's facilitated a lot by very um you know robust us electronic infrastructure rather than you know someone manually quoting and thinking about >> so so you think that like for example Citadel I'm assuming you know is a very active participant in this they're looking at it and their computers are constantly calculating it and then either buying or selling whatever it takes as the options become closer and closer and so they make a decision be like okay we're going to hedge every minute we're going to hedge every minute with a delta or when the delta gets this large or whatever. Um, okay. So, you know, while we're talking about that, let's talk about the different ways to held your delta. Um, you've had to run a book. Uh, what did you find was the best way in terms of, um, did you hedge once it got to a certain level or did you hedge every single day? What just walk us through the different um, techniques that market makers employ and talk to us about what you liked. >> Yeah. So I think this is as much an art as as it is is a science. Yeah. >> And so it's really dependent on one asset class and sort of the market dynamics in that asset. But in general I would say you can look at it as sort of a kind of a 2x two matrix even of your your gam own gamma position and then number two whether the market is trending or mean reverting. So the the holy grail the holy grail in delta hedging is you have you can figure out whether the regime what the regime is whether or not the market is trending or mean reverting and trade accordingly based on your own gamma position. So for example if you think the market is trending and you're long gamma obviously you don't want to hedge right or you want to hedge as least as you can because you you can just let your winners run right you get longer as spot goes up and you can just leave it like that. But if if the market is mean reverting on an intraday basis, then if you're long gamma, you should be hedging as much as you can, selling high uh buying low and to able to kind of make back the theta you're paying, >> right? >> And vice versa if you're short gamma and the market is trending and mean reverting. So that's effectively saying you you know they're trying to figure out or try to develop a signal um to determine whether the market is trending a mean reverting um and that's that's effectively translating to um buying buying low and selling high. >> Yeah. Right. Do you figure do you guys um try to look at the the behavior of the market regardless of their position and say is it mean reverting or is it uh uh trending and then change their their strategy because of that like is there like will you go look at like the behavior of it um and and change your delta hedging or was that more just kind of a feel thing? >> Yeah, this is you can definitely create like effectively statistical signals. Okay, look at that. Um some example that people do for example is they look at different measures of realized wall. Um people look at intraday realized wall versus close to close realize sort of like a variance ratio to see how much this thing is moving on intraday basis versus close to close >> right >> to figure out if it's been reverting or or trending. Um there's different measures of all you know things like Parkinson's that take the high and the low of the day. Yang Zang that takes the open, high, low, close of the day to try to just try to get a picture of what type of market this is and how you're going to measure the realizable because Yeah. >> Oh, no. Go ahead. Just finish your thought and then I have a good I was just laughing thinking about something you told me, but anyways, go finish your thought. I'm sorry. >> The number one I guess uh rule in in sort of data uh data gamma hedging is the the realized wall that you experience, right, is different than what the market experienced. the the realized vault you met you you trade is unique to yourself because it depends on how you delta hedge and when you delta hedge. >> I never actually that's great. That's a great point. I I never thought about when we were talking about different things about that we might discuss. I laughed and said we could have we maybe we'll be able to settle this age-old question about whether you should hedge um in terms of what implied what volatility you should hedge to whether you should hedge to what you think forward imply forward realize volatility will be like the French quants do or whether you should go and hedge to the market like the Chicago floor traders do. And you had a great line about which one you should hedge to. And why don't you tell us what it is? >> I I I said that the I said that the the the French quants sell exotic variants and blow up and the Chicago ones don't. But yeah, I said that way. And uh it is it is interesting because um intellectually to me the French um the French method makes a lot of sense, right? Like why would why would you hedge to a vet that you didn't you don't think that is going to actually be achieved going forward? um a instead of like with the the way that the Chicago guys do it or I shouldn't say Chicago but they're just they're they're more likely to doing this. You're letting the market move around your deltas and that was the part that I still I I must admit I haven't fully accepted the Chicago way. I I you you seem to have fully accepted. What what what makes you so sure that the Chicago way in terms of marking your v to the or hedging your v to the implied v is a better way of doing it? >> No, I so I I don't I don't particularly think you should hedge the implied v of the market, right? I think I think you have to there there are many um ways to hedge your deltas and you just have to choose the rule one that's right for the market regime and the right asset class. There's one thing we did at the desk also is you know we hedged on based on timebased measures. So for example if you are measuring V close to close and you're pricing everything close to close um then we should hedge close to close right. Otherwise it doesn't make sense right. Yeah. >> Especially for for an altcoin where there's no market we can dictate where we want to price this this option. Um one thing we did on the on the FX options test is we hedged every four hours. very systematic, right? And we just we just put we just flat went to flat every four hours at the fix usually a fix and FX and so then that becomes your measure of realize, right? Because that's the that's the window at which you hedge. So that should be the window at which you calculate whether or not you know your the the the realized value you are monetizing is paying off for the implied ball that you're paying for. That's a great point and that reminds me of another question I have for you. Um, I'm pretty sure that if you watch the S&P trading of the like the S&P, and I know you're an FX guy, but I'm just going to talk in generalities here, that what happens is the book gets rolled over throughout the world and it goes from, you know, let's just start it in Asia, then it moves to Europe, and then it moves to New York, and then it moves to I guess there's a New York close. And it seems to me that there's like I don't know what time it is. it's like 3:00 or whatever. There's a definite hedging point and I feel like the the the charm bid uh really kicks in and and the we get a situation where in the middle of the night you get some buying in the S&P 500 futures. And that to me really does feel like the opening of like a the rolling of the book into another another situation. And in my day, we wouldn't we wouldn't hedge in the middle of the night. Like I think this is kind of an an interesting change, right? That you're you're we would just have gap risk. And now all of a sudden you have this situation where apart from the weekends where we have wars and everything, but uh you know apart from the weekends, there's always trading, so you can always do it. Do you ever worry or did did it ever kind of occur to you guys that people could figure out your position and frontr run the the potential hedging that they see when you do it at a systematic time? >> Well, that depends on the notion of the position. So, I I haven't I will admit I haven't stayed up at 3 a.m. to watch S&T. >> Don't lie. You have. Don't lie. just only only only only yen in euro. So um what I will say or I what I guessing this is is for example um this is effectively how dealers I would estimate decay time right and the way that they decay time or they the way that they move to through time is not linear in the sense that they will probably wait active market hours or mark hours where there's more data more than you know than 3:00 a.m. in the middle of the night. So the the variance that they assign to market hours is probably much much larger. And at a desk you you know like at a desk uh for example trading FX options you could decide effectively how much variance you want to assign to each time of day and you can decide how to move time effectively through that um through that window. So, I'm assuming it's the the flow would be associated to that. I don't know if it's mechanical um or not, but in terms of someone guessing your position, >> yeah, >> I think you'd have be really really large. And it's it seems to me that, you know, it's it's very hard to do in something like the S&P. >> Bohan, uh you're gonna be you're gonna laugh at me on in terms of how we dealt with our weekend effect. on Friday after Friday at lunch, we used to turn the our Excel sheet to Saturday. >> I I'm not surprised. I I think that's I think that's just the right thing to do, right? Like >> that was that was the big sophistication that we had on Friday at lunch. Don't turn it to Saturday because we would be like, "Oh jeez, you don't want to be paying for the for the full decay of the weekend." Um all right. Well, you know, before we let you go, I want to talk a little bit about correlations. Um because that was originally why I reached out to you to understand how dealers dealt with correlations and I was I was kind of flabbergasted not flabbergasted I was a little floored that it's ends up being a little more uh scenario analysis than I ever imagined. That was one of the things. So, why don't you just explain to us um correlations, what they are, why they were important in terms of pricing on the exotic desk and how you dealt with it when you got stuck with some correlation positions. >> Yeah, for sure. So um the the bene the main benefit of a correlation product um is the it makes so just as an example we don't think about most people don't think about this because they're sort S&P or um you know trading trading stocks and uh in currencies though we think about everything at least at a bank like Goldman which is a US bank think about everything in dollars right so how we think about Euro dollar and sterling versus dollar which I'll just say cable um we think about Euro dollar and and cable and we also think about how euro moves in relation to um sterling and that's you know that's an active market um the market and euro sterling well but there's an effectively an implicit tri triangle rule between the three um because of obviously no arbitrage conditions where um you can trade a euro sterling option as well as a euro dollar option or a cable option. >> Right. And then when if you have all three prices, you should be able to figure out what the implied correlation is, what the market is saying those they're going to correlate at. >> Yeah. Exactly. So for example, a euro sterling option is just much much cheaper than a euro and sterling option or a euro and the ca or the cable option because the implied core about is about let's just say around 80, right? Right. Because typically the Euro zone, whether that's monetary policy or interest rate differentials, it usually uh moves moves more in sync. >> Right. So in essence, what they're saying is that if if euro is going up, the pound will likely be going up as well. So therefore, that euro pound won't move as much as the euro dollar. >> Yes. Exactly. >> Okay. So, how do you deal with it as an option market maker in terms of like when you have all these positions? Because one of the things that I'm just kind of shocked about is um this S&P position where they're we have this weird strange because you can figure out the implied correlation um of stocks within themselves because imagine you have every single stock in the index and you know what that implied volatility is and then you know the volatility of the index itself. You can say this is has this implied correlation. One of the things that I'm just flabbergasted by and and continue to just be amazed at is the realized correlation has been so low. And I've been wondering is it a question of the products in terms of the autocallables getting sold out of Korea and all those things that are causing that or is it a function of the pod shops doing a lot of long short uh investing? And then one of the one of the my big kind of takeaways was that there was lots of people that were trading this correlation because they were in essence shorting index vault and then buying all the individual stock vaults. And so when we started talking about like how do you get rid of that risk and how do you deal with it, I was kind of surprised that the way you did it was through a lot of scenario analysis as opposed to actually being able to change anything because at the end of the day, if there's not another counterparty willing to sell you correlation, you're kind of done. >> Yeah. at at the end of the day if there's no um liquid market for the actual correlation it's about the level where you want to take the risk right so for example the in the in the scenario of a Euro sterling option there is a very liquid active euro sterling op euro sterling market so um if you you know you if you want to sell um your sterling vault uh and buy the core you can do that you can just go to the broker market it's OTC um and someone someone will take the other side at some level for you. But in more illquid products uh in products where there's no liquid um correlation crow correlation uh market you kind of have to sort of manage the individual legs of whatever it is you are hedging and take the risk of the correlation at a level that you know >> makes sense to you >> sense for you. Yeah. And there's just no way. I was kind of a little surprised that at the end of the day that that's that's there. You just have to deal with it. There's just one of these things. It's it's like the old days when you were asked to make a market on an option that never traded again and you had to delta hedge it. The reality was that you owned that option or you sold that option for the life of the product and you were going to have to just delta hedge it through the life of the option. And my understanding and what we kind of agreed on was that you you're either long or short implied correlation at this level and and there's you're just going to have to hope that the correlation ends up being either a good sale or a good buy. >> Yeah. For for a liquid products or liquid pairs or cross asset sometimes that is the case. Yeah. And I think the most thing things people do is they >> come up with some axe or some pitch of a structure that gives them the other side of the risk. that's the most thing they can do and they try to sell that product to get the other side. Usually also you'll see it because as a function of supply that they've seen from the systematic community um for example. So that's a way which they would hedge it. But you know you think you can think about it as as a as an exotic option you're pinning for example right uh if you are pinning a dual binary for example you're pinning both strikes that's a scenario well no one will give you the other side of the risk other than the person you traded with and you're have to beg to unwind it >> because because no one is gonna like you're gonna you're gonna have to hedge both and figure out you just gonna have to take the risk at the end of the day. Okay, I'm going to put you on the spot a little bit here. Um, you know, we've chatted about a lot of different things in the option market option world. What, you know, if you were conducting this interview, what would you have asked yourself that I might have missed? Take your time. No rush. Like, just think about it in terms of what we've talked about, what's interesting, what other people end up asking you about or what you think is really important in terms of stuff. And also while we're at it, we haven't talked about the macro world at all. I I know you're an avid macro guy. Uh do you have any thoughts there? And uh you know, is there some is there something you wanted to discuss from that aspect? >> Yeah. So let's let's talk about um sort of I guess the macro piece first. I think it's a very right. It's a very tricky uh tricky moment in time, right? I think people are trying to figure out why the S&P has effectively, you know, gotten gotten woken up from a five and a half month topping process just by closing the straight of horses. >> Yeah. Okay. Right. >> And so like I I think at the end of the day, uh it's very hard to fight this price action. I think you have to go with it, right? So I think at the end of the day you you end up with a portfolio um that is both long the asymmetric stuff which is the pro you know escalation stuff which is long long long crude uh long a things like that and versus things that you know just long risk assets effectively right long long long S&P so that that's how sort of my currently see you know my setup is I think a lot of the front end rates that's repriced a lot already. I I I do still like that trade. Um but at the end of the day, I think it's more of a about a balancing act and a position sizing exercise uh to create a sort of a balanced portfolio between these two. Um and I I do think you can construct sort of using options, you can construct sort of tactical like more asymmetric payoffs. Um like for example long uh being long Brent is great right now because you can get benefit from the the backwardation you get the roll yield. Um but then the other thing is also VA is extremely high right >> so what I like is you know I did this last year as well on the first sort of the 14-day war is uh I I like one by two put spreads in and and in and in and in and >> Okay. So explain to people what that means. >> Yeah. So, you're buying a higher strike put and you're selling two um lower strike putre puts at effectively a zero cost or a credit. >> Okay. Um, I chose WTI, but we can choose Brent at at strikes where you think, you know, if if there's a piece, right, if there's some kind of deal and hormuz opens where you think WTI goes and because VSS are so high, um, I am selling the cheap side of the skew. I'm selling the the the part wheres are low, but because VSS are so high, you can get decent payoffs. For example, uh I think you can get something like June um 75 sorry I want to say 78 maybe 70 uh 1 by two put spreads at zero cost so that you're effectively bit betting on the fact that you know spot the downside in spot is limited to that level and if you get like a big 20% down move on some kind of deal um your your m max payout is is uh is uh effectively the distance between the the two strikes. So, it's a fairly asymmetric way to bet on a sharp move lower while not spending any premium. >> And so, do you find do you find yourself using those kind of structure like different structures of that all the time? And do you think that that adds a lot of alpha to your trading? like like is is would you just be outright delta one or do you always try to execute through options? >> Yeah, I try to find the best expression for what I'm trying to trying to express. Right. So, uh if delta one makes sense from a riskreward perspective from where my stop is going to be, I'll use delta 1. Okay. >> If if something's interesting about V about skew, um then I'll I'll use options. Um, one example is for example, there was a a week during the Iran war where S&P just didn't do anything. I think was I think was the first war first week or something, >> right? Because we had this situation where stuff was going down a lot and up a lot and it was just sitting there going sideways. Okay. Yeah. I'm remember that. >> Yeah. And the right expression actually I think you nailed it and and it was um selling call spreads, >> right? >> Right. because you sold the at the money call. Vault was pretty elevated and put skew was maybe at the 99th or 100 percentile the past two years and so you the call you bought was extremely cheap, right? Because the the market had priced in a very very rich put skew. So things like that that do add edge um I think uh for for trade expression. Um, one thing that I liked as well is the same sort of trade as the the 1 by two foot spread but on on dollar yen. So I like 1 by two costless dollar yen call ladders. >> Okay. >> Strike at 160. >> Okay. So one second we got to because I always get it backwards because of the way it exists. So which way are you going? Explain to us the position and then I just before we talk about this anymore. I have been so wrong on FXVA and maybe you can tell me why I'm such an idiot that I keep saying that you can own longdated V because I keep expecting FX to get become a a volatile asset class, but I've been just wrong. So, first of all, why am I so wrong that FXV is just so lame? And then next up, explain to us exactly what your position looks like. So, first of all, tell me why I'm such an idiot. >> Right. So, uh, the problem with G10 FX is everything. It's such a it's such a noisy market with a ton of two-way flow, but also at the same time, when you look at it, interest rate differentials tend to move together in the developed economy, in the developed world. And it's it's really rare to see uh a large you know differential where you know one central bank is what way ahead of the other at least in in NG10 FX and they can lead to directional moves um and especially if there's flows supporting it um like I I think at this maybe at the start of the year um Aussie had a good run higher because the RBA was hiking rates and risk risk asset just holding. Okay. But you had a you had a large commodity bull run which um which really help them from a terms of trade perspective, right? But those those trend moves tend to be repriced, you know, fairly quickly and at the end of the day FX is always always always a relative game. >> Okay. >> Um and that tends to lead to mean reverting moves more so than than large trend moves. >> Okay. So, I'm just wrong about long-term vault picking up. Um, what is the position you like and explain to us? So, let's just remember everybody when we're talking about USDG payy, um, lower it means a higher yen. So, if we go from 160 to 150, that means the yen is rallying. Explain to us what the position is. >> That sorry, that means the yen is depreciating. The dollar is rallying, right? >> The the >> dollar yen higher. >> You think dollar yen you Yeah. You want you're saying I want to bet on on the yen weakening. Is that what you're saying? >> Yes. Yes. >> Okay. Okay. Fair enough. Yeah. >> So, I think this was this was pre-Iran war, but the the same concept applies. You could buy a three a two-month I think it was 15750 15950 strike call ladder. So, buy sell right at zero. >> Oh, that's what that's what a call ladder is. It's you buy the first strike and then you sell the second and then you sell the third. >> Yeah. >> Oh, okay. So, you're you're in essence on the hook if it if it takes off the >> if it takes off higher. >> Yeah. Okay. >> Right. >> So, if you think about it, um Kevin, if you think about it, it's actually I'm not actually bullish on dollar yen or yen depreciation. I'm just saying that in the scenario where we have an event where Dalian goes higher I think the depreciation is going to be limited because of what they've talked because of the rate check first of all that has happened in the past but because of what they've talked talking about in terms of intervention and they're watching 160 as a key level and you know market positioning effectively the market also kind of agrees um that 160 is the kind of the key level to defend and and to watch. And so there is what I'm betting on really is sort of a grind higher in dollar yen if that happens. And if it it's not even my view that I think dollar yen, you know, necessarily goes to goes to 15950. This is pre-Iran war. But the the the the asymmetry lied in the payoff and the fact that it was zero cost where I even on a small credit where you can do this trade and and sort of bet on the muted realized wall um near the 160 level, >> right? I I remember talking to one of my subscribers, real smart guy, and he I remember him telling me this was before the war when oil was just kind of creeping up and one of his favorite trades was to do the like vibrant uh slightly out of the money call and then sell like one and a half more out of the money calls. And one of the things I thought was really interesting was he said to me, "Oh, this is realizing like a four sharp." So he was looking at the structure and rolling it over and continually saying that this this was a trade that's working. And one of the that's kind of what I realized is that when you talk to these professionals like the people in the pod shops and the people on the desk, a lot of times they're using these sorts of structures in very smart ways and really really that is where they are adding so much alpha to their trades. So I I thank you for that. So before we let you go, let me just uh finish. We're going to ask you a question. We're not going to desert island disc that we're going to do. What was uh the most kind thing someone has done for you in your career so far? >> Oh man. Um I have to give this to So I entered at RBC actually. >> You did? Oh, you you worked at the Lion. >> Yeah, I did during during I think it was maybe my second year in university. >> Okay. Um, I I just had a I think I was doing sort of portfolio optimization, analytics stuff. >> Um, and I had a I had a very cool boss um who really introduced me to like quant trading the you know brought me to the trading floor that I thought that was very cool. I didn't know what that I would I I didn't think I didn't know anything about trading at that time. It was my role is much more like analytics and quant driven. >> Yeah. and spent time to teach me, brought me to the trading floor. I thought it was much more cooler that those people got six screens and we got two. So, so from there, I think I really got interested. I wanted to be uh wanted to be a trader. So, >> so are you gonna tell us your boss's name or you want to keep that priv private? >> I I'll say his initials, DJP. He knows who he is. >> Okay. Well, there we go. Anyways, DJP, thank you for that. Um listen, why don't you tell people before we let you go about your firm and where people that want to learn more about that uh can you know find that information and also anyone wants to chat with you um where they can reach out and talk to you. >> Yeah. So Falcon X is a um you can think of it as a leading prime brokerage for digital assets. So anything from custody um direct market access market making uh of course inspot options um so sort of a one-stop shop you can think of it as a a an asset manager as well um for everything digital assets. And for me um I don't have a public Twitter account. >> No, you're smart that way. Okay. But you can you can find me on LinkedIn at bohanjiang or you can email me at bohanjiang.ssfgmail.com. So boh.sfgmail.com. >> There we go. And you can also if you're on the Bloomberg, you can hit him up on the Bloomberg. Bohan, uh, thank you so much for taking the time to explain, sharing your story and and and helping us understand options better. We really appreciate it. >> Thank you for having me, Ken. >> All right, Patrick. Time for talking charts. Lots going on. What is your squiggle m what does the squiggle master himself think about these markets? >> We basically've been uh two weeks since our last episode and we just when we did our last episode, we were just absorbing the uh little squeeze on the upside that happened in those uh final days of that week. Uh but it just did not let up. And uh we saw we saw, >> you know, it's it would be impressive if it was just Avis that did that squeeze, but instead it was the entire market took a took a squeezing here. It's been a bad week for the short sellers. This is for sure. Uh, and >> yeah, I just I'd like to just jump in there quickly because one of the things that I think is amazing about this market is how many it's never happened before are actually happening. >> Yeah. >> Right. We we're getting these sorts of moves from oversold to overbought that have never occurred in history. We're getting moves from down 10% to all-time highs within 10 days. Again, something never happened again in history. I don't know if that's a good sign and you could interpret it as like that shows how strong the market is or if you interpret it from a negative side and say it shows how manic the market is and how con it's like convulsing almost. I would go do a third version of that. Like I think that somewhere in the middle of that because what I and you could push back on this but I I feel that this demonstrates genuinely >> how uh uh flu uh flows have driven markets more than narrative. uh like what what we basically had was an extraordinary trigger uh that uh caused uh many of these uh systematic traders to sell on the way down and uh and I think you were the one that was writing about it, but that JP Morgan whale uh was the turn point uh on the market at the bottom like when when that roll happened on the uh last day of of the month and um and basically everyone that was net short, dealers holding all this uh gamma uh delta hedging on their books, all the CTAs net short, and suddenly we saw a situation where the flows just pivoted and forced them to completely go the other way and had nothing to do with the narrative. Nothing really changed. There's the straight of Hormuz is not open. The same gluted, the same economic problems, everything is still actually very raw, very real. nothing has changed other than it was flows driven and uh and I'm the point I want to make and you can push back is is that it really goes to show like in this as we've progress in the way that the market is evolving uh you can't ignore flows flows are uh seem to be the ones holding the steering wheel and when this is uh when the driving is actually happening what's your what's your take >> well I I agree with your analysis about the last two weeks of March and the JP Morgan option whale got the dealers. We we declined into the strike where they were short. I saw so many bad takes out there, Patrick, where folks were talking about how I was going to pin to the strike. And I'm like, no, it's the exact opposite because the dealers are short this strike. They're not long the strike. Usually, we rally up into the strike that they're long. And there was all sorts of bad takes out there. And I was highlighting how this was making the system very unstable. So, I agree with that part. I also agree that once that rolled off and the dealers were no longer short, it made for a situation where the marketplace was more stable. It it it wasn't as much chasing. I guess where I push back a little is that folks seem to, you know, imply that then all the CTAs got back in there and they pushed it up and that there's other, you know, vault control folks are buying it. Well, first of all, the vault control is barely relevered. So, it's not them. Uh, I I really think it's more retail and maybe it has to do with the uh tax refunds being higher than than folks or sorry, the tax refunds coming through and that money going into the market. But to me, it feels much more manic and not as much flow driven. And I know lots of people love to blame it on the CTAs and they love to say that that's what it is, but I I don't buy that that's what's driving this. To me, it feels like a lot of people got bearish and then now they're completely convinced that the problem is fixed and they're chasing it. >> Okay. So, I'll I'll agree. Uh but the what the reason why I think the CTAs were important is it's because it's the marginal buyer. The fact is is that there was retail coming in there. There you can't not have a rally like this without retail participating. But it's about the fact that they were not contributing to the sell side. They were contributing to the buy side. And that marginal buyer is discovering a higher bid or pressing the bid uh persistently in price discovery to find those higher levels in the market. The thing that's really interesting and why I do actually agree with you on the retail side and one of the things that's been so evident and I talked about my members for the last two weeks was that that first last five months was a story about this great uh sector rotation. Uh it was the mag sevens were dead. There was uh this was the software doom. AI is going to finish things off. Uh, and everyone's got to own consumer staples, Halo, uh, all of these, uh, different themes. And out of the gate here there is only the breath never got much above 50% because this is all being driven into the tech names and they have been the leadership out of this in a huge way and um and that's the new thing and this is why retail uh when you said that retail's back then uh I absolutely have to agree because retail wouldn't be coming in there to to take on some more utility stocks. uh the the retail comes in where where they are most familiar with which is owning uh the the sexy names that uh that are on sale and um and so to me I agree with you on that. So I want to go through Do you want to add to that or do you want >> No, no, no. That's great. Let's let's get to the tricks. So, so let let's just kind of straight up nail uh like the the big leader uh in the SMH, the semiconductor index. And this thing uh is running like we've got ourselves uh a full-on semiconductor bullface. And what's amazing is is that you know while Nvidia certainly has turned the tide and uh you know has approached its previous highs but this is really where AMD has decided uh to run away like it stole something. Like look at this morning's gap. That's not even an earnings driven gap. The thing just goes from 300 to 350 bucks like nobody's business. They've decided that AMD is like their little uh darling now. But >> it help that Intel, you know, reported awesome numbers. >> Yes, Intel goes screaming higher with this gap. Point is is is that the semiconductors are on fire and they are taking so much flow uh in there. And more importantly, the Mag 7s have have gotten love. You know, the one thing, Kev, that's interesting about this entire MAG7 pullback that we saw for five months, and we've talked about the MAG7 so much in previous episodes, but this entire pullback on the MAG7 basket has been basically a 50% retracement. Uh they gave back half of their gains. And after a four or five month consolidation that didn't do more damage than a 50% retracement often that's a correction that has played out and the fact they broke out with this kind of momentum makes the earnings next week the pro in my opinion the single most important thing out there maybe even for the for the purposes of the bull market maybe even even more important than the resolution in Iran because why would I say something so bold because the Mag Sevens came out of the gate so strong and they were at such key overhead resistance that if after five months of them dragging their heels, if they start beating and they actually um all gap higher in any way like Nvidia or Intel style on the upside, you've got the making of the next bull leg driven once again by that narrow mag seven basket that would be needed for the S&P to go 7500. uh and therefore whether they beat next week or not I think is the 100% the thing to watch. >> Won't disagree with you and and and the reality is that if if if this if they continue to if we get earnings like Intel on the other names they're just such a large portion of the index. It's going to dominate the index. >> Yeah. >> It'll be what we're watching. >> Let's go through them all. like Apple, it's been consolidating sideways in what uh uh technicians I I don't know whether a technician wants to jam a horizontal triangle or a flat formation or megaphone or whatever uh uh pattern you want to throw on. The point is it's been consolidating sideways for five months and it's approaching its highs right before its earnings, right? Uh you then um let's do Microsoft has been caught in the whole um SAS uh software murder. It's on its way back. I don't would I think that out of all the mag sevens, the one that's least likely to make it back to its highs is Microsoft uh just because it's uh been killed so badly. But even if this thing does a Fibonacci retrace, we could see 480 bucks on the upside on this thing, right? >> Can I jump in here with a little bit of fundamentals? Um, Microsoft announced that they were for the first time ever >> trying to buy out some of their senior uh, developers and I think it was seven or 8% of the workforce in terms of early retirement and and get them out. And that was kind of this shot across the bow that the AI is really kicking in and that these companies are going to have to lay people off. It was quickly followed by Meta doing the exact same. What I found really interesting, Patrick, was I would have thought the market would have taken that positively and it was just a day's reaction, but the market the market sold off on that news and I found that surprising. And even today, we're recording this Friday morning, Microsoft is is is up, but considering how much everything's screaming, it's not doing that great. And one of the things that I think we should just watch for is these software companies are going to start laying off people in a big way. And what does that mean for the stocks? >> Yeah. Yeah. It's uh well, you know what? At first, I could imagine it being a a plus, but in the end, it really does show the problem that everyone's saying with AI, which is some of the highest paying uh kind of jobs out there are going to be uh downsized uh and it's going to be economically disruptive, but that's a that's such a big macro theme that it's not going to reflect into stocks on any short-term basis. But it's a scary thought that continues to be like, you know, we something we're going to have to deal with in years to come uh in the markets, right? The uh so moving on to like Meta, you're seeing flagging formation like if it beats it's going for its previous high retest near 7800 very easily. Um you Google uh was uh just you know one of the strongest throughout the whole period. the entire consolidation was even just on the shorter distance breakout uh a 61.8 off of the midpoint broke out now near 52- week highs. So all it needs is one beat and this thing is running like Intel to new fresh highs uh and and and pressing, you know, that a big move on the upside, right? And then you take Amazon uh already trading at 52- week highs uh and it hasn't even reported yet. This has been one of the ones that have been the strongest out out there, but this is again one of those that's setting up like Google for uh for that press to fresh new highs. So, you know, I mean, we talked about Nvidia already, which is near its highest, but you can see other than Microsoft and maybe Meta, which have kind of dragged themselves a little bit behind, you've got a situation where many of these MAG7s, if they beat, they're going to gain traction. And if they get traction, uh, that's what the, um, from a market capitalization perspective, this is what the S&P needs in order to make any legitimate progress. And so uh this is the thing to watch in my opinion uh for next week 100% like the all eyes on on that. And what I want to highlight is off the liberation day lows from a measured move perspective there's a weekly measured move up towards 74 to 7500. And one thing that I've been telling my members is like we ain't going up there without the mag sevens. And this is why um this is why uh what happens here in the next uh week is the thing to watch. All right. So uh uh the the other interesting thing is is that the breath of the market hasn't improved much. We're at 56%. For a market that's trading at 52- week highs pressed this way. We have not seen a broadening of this rally. And what's interesting is like when you take a look like financials the XLF failed right in their fib zones failing to demonstrate that they are joining the party on the upside and so we have a situation where this is a very very narrow rally uh like even even the defense contractors you know Rathon missed uh you like this was a leadership space that was genuinely running and um it's not participating like this is literally I'm as I'm I'm curious whether this is a 2000 deja vu where just in the final parts of the dot bubble only the.com bubble stocks were running and everything else was just flat and I wonder whether we're in the midst of seeing basically uh a parabolic bubble in the uh in the stupid stocks. >> Don't you know though Patrick this time is different and those guys in 2000 didn't know what they were doing this this time it's different. They know what they're doing this time. >> Yeah, this time it's much more val similarities because this time is different. >> Oh wow. Anyway, so uh uh so nonetheless, we have a situation where uh where the breath is not impressive for where the market is on a relative basis. You would think when a market's making 52- week highs, we should be at 66 to 75% participation at minimum. we're at 56%. Um, which is we're saying it's very thin on uh in terms of that participation. It really is concentrated very deeply. Okay. So, what's interesting is that the your usual international suspects joined the party. Nikke broke to 52- week highs. Cosby broke to 52- week highs. And so um those those kind of AI tech heavy kind of Asian themes uh sectors have or stock markets have have also uh collaborated and and and contributed to this entire momentum uh working that way and uh and what now when we >> can I jump in there because I think one of the things that's interesting about that is if we think about the the energy or the military conflict and the con and the uh countries countries that are most affected by this war, you know, this energy problem. You just named two of the countries that are most exposed and yet their stock markets are doing the best out there. It's it's a real dichconomy in terms of or a paradox in terms of what you're what you're experiencing in terms of the narrative about oh these guys are the most screwed and yet their stock markets are doing the best. Obviously, we know why. It's because they they have all these semiconductor industries and and things of that nature. Having said that, Japan is not as as influenced by that as Korea is. And yet, it's still doing well. I I I continue to love Japan and think it's one of the the names that you just buy it and forget it. >> Sure. Like I I mean that's a that's a whole secondary conversation, but but I do think that we kind of pivot here and do talk a little bit more about what's happening in the Middle East. Uh, and because I do think at some point the stock market will give a [ __ ] Uh, it will at some point. Uh, and you know what? It may very well be. Um, you know what? I I don't want to use the 200720 analog because uh I don't think there's going to be a great financial crisis. I don't think that there's going to be bank collapses and and all this drama. And it doesn't even have to be a bare market of that magnitude. But what but what it the the part of 2007 after uh we saw the the um first wave of failures in 2000 in the July 2007 bare sterns and all these things in terms of uh the subprime uh the market brushed it off after a 10% correction 12% and rallied to fresh new highs in October and it took an entire six months later for the fundamentals to matter. And and I I wonder whether that's a good analog for the fact that the macro matters, but what it is is everyone expects that the everyone should give a [ __ ] now. But maybe the scenario is all these macro things like uh the the knock-on effects of higher oil prices on a a sustained basis and all these different things are problems, but maybe the stock market don't give a [ __ ] about that till September. Like it's >> Can I can I jump in here because I do do have an opinion about this? >> The fact that oil is only $95, Trump is not wrong when he says it's really not that high. >> Even $4 gasoline or whatever it is or when you adjust it for inflation and look at this, >> the numbers aren't that high. So, we could have a situation where oil stays at $95 and the stock market keeps going higher. But the what I find difficult is the the folks out there, the be let's just take Jeff Curry because he's probably the one that's the most visible that people will know. Jeff Curry, former Goldman Sachs uh you know, oil analyst or commodity analyst that's now working for Carile or somebody like that. He's talking about the fact that we're going to run out of run out of oil. And in essence, what's going to happen is the economy is going to grind to a halt. I suspect that before the economy grinds to a halt, we're going to have oil at $200. So, you have on the one hand those folks saying this, yet at the same breath, we have oil trading at $95 and it's not showing any signs of worry. And the real question ends up being, is the oil market wrong? And the folks that are kind of doom at 11 uh barrel counters, are they underestimating the fact that this market is more malleable? It's more able to adapt and that there's oil at different places and that they're overly concerned about um a pinch in the system that doesn't ever occur. Because if that's the case, if we don't get the spike to 200, Patrick, then what does this straight over her moose really matter? >> Like like yes, it like I I guess what I'm saying is that unless you get a a real push in oil, it's not that high and it shouldn't matter as much as the bears think. Now, I I happen to to be sympathetic to the idea that the >> the markets are getting tricked, not tricked, but the markets are getting influenced by rhetoric out of the administration because they don't want the price to go high. So, they're trying to talk it down. So, it ends up being that the signaling mechanism of markets has been broken, right? The the administration keeps saying there's going to be a deal, there's going to be a deal. So therefore, the the market doesn't go ahead and price it in higher, which then could cause like a supply response. And ultimately, one of the things that I look at is that if if they are talking down the price of oil, they're doing the long-term market a disfavor because if you're sitting there in the shale in the US and you're thinking about maybe I should go and and start, you know, exploring more and increasing supply, but then you hear the the the administration talk about the fact that this problem is going to be solved tomorrow. you don't go and do the necessary steps that will in actually create a situation where we get more supply. So, so in the long run, you're making it worse. So, bringing it all back, I >> I guess where I'm where I'm saying is it's only going to matter from a macro perspective if we get what the Jeff Curies of the world think in terms of a spike to 200. And if it's just a a situation where we meander around 95, then I suspect the market could handle it better than than the bears think. >> So I I feel uh the safer approach in my the way I'm approaching it anyway is uh to take something more down the middle. Um, and the way that I uh view it is that there's going to structurally be a huge inventory draw like you can't hide. Uh, and therefore uh there will be a structural demand for oil long after the the strait is reopened and it's going to take a there's going to be all sorts of issues to normalize the oil markets and therefore there's a higher floor for oil. And uh and so my starting thesis is that the we're not going back to the prior uh regime of oil for at least another year. Um you know maybe if you want to forecast 2027 or something 2028 everything goes back down. I could buy that. But this year I think higher oil is here to stay. And so with the fact that oil pulled back to me it's still very asymmetric. Not only if you go to deferred contracts do you carry in some cases positively because of the backwardradation uh and have at least a a positive tailwind uh on your back but you uh at the same time in uh probably have far less downside risk from these levels like maybe let's say down to $80 or something like this would be a an a reasonable downside floor but you have a huge right tail and so I still think at this stage age betting on oil um is still asymmetric in a sense that you as long as you can buffer uh some reasonable loss on on you know draw downs of like $10 on the downside you have a higher floor holding you up and if things are are very much like COVID where nobody cares till everybody cares and then they all care at once and then suddenly that right tail explodes and oil goes shooting higher uh you you have you have that upside. So to me with the pullback off of 120, it's an opportunity for that asymmetry to have a reset. >> But you're but you're taking advantage of the phenomenon that I discussed in that the administration talking up a potential of a deal is keeping those deferred contracts at lower levels than would otherwise be the case. >> Yeah. So you're saying in instead of going and and you know railing against it, you're like, I'll bought from you and and that makes complete sense because what you're arguing is that those those contracts are too cheap given the potential for a spike higher. And I'm not disagreeing. I I'm I'm with you. The >> I guess what all I'm saying, Patrick, is that until we get the spike, I'm not sure that the stock market cares that much. >> Yeah. So I want to move on from oil itself and talk energy stocks briefly. Okay. >> And uh and what I and my view from energy stocks versus oil are is slightly different uh in that I I believe that uh we went through a decade uh whether it's renewables and everything that energy stocks and energy capex spending and all these things were uh you know taboo. to basically uh there was no build out nothing and what I believe that this war has done is uh uh structurally changed uh the regime that we're in in terms of energy the attitude towards energy and investment into energy security uh in and uh finding new sources of energy to diversify away from hotspots and things like this is going to be stay mainstream And I think that uh that the bull market in energy is uh is still just getting underway and even and it doesn't need oil going to 200 in order for energy stocks to be in a new bull market. And I uh and the fact that we've seen all these energy stocks now do 50% retracements. I'm I I don't think we see the Eiffel Towers. The Eiffel Tower formation is obviously when us giving back all of the gains that were made and uh I'm in the camp that uh that we're not going back to like previous lows like this was a short squeeze on the upside on energy stocks or something. Uh I think that old dips should be bought and we're finally seeing a dip. What's your thoughts? >> I I think that you're going to be completely wrong and the reason you're going to be completely wrong is because everything you said I completely agree with. Okay, >> I have nothing to add. I I it makes complete sense to me. I I've owned energy for a while and when people ask me if I'm selling, I say nope, keeping them all alongs. >> No. So, uh it's very simple. Take the XOP and put on a monthly chart >> and I want to highlight that uh this was the bare market of the last uh you know decade and a half and this was just the breakout out of a five-year trade range. You know, does this look like a bubble that's run too far too long? You know, like this this chart to me is saying that there's something on a big picture monthly chart basis that's happening that uh even long after this straight is reopened. Something's been set in motion and that this uh this is going to uh be a place that will continue to see flows for uh long periods of time is my view. >> To God's ears. So uh the the interesting thing that well the next thing I want to move on actually let's quickly just touch on gold and what's particularly interesting about gold obviously there's a lot of people that like to uh speak to the fact that there's sensitivity to rates uh sensitivity to the dollar uh all of these things driving it but I like to keep uh the gold the precious metals trade a little bit more simple. When we look on a weekly chart, we had one of the most extraordinary bull markets uh on the upside, it was just an absolutely stunning 2-year bull run on the upside that ended with a parabolic short-term blowoff. And while I don't necessarily think that this ends with a huge crash, what I do think is that after a two-year bull run and a blowoff top like that, there are there's prolonged periods of backfilling and absorption and reconsolidation before the next bull phase could resume. And the way that gold continues to behave uh collaborates to or at least is technically uh confirming it to me like you have gold here can't beat its 50-day moving average can't beat a Fibonacci zone on the upside. This is still uh a market and whether it's silver, platinum, platium, uh the gold miners, they all look the same, which is it there's a long-term bull story and if you hold it long enough, you'll be fine. But if I'm talking the second quarter of the year, this feels like it hasn't finished correcting the the last blowoff and that we have some uh more uh chop to to absorb here on some back filling before any bull market resumes. >> I will say though, Patrick, the gold miners might be somewhere you could hide here. Newmont just announced their earnings. It didn't uh blow out earnings behaving well >> and I'll say no. >> You'll say no. >> Okay. Why is that? >> No. Well, it's the same pattern. It blew off on the upside. It uh it failed on the thing. Right now, it is just showing a direct correlation to the the chart on gold. Uh so unless I see unless I see the correlation break right now all I see is that uh the pattern is actually identical on the gold miners to gold. Now that doesn't mean that there's a huge downside. It just means that you might have to absorb several months of grinding. Um and uh and this just won't be a place that's going to get a lot of attention. you know the the kind of reminds me a little bit of what uranium had to go through for a little bit you know before uh the re-resumpumption of the uranium bull run it went through like six months of very challenging period actually let's just use the URRA as an example but you know uh like before the it went through let's say these kind of periods where it just spent you know half a year to a year just uh banging out some short-term lows before re-resuming and even arguably is doing that over the last uh year, right? Like there's these periods where it's still a bull market on the monthly charts, but it just spends a prolonged period just absorbing the prior bull run and before it re-resooms on the upside. I'm long-term a very the bull thesis on gold is in my mind sound like I don't uh I wouldn't want have no actual fundamental reason to hate gold but they feel like they're in correction mode and there's no evidence that they have left that correction mode and so the assumption then is that that you have to assume that they're remaining in this corrective phase. I'm more hopeful than you are that the gold miners can grind higher even in a gold. >> Well, you might be right because we both because we disagree. That's the first sign that that uh one of us has >> one of us is going to be right >> that's like >> we when we both agree we're both wrong but if we disagree one of us is for sure going to be right. Okay. So listeners this is makes it totally worth listening to the show. >> Okay. That's right. There's always someone who's going to be right. Okay. What's next? >> Copper. What I I you know what's interesting is that uh copper for the last uh you know first quarter of the year surprisingly correlated to gold. Uh there was some bizarre reason industrial metal was kind of up when gold was up down when gold was down but really decoupled in the last month and busted back up towards its highs. Maybe copper is it's because it's getting basketed into the semiconductor data center thesis, right? Like everyone needs copper to connect these things. Um so maybe that it's driven by uh uh the the investment in that basket, but copper at least at this moment actually is behaving way better than gold. >> Um you'd be proud of me, Patrick, the other day for my uh I do this uh recap. I I just kind of sent some charts off to my subscribers. >> Uh and I was stumbling upon the fact that the Bloomberg Industrial Metals index. >> It was just a nice clean breakout. >> It's looking terrific. It's it's uh >> I you probably can't pull it up, but I'm with you that it's it's that these these stocks are going and in a way that you wouldn't expect or not these stocks. lithium, lithium broke out, uh aluminum, uh even though Alcoa missed on its earnings, but aluminum was breaking out like Yeah. And even even uh all the um iron ore plays still look very good. I'm just going to pick on Rio, but like it's up at 52- week highs. So, you know, if if you're not in the precious metals space and you're in the uh mining space and metals and industrial metals kind of basket, they're they're getting love. there there's they're they're they're behaving very well and and uh and continue to uh to uh take flow. Um and so uh yes on that what's interesting Kev though I want to just go back to energy for a moment and highlight gasoline. So this is the continuous chart on gas, but what you can observe here is that the pullback on gasoline was nowhere proportional to the pullback on oil. And we're trading back to in North America at the 52- week high of gasoline futures. And uh I find it interesting, but they they didn't get the memo that uh things pulled back 20% off of their peak highs. Uh, and um, it's interesting will be whether or not this can bust this 330 level on the upside per gallon. >> There's some real seasonality to that though. You have to be careful. Um, and I think that's what you're saying. Yeah, we're going into summer of the driving season and uh, it's to be expected that's going higher and I I'm pretty sure most people will say that that that's not coming down anytime soon. >> Yeah. So briefly I wanted to uh just uh change top gears here and go to the currency markets for a moment. Uh the dollar is deeply embedded in uh its one-year trade range and it's actually going on more than a year now. uh other than that little turtle head formation that it had uh at the back in January uh more or less this entire trade range has been defined in by this kind of like 96 to 100 zone and we're deep right in the dead center of that trade range right now there's no resolution uh on the dollar the dollar is has zero trend and the interesting part uh to me has to be the euro Oh, I mean obviously, okay, first of all, let's start with the yen. Just get this one out of the way. I'm going to do the yen US dollar inverse charts just so that we can talk in yen terms, but the yen has been extraordinarily weak and um uh and simply uh looks uh like it wants to fail. Like I can't believe this level like when it put it on the the traditional number, the US dollar yen where the 160 level on the upside, but there's a ceiling. But the but it is not rejecting there does we haven't seen an intervention. We haven't seen anything that has tried to talk uh uh the uh US dollar down or the yen up off of this. First of all, you have any comment on that before I go to Europe? >> So a buddy was telling me the other day that the yen is traded with uh within like one handle of 159 and a half for the past like 33 days or something. which point I responded. I told him I said makes complete sense because I'm long all sorts of ball on the end. >> So I'm I'm single-handedly responsible terrible call about that we were going to see some FX ball. Uh it's been an absolute just dud of a call. We've seen nothing. In fact, it's the exact opposite. It's been so quiet. >> Um I'm perplexed, Patrick. Uh it would seem to me that there should be more volatility in the FX market, but there's just not. And I'm wrong and there's just no excuse for it. So I want to pick your brain on the Euro here. Uh so the Euro zone, they were doing their fiscal um uh they uh the rates differentials. Everyone was expecting uh the US to be a little bit more uh the the softer on the rates. Everyone's looking for the ECB to potentially even uh raise rates uh here because of inflation pressures. All these kind of things uh has a lot of uh the banks out there anticipating 119 to 122 levels on a lot of these forecasts out there. But the the one thing that I kind of really spend a lot of time thinking about is is that you know there there's economic stresses in Europe and the fact that they are a net importer of oil and they're a net importer of food and all the different uh goods from the Middle East means that they are disproportionately impacted um by what's happened in the Middle East versus the US. the US can actually has a huge buffer uh that can withstand and have less e economic impact than Europe. And uh and therefore the whole rates differential argument I think is rubbish because in the end I think that when we look far enough out the Euro zone will have to inevitably provide some sort of easing to offset um the impact of the economic slowdown that will result in from from all these rising prices. And so I'm I'm wondering whether this is one big topping formation in the euro and whether the end result of this will actually be a euro uh that breaks this almost like head and shoulders pattern to the downside. Uh what's your push back on that or what are you thinking? >> Well, I guess my push back is that everyone knows all those things that you said in terms of the >> but yet that's not the consensus forecast. I'm not as sure. Everyone I know is bearish on the euro because they know that they have to import all sorts of oil. I I don't know anyone that's saying buy the euro because they're going to raise rates. Everyone's, you know, talking about how screwed Europe is. And and to me it feels like I don't I guess we could look at the actual sentiment charts, but I I don't see the same thing you're seeing in terms of are you more neutral here on that? I don't really have a view on the euro except that it it just feels to me that everyone is always bearish euro and at times people get more bearish euro and I'd be shocked if people aren't more bearish euro into this uh energy uh crisis. >> Having said that, if the energy like if energy spikes to 200 bucks, no doubt they're going to be the ones that feel it. So, are you like, am I comfortable betting, you know, that that's not going to happen? No. So, I I'd rather just there's there's easier trades out there to me. >> Yeah. >> Yeah. Uh so so moving on I wanted to uh oh by by the way there's a lot of people that are obviously getting uh uh a little bit of uh chatter going about the fact that Bitcoin has broken out of uh the trade range that I had for several months on the downside. And the one thing that I just want to push back on the breakout because first of all it is a breakout. I'm not going to technically say that it's not a breakout. It spent a month above its 50-day moving average. it broke the previous highs. Technically, this is a cumulative price action. But what what we've been highlighting for the last year on Bitcoin is that it really is a risk on riskoff asset. It is not a a safe haven in any way. And the market here went riskon in the last month. And so if the market's going riskon, the the reaction function that I was expecting is that Bitcoin would go up and it is. But when you look at the magnitude of this rally relative to the way things are ripping on the things that are working, this doesn't look like anyone's giving Bitcoin any real love. Like this is not like the the next bull market in Bitcoin is starting kind of price action. Uh to me this is just uh it was so oversold that it's just uh taking a little bit of that the um that oversold pressure off and it's rebounding. We haven't even beat a fib zone uh nor have we beat what were its previous lows acting as overhead resistance. And so while Bitcoin can strengthen another 10% toward let's say 85,000 on the upside, uh there isn't any impressive hurdles being beat yet. That is make me want to say something more optimistic other than that was very oversold and it was due for a a retracement and it's getting one. Uh and that's the way I'm going to leave it at Bitcoin and I I don't know if you want to comment. >> I have no comment about Bitcoin. The the the next thing though I wanted to touch on was uh rates and I'm a shocked that nothing is really happening in the rates market. So this is the so for December 2026 but things have been so quiet uh after what was an extraordinary month of March. Uh we had almost like a one two-day reaction and then they've just been in a trade range uh uh ever since. It's like we're basically uh a stone throw away from the same price level we were a month ago. uh a point here being that uh and and the correlation the inverse correlation to oil is quite evident right and the question becomes um you know if oil is going to have another meaningful spike higher and I say if because we don't know that for sure but if it is will we see another hammering on the downside of these uh sofur futures or will it decouple uh and that and That's what I want to pick your brain on like what do you think that the oil correlation on and here by the way is the Esther uh chart and you can see in Europe sim almost identical uh chart formation in a sense of the reaction was the same. Do do we see that if we have an oil jump to 120 to 150 that these things will have uh one more full leg lower? So I think that's a great question Patrick and actually I'm writing a piece as we speak about this topic. Um I think there was a much different uh reaction function in the front end of the curve when you were taking out uh future implied easings versus pricing in further hikes. Meaning that when oil first went up, it was easy for the front end of the curve to follow oil higher, like the rates to follow them higher for the fixed income to sell off >> because what was occurring was that we had a situation where there was three cuts priced in and it seemed to be evident that the Federal Reserve would be have trouble cutting rates into a spike in oil. It's one thing to take out further easings. It's a much different, you know, situation to price in hikes. >> So, my suspicion is that the next time we see a spike or sorry, if we see a spike in oil, >> the front end of the curve will not follow oil higher by anywhere near the same degree. And I've done some correlation work and it's already breaking down in terms of that relationship. it's become less sensitive and and not fall. >> But would but a double bottom retest would be within your uh >> right if we got $200 oil, no doubt that the the front end of the curve would get under pressure. Uh you to expect otherwise would be foolish. Having said that, I I suspect that if we get $200 oil, the back end of the curve behaves better because what'll happen is they'll start pricing in a recession. >> Yeah. >> So, what I what I would anticipate seeing in a in a spike on oil would be a flattening of the curve, which is very much against what most people believe and what how most people are positioned, but that would be my expectation. All right. That's uh the interesting thing uh by the way is that if you just overlay the behavior of the price on the chart rather than looking at the magnitude of the moves, it's interesting, but even the long end of the curve and the long bonds actually behave the same way. We've seen generally that the rates markets have all kind of had the same reaction and and it's been an incredibly boring month. the last uh the last three four weeks has just had these bond markets uh look like they're watching paint dry. >> Well, compared to the rest of the how much the rest of the markets are moving, that is an accurate assessment. But I will push back a little in that the moves in the bond market were more violent on a relative basis than the moves in the stock market in the initial uh uh kind of days or months of the war. So what you might be experiencing, you're calling it boring, but it might be just a function of the bond market returning to a more normal V given the outside the what's happening because there's no doubt Patrick there was a lot of pod shops and uh you know hedge funds caught off guard in terms of the front end of the curve and the moves there were way more violent as opposed to the stock market. Like the stock market was down what 8 10%. Those things happen all the time. But the front end of the curve, we took out three, you know, what was it? Three cuts within two weeks. That's that's a real a really violent shift in in sentiment and and and forward expectations about rates. >> All right. Well, listen. I'm going to wrap things up with us having to We can't not not talk about Avis. >> Yeah. >> Stop all over again. What what's amaz what's amazing to me is when you look at this chart >> uh how uh how like uh this is like a complete repeat. What's actually though different about versus GameStop uh was that GameStop and these others only took a few days to go their th00and 2,000% of whatever they ran. Um what what's interesting is Avis's advance was more orderly. It took almost two weeks uh in it still went parabolic and still had the exact reaction you would have expected but uh it played out a little bit more prolonged like how did you read this? >> It's just insanity. I I think it's just it's made a farce of markets. I what I want to know Patrick is what do you think that the Dow Jones transport sell signal is is valid? For those who don't know, this thing was 17% of the Dow Jones transports. So now like um this the car the Avis has permanently scarred the Dow Jones transports uh uh chart. Go look at it. It's also got a ridiculous spike on it. It's it's nuts. >> DJT or something. >> Uh no DJT is Trump's thing. It's TR. I don't know how you get it in the in in your charts, but um yeah, it was 1,800 at the at the end of March. It it spiked to 2500. >> It was it 50% increase in the transports because of this, >> right? So So all I can say is there's there's a lot of folks that used to use that is there there'd be some sort of signal. I can't remember you. you're the technician, you would know, but there's some sort of signal of the Dow Jones versus the Dow Jones transports. And um it's just permanently scarred. It's like COVID permanently scarred the unemployment numbers. Like you can't look at those charts without having to try to remove that. It's the same thing now. >> But back to this back to this car, completely ridiculous. >> It'll be it'll be interesting. Um a lot of people are talking about the competitor Herz because uh while the short interest at one point was like 80 plus percent on a Avis uh Herz has over a 50 plus percent short interest and what just like AMC rolled around like they take their turns cornering uh these short sellers and a lot of people are speculating whether Herz is next. Now I have no idea whether they'll be get the squeeze on but what I do know is Hertz had its implied volatilities double basically because of that. Um and so there was increased speculation that the there was going to be a squeeze here and the the dealers just jumped at implied so so rapidly in this thing. He'll be really curious whether Hertz just was a nothing burger or whether this uh ends up uh being the next uh kind of knock-on story. >> And and it's bringing this back to what I talked about when we first started talking about the stock market and you've kind of highlighted how we've gone back to the uh stocks of old. I'm not sure that this action is healthy, >> right? No. getting stocks doing this is not a sign of a of a well functioning market. >> Um, >> right. No. Okay. So, did so did the the you know the stock market is supposed to be an expectation about future cash flows of of the stock of the stock. Did the did the under did the market assume that the price of the or the future cash flows of AIS rent a car is going to be increasing by you know whatever the number was a thousand% over the last two weeks >> go back to this go back to reminisces of a stock operator and or think of all the stories you're using example of you're right you're using an example of when the market was very very precariously perched in and what was right before the 29 crash and there was no rules and people were getting burned and there was crazy stuff happening. So you're the fact that you bring that up is is a is just making my point. No, but but no no no actually no my point is is that there the idea of uh you trapped positioning and when one group tries to corner a market and another group comes in like think of Aman versus Icon with Herbal Life or uh any of these things what happens is that when you have a hund% of a like in GameStop where you have 100% of the float carried short by hedge funds and then you have a couple of players that come in there for a squeezing. This shit's been going on for hundreds of years. >> Not this not at this level. I I'll push back. >> Look, this is this is okay. The point is is that these kind of games have always been there. Yes, >> I'm not disagreeing that those games are there. >> Options markets allow huge amplification um uh of this. But anyway, >> I Patrick, the the the markets exist to provide uh price discovery so that companies can raise capital and and help our economy. >> It's always been a speculators market. Uh yeah, I'm going to get you I'm going to get you your um uh grumpy old man yelling at you can you can uh you can start your own uh movement. But like this markets have always been this you any one player comes in there and tries to corner something. It's the job of the rest of the participants to uh to to uh trap them. And this is the way the market has always been and it's not going to change. It's uh >> I I'm so I'm not as convinced as you that this market is healthy. And the fact that you brought up reminiscence is a perfect uh kind of um example of of a an environment that this reminds me of and and and so we agree that uh this is very much like reminiscence of a stock operator. >> All right. Anything else? >> No, that's uh that's it for the talking charts. So, uh, let's give this a show a wrap. >> All right. Thanks for tuning in, Patrick. Where can they find out more about you and your incredible analysis of the Swiggles? >> Well, you can uh follow my my channel on YouTube where I do the daily uh market analytics uh for free on the on the channel. It's Patrick Surreszna and you can follow my subscription at bigpicturtrading.com. And Kev, where can they follow you, buddy? >> The macroourist.com. And bull, listen. Bull market, bare market. We're just happy for you to spend some time together on this crazy ride. Now, stick around for the after show. Okay. So, no beer uh review cuz you've done I was missing I was just missing a nice squeeze of lime, you know, like uh this is a beer on a nice kind of warm day where it just needs a little citrus and uh I failed on that front, but uh I'm not going to score it. It's it's a Corona. Everyone knows how it tastes. That's >> um Yeah. By the way, while we were doing this between 10 and 11:00 this morning, did you see Nvidia? >> No. >> 200 to 208 or something right now. >> Straight up. >> That happened while we were recording because when I put the chart up uh like 40 minutes ago, >> the world the world completely just exploded. >> Is that a new high? I think it might be a new high. What is that? >> Yeah. Well, you know, you know what's crazy is like uh I was say I was saying that we should have added some and so the fact that I'm not in is exactly why it's going up. It's uh >> All right. Listen, I don't have anything. You have anything to say about >> uh Danny, you're on. >> Oh, okay. >> Danny, >> I'm here. Yeah, I'm here. Hello. >> Hello. Oh. So, uh, so, uh, what was cool, Kev, uh, I, uh, I had, uh, my, uh, birthday la the other week. >> Oh, congratulations. Happy birthday. I missed it. >> Thank you. And, uh, so those familiar with Big Picture Trading and, uh, and the membership and, uh, know uh, my little protege uh, Mile, who uh, basically comes on to the webinars with me and everything. And uh for my birthday, he went out of his way to use AI to uh write a song about me. >> Oh, why are we Can we include it? >> Yeah. And like he like Danny, what did you think of it? >> Well, I mean I I think it suits your personality very well. I think in in the the the beat, you know, the sound, everything. It's It's very Patrick. >> Okay. So, should we use it to play it out? >> Yeah, let's throw it in here. >> Okay. So, we'll use it to play it out. Well, happy birthday. Happy belated birthday, Patrick. And in the meantime, here is Miss Hill's um song that he wrote for you. >> All right. >> Take care, everybody. >> Thanks. Cheers. PPP the name that moves the room. PPP pat on the chart. PPP come in the dark. PPP head from the start. PPP pressure pack pressure pack. Delta gamma theta Vega. He plays them all. My deltas fly higher than Delta Airlines. Theta DK working for him while you sleep. Vega crush when B drops. He saw it coming. >> Gamma scalping like it's a video game. Head so heavy he never sweats. Calm while the market bleed. PPP pat on the chart. PPP calm in the dark. PPP hedge from the start. PPP hedge from the start. PPP pemmetry king. Small risk. Massive upset. Draws Fibonacci zones like a sniper's crosshairs. Always in the zones. Yeah, he's stacking up the bags. Bare markets are his playground. Everyone panic. Stock whisper all over commodities. Gold for energy. Metal G metals 100. Massel cooks him on jazz, but that's a different story. PPP pat on the chart. PPP calm in the dark. PPP calm in the dark. PPP heads from the start. PP pressure pack pressure. Happy birthday, Pat. The gold of the charts. PPP, we see you. Peer pressure pack.