Chaos overnight: Saudi declared war on Russia and pushed crude prices down to $32

• 00:03: sold some more softbank (9434)
• 01:49: Somehow bought 4 AUD. Think this was a left-over stop. Anyway, made money on it!
• 06:17: sold Mar Z.
• 06:33: bot GC (chaos, not inflation)
• 08:03: 21 Mar 3000 puts on ESTX50 sold at 155.30 and bought back (stop) at 181.90 40 mins later (ugh!)
• 08:46: Sold 1 MXEA Mar
• 09:04: sold 3 SX7P Mar
• 09:06: sold 1 TOPX Mar
• 10:22: bought 1 EUR Mar

Overall, had instinctive feeling that today was going down. Racheted up my exposure to $327.9K margin. Scary!

Mondays are odd, because the US markets don’t get going until the US morning, so there are no live prices for ES in the morning. Your exposure to the far east via US derivatives (FXI puts) is considerable. This is likely to be a huge day for you. The question now is how to avoid getting crushed by the bounce. You have to unwind, but what do you trade??

The most amazing thing about the markets is that no new information has appeared in the last week or two. Coronavirus was known about in January. The overvaluation of US markets was known then. The likelihood that US interest rates would go to zero (like in Europe and Japan) was predicted months and months ago. The weak growth of the world economy (especially the US economy, whose notional real GDP growth was boosted by dubious hedonic adjustments to the GDP deflator). None of this really mattered until a dislocation in the market forced participants (now, probably, algorithms channeling human actors) to see the world from a different perspective.

After lunch

No point in trying to list sales. Basically, you unwound some of your exposure through straight short futures positions in Australia, Japan, Europe. After an initial phase in which circuit breakers halted trading, the ES market started to rise. You actually bought one ES future.

At one point you were up 20%, $197K. You could not realise this, no bids or offers in many long dated options positions.

This morning’s (US time) action will condition the algos not to but the dip so enthusiastically in future. Whether I can replicate this performance again this month is debatable. Hopefully, the bull will be slain and we’ll grind down for the rest of the year. Margin back to ~$250K in >$1M. You still have a lot to make back.

3:30pm

Market recovering a bit. Bought a couple of ES, to blunt the impact.

Got short (via puts, looking for liquid ones) for MM, VZ, SBUX and BA. VZ because it seemed to have held up so well.

Lesson: good and bad stocks will be pulled down together because so much trading is via ETFs.

Wrap

One of the most extreme days in the market in recent history. Saudi, coronavirus, waking up. You were up 20%, which is good, but with many equities markets moving 7% this was not as good as it might have been. You kept your risk under control, and maintained your stops, so you were definitely more disciplined than you have been in the past.