Derivatives are bigger in value than underlying equity assets, says ModernIR CEO Tim Quast

Market Structure & Volatility - Market structure analysis provides accurate insights into market movements [2] - The probability of volatility returning in late Q3 or early Q4 was observed [3] - Market movements are often mathematical and predictable, not solely driven by news [5] - The "123 rule" suggests a relationship between SPY movement (1%), underlying stock basket movement (2%), and momentum (3%) [6] - Narrowing spreads in SPY (50-60 basis points) can signal potential market trouble [6] Institutional Investor Behavior - Growth funds may hold significant cash positions due to redemptions [7] - BlackRock gathered $26 billion in assets in a quarter, deploying most into large caps [7] - Market makers like Citadel, Susahana, and Jane Street price large caps, with economics breaking down when spreads narrow too much, leading to volatility [8] Options Market Impact - The volatility of volatility in SPY reached the sixth largest in modern data sets on October 10th [11] - A long period of neither hot nor cold market conditions occurred since 2018 [11] - High volatility and a long period without a reset increase the probability of market trouble, especially around options expirations [12] - Zero days to expiration options have a $12 trillion notional value daily, exceeding the daily stock market value of $800-900 billion [13] - New options series reset on Mondays, making them potentially important [13] - VIX expirations occur on Mondays and Wednesdays, with market stability uncertain until Thursday or Friday [14]