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Nancy Davis on Why She Buys Options While Everyone Sells

NowPress play to follow along0:00 / 15:01
Chapters8 segments · tap to seek
ticker lesson

Breakdown

0:00lesson

Interest rate dynamics and Fed policy

  • Fed hikes 25 basis points in threeish years
  • Narrative in press conference focuses on data dependency
  • Focus on PCE and working groups
  • TIPS as new inflation measure
1:55lesson

Inflation measurement and market implications

  • Inflation gauges show high inflation
  • Oil prices continue to rise
  • Fed's hand is forced
  • Yield curve flattening
  • Inflation expectations via yield curve
3:54lesson

Options market and implied volatility

  • S&P implied move ±70 points
  • E-minis down 40 points
  • Implied movement through end of week
  • Fireworks expected
5:38lesson

Options strategies and bond portfolios

  • Vanilla bond portfolios short interest rate options
  • Negative convexity
  • Prepayment risk
  • Collable bonds and corporate long options
7:44lesson

Curve trading and options usage

  • Curve can go to infinity or massively negative
  • Long options to capture curve direction
  • Backwardated curve
  • Rolling term structure
9:48lesson

Options strategies for volatility

  • Continuous positions in MEES and MNQ
  • Roll premium throughout the year
  • Short front weekly, buy back
  • Hedge directional moves
11:42lesson

Directional exposure and market-based expectations

  • Options for curve sensitivity
  • Inflation and deflation expectations
  • Market-based measure vs CPI/PCE
  • Different way to get exposure
13:47lesson

Creation of Ival ETF and market insights

  • Aha moment with TIPS in late 90s
  • Profit from higher inflation expectations
  • Ival ETF created in 2018
  • Hedge for credit spreads and inflation

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