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Market Anomalies: Why 'Cheap' Options Are a Trap

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ticker lesson

Breakdown

0:002Y/10Y· ticker

Yield curve flattening signals aggressive Fed

  • Two-year yield jumps > 10-year
  • Curve flattening = Fed rate hike expectations
  • Jobs report beats estimates by 4σ
  • Labor market narrative shifts to stronger growth
1:53ZB/ZN· ticker

Short bond positions after strong jobs report

  • Exit ZB/ZN long call spreads
  • Short delta exposure in bonds
  • Put verticals in 108-109 range
  • Bearish on 30-year treasuries
3:43lesson

CFTC report limitations for timing

  • COT report delayed by 5 days
  • Data window closes Tuesdays
  • Use for long-term positioning
  • Avoid overreacting to outdated data
5:30LULU· ticker

Volatility skew analysis in LULU

  • Compare OTM puts/calls at 99.48
  • Skew points to upside risk
  • Sell 97 puts, buy 95 puts
  • Base trades on skew shape
7:32SPX· ticker

Box spread financing cost analysis

  • Box spreads finance cheaper than margin
  • P&L treated as interest expense
  • SPX European-style options
  • Avoid single-stock box spreads
9:35lesson

Hard-to-borrow stock mechanics

  • Shorting hard-to-borrow stocks = higher costs
  • Synthetic shorts via put/call combos
  • Put-call parity reflects market pricing
  • Avoid cheap-looking synthetic positions

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