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Cem Karsan Explains the Quarter-End Flow Most Traders Never See
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ticker lesson
Breakdown
0:00lesson
End of quarter flows and structural rebalancing
- End of quarter is bullish due to releveraging flows
- Structural rebalancing from $30T equity exposure
- End of year is biggest driver of Santa Claus effect
- End of quarter is mini version of end of year effect
1:49lesson
End of month/quarter structural support
- End of month/quarter is structurally positive
- Front running of flows ahead of events
- Administration pushes markets up at end of quarter
- End of quarter marks leverage ratios for borrowing
3:36lesson
Portfolio drift and rebalancing effects
- Divergence between stocks and bonds influences rebalancing
- Risk parity rebalancing effect is smaller now
- Institutions and pensions drive rebalancing
- Net pressure is up despite two-sided pressures
5:26lesson
Dealer positioning and strike activity
- JP Morgan hedged equity trade is rolling
- Strike is 5% above market at end of quarter
- False selling trade at end of year expiration
- Implied volatility compresses before expiration
7:06lesson
Volatility trends and market expectations
- FXVA and gold vaults are top performers
- Interest rate and FXVA are preferred assets
- Equity vault is compressed, rate vault is increasing
- Dispersion will remain high due to structural factors
9:13lesson
Market skew and tail events
- Left tail skew expected in next 9 months
- Dispersion will stay high due to structural factors
- Midterms could trigger correlation of one
- Tail event similar to COVID could drive opportunities
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