Why the Big Drop? Everyone Is Short on Cash
These past few days I kept waiting for big buy orders to come in. They did show up, for example:
$SPCX 20270416 215.0 CALL$ — 12K contracts bought, over $10M traded;
$DRAM 20270319 60.0 CALL$ — 30K contracts bought, over $10M traded;
$CRWV 20270319 85.0 CALL$ — 14K contracts traded, close to $10M+.
Today, during the big selloff, DRAM $DRAM 20270416 60.0 CALL$ opened another 27K contracts, over $9M traded.
But these big orders have one problem: they were bought too openly. You can find them by searching Tiger's desktop unusual options activity. Normally, big players' bounce bets are bought quietly, and they try to use capital as efficiently as possible by buying out-of-the-money calls expiring within 3 months.
Choosing expiries far out can be seen as avoiding crowding with market makers. But usually, at a bottom, market makers have a hard time stopping a bounce. So it suggests they still lack confidence in a near-term bounce.
There's good news for Hong Kong and A-shares: Thursday was the last day of the transition period for offshore trust tax top-ups, so stock selling can pause. By comparison, Trump accounts are another kind of tax top-up for wealthy Americans.
There's bad news for US stocks: this special American-style tax top-up got bigger today. Republicans reportedly plan to expand Trump accounts to people under 40.
My feeling is everyone is short on cash now — politicians are short on cash, companies are short on cash. Meta's earnings were good, but on the call it said it would start raising money this fall, so the stock dropped hard.
So the reason for this market crash is almost funny and awkward: everyone is out of money. Is the Fed really going to announce a rate cut at next week's FOMC?
The SPY 37K-contract short position opened Wednesday hasn't been closed: SPY20261027767.0PUTSPY20261027767.0PUT. Looks like they're waiting for Friday.
The other big sell call order, SPY20261113795.0CALLSPY20261113795.0CALL, also makes sense. For now, unless helicopter money starts, SPY will have a hard time rising above 795 before Nov 13.
QQQ's representative bearish big order is the 696 Put: $QQQ 20261030 696.0 PUT$ . During the session, part of the position was rolled to the Nov 6 691 Put: $QQQ 20261106 691.0 PUT$.
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