My take on YOLO short squeeze and volatility..

I guess much has been said/written/memed about the most recent r/WSB YOLO short squeeze, and tbh have nothing really smart to add... but i'm puzzled by the pro-investment community reaction to this (namely HFs, bank sales desks

and prop traders)...

While squeezing traders position has long been a guilty pleasure of the Hedge Fund community (and few aggressive banks, with questionable motives to skew prices), everybody seem to be shocked that retail traders do that, and running a decent risk management

scheme...

My best recollection of a brutal position squeeze was the $12bn JPM lost on CDX spread (aka, the London Whale)

https://t.co/bDHAL2UwpX

Back in these days the entire market knew that JP's trader was, in fact, the entire position in the illiquid index (off-the-run)

so almost every credit trader that I knew traded against that position... Now, that's perfectly legal right? it's not crossing any legal boundaries of price manipulation, so why is it ok for pro traders to do that but it becomes shocking when your neighbor's kid does that?

and the CDX example is only one of a handful of examples of skewed position that got squeezed hard, the only difference is the orderbook distribution...

While in "normal" markets orderbook distribution oscillates between normal to slightly skewed, in the YOLO case I think that

Today's Twitter threads (a Twitter thread).

Inside: Pelosi kicks Katie Porter off the Finance Committee; and more!

Archived at: https://t.co/zf4VwiHi1P

#Pluralistic

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Pelosi kicks Katie Porter off the Finance Committee: Paging Upton Sinclair, Mr Sinclair to the white courtesy phone.

https://t.co/dZSiJ1xFry

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#20yrsago Teresa Nielsen Hayden’s formal excommunication https://t.co/7YzBVPa9pr

#15yrsago New discussion draft of GNU General Public License is released https://t.co/s75A4o6n6G

#15yrsago Firefly fans trying to raise enough $ to produce a new season

#15yrsago King Foundation uses copyright to suppress “I Have a Dream” speech https://t.co/PeYSLzHkuq

#5yrsago Worried about Chinese spies, the FBI freaked out about Epcot Center https://t.co/yzSSdYBikn

4/

#1yrago Court case lays bare KPMG’s crimes: poaching employees from its own regulators and making them steal government secrets https://t.co/JdLATfUqF2

5/