1/ Here's a new 🧵, which I plan to revive every 10 days or so. I'll set up an options structure in a market that's "hot" right now, expressing a view while taking advantage of structural inefficiencies in the market.

Reading this article for the nth time, I'm forced to ask, what would an AI system have done under the same circumstances? It's worth pondering nowadays. 1983 Soviet nuclear false alarm incident - Wikipedia

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@unusual_whales.

9/ As ever, this should not be construed as investment advice. Thanks for reading this far.

8/ However, if Sep futures start drifting toward 96.125, dealers may have to buy futures as their short deltas increase, with the call spread acting like a giant magnet. The mega buyers will benefit from feedback, if they are able to quietly manage their position.

7/ Even the 96.125 strike is quite far out of the money, as the Fed funds market is currently pricing a 25 basis point cut in September. A 50 bps Bessent influenced cut pushes us slightly beyond the 96.125 strike at maturity. Not bad, but not ideal.

6/ Open interest picked up substantially at both strikes, indicating a call spread going through the market. Skew flattening in the 96.10 to 96.2 area suggests that the orders were a resounding BUY. Dealers raised their quotes for the call spread, locally compressing the skew.

5/ Using Allasso Copilot, we see a significant increase in open interest for the 96.125 and 96.25 strikes expiring on 12 September. The bar charts below have been taken from 4 and 13 August, respectively.

4/ Here's a time series of the underlying futures, taken directly from the CME website.

3/ To repeat, while Unusual Whales offers fairly comprehensive coverage of listed options on US securities, we need a work around for rates and commodities. The recent mega flows into SOFR 3 month September futures options caught our attention.

2/ The overarching idea is that, when open interest increases sharply at certain strikes, a large new position is being established. Maybe the options market knows something, but at the very least, this mega trade has the potential to distort markets.

1/ This thread takes a cue from @unusualwhales, with help from the Allasso engine Whales scans for unusual options flow predominantly in US equity options, but we can extend the idea to other markets, such as short-term interest rates.

A new commodities article, co-authored with @StephanSturm and several excellent students from an NSF sponsored REU program has been published in the September 2025 issue of Wilmott. Please see below.

Not every day you see a turtle at the Starbucks, Hampstead UK

9/ Recall that none of the material in this thread should be considered an investment recommendation. Thanks.

9/ Nonetheless, I would hope to see a reduction in open interest along the farther reaches of the put skew before implementing the strategy as an "all weather" hedge.

8/ Does this spell the end of the short 1x2 put ratio as a viable tail hedge? Not necessarily, as a strategy that doesn't back test well can still be successful in practice, given selective entry points, efficient delta hedging and so on.

7/ This is true even in delta-adjusted terms.

6/ Open interest, has loaded on the far if not extreme downside. Clearly, some market participants haven't forgotten March 2020, along with the potential for more radical political uncertainty.

5/ The long term back test is extremely attractive, especially if we are quick to take profits during pre-2020 profit spikes. Historically, this was a fine tail hedge. However, post-Covid, we see far more decay in the strategy. The 5 delta skew seems relatively rich nowadays.

4/ The trade provides significant downside coverage as we cross the lower 5175 strike. It also provides some edge if we believe that the odds of a move down to 5175 is higher than the the market odds of 1 in 20.