Simon Ree's Linkedin Analytics

What happens when you trade expectations for appreciation? We saw Lady Gaga in concert last night. Now I'll be honest - her music isn't really my thing. I'm more of a rock/metal kind of guy. I like my concerts raw, authentic and a little messy. Sweat, spontaneity and a little bit of chaos on stage. By contrast, Gaga's performance was choreographed to the split second. A full-blown, theatrical audio-visual performance. Every movement, note and lighting cue was scripted with surgical precision. At first, I wasn't sure what to make of it. It felt too orchestrated...too controlled. But once I let go of my expectations...once I stopped comparing the show to what I thought a great concert should be, I gwas completely transported. Her vocal power, versatility, range - next level. And her use of mix voice? Enough to blow the roof off the arena. What struck me most wasn't just her talent - it was the discipline behind it. Gaga's strength lies in how she channels emotion through intentionality, like a masterful theatre performance rather than a jam session. Art with exclamation marks!! I walked in a sceptic. I walked out a fan. Here's the lesson: In life, in leadership, in trading - expectations can be our limiting factor. They frame our judgement and narrow our openness. But appreciation - for craft, for difference, for excellence in whatever form it takes - expands us. Sometimes the greatest breakthroughs come not from being right, but from being open. To new styles. New perspectives. New ways of doing things that challenge our assumptions. Because mastery doesn't always look how you expect it to. But when you trade expectations for appreciation, you give yourself permission to grow.

How can options activity drive a stock market rally? Let's unpack the mechanics of a "vanna rally" today! Background: the VIX recently experienced its second biggest vol-crush in history, declining 50% within 4 weeks (see first chart below) Leading into this sharp decline in volatility, we had seen a surge in put option buying (see second chart) Now, imagine you're buying insurance on your stocks through put options. The cost of that insurance is tied to how volatile market makers (dealers) expect the market to be (implied volatility - IV) Dealers who sell these put options hedge their positions to avoid getting burned if the market moves against them When a dealer sells put options, they take on long delta exposure, meaning they are exposed to the risk of the stock falling (selling a put is, after all, like betting that a stock won't fall). To hedge this, they need to short the underlying stock in proportion to the option's delta They will alter their hedge as the options' delta changes...enter vanna! Vanna is one of many Greek risk measures in options trading, but it’s a bit more niche that delta, gamma or vega. Vanna tells us how delta changes as implied volatility changes When IV drops (the market feels less risky, say, due to positive tariff headlines) it affects the hedging behavior of the market makers who sold (a whole bunch of) put options. A vanna rally refers to a self-reinforcing market move driven not by fundamentals, but my the hedging behavior of options dealers is IV drops and delta exposure shifts – particularly when there is large open interest in puts VANNA RALLY - THE MECHANICS 1.Dealers are short puts. To hedge this, they short the underlying stock 2.Implied volatility drops. As the market stabilizes, IV falls – the perceived riskiness of the market declines 3.Put delta decreases. Lower IV means puts become less sensitive to price moves, so their delta shrinks 4.Dealers’ initial hedge is now too big. Since the puts they sold noe have less delta, dealers are over-hedged. They are short too much stock relative to their new delta exposure 5.Dealers must buy stock. To reduce their hedge, dealers must buy back stock. This buying pressure can push the market higher, when put open interest is high 6.The feedback loop kicks in: Higher prices -> lower IV -> Lower delta -> more buying of stock to unwind hedges -> higher prices…etc When the fear in the market (implied volatility) drops, the cost of insurance (put options) goes down, and so does the risk for the dealers who sold that insurance They no longer need as much downside protection, so they start buying back stock they had sold earlier as a hedge This buying can push prices up when put OI is significant, which lowers fear (IV) even more…and the cycle continues… Vanna rallies can be particularly potent after a surge in put buying AND when implied volatility drops off a cliff 😉

Breaking things for fun and profit! So, they jacked up tariffs to 145%, watched global trade stumble, then graciously dialed them back to 30%. Markets cheered, and we're all supposed to feel like winners. It's like smashing your own car window, taping it back up with duct tape, and receiving applause for your ingenious work. The playbook: Step 1: Impose crippling tariffs Step 2: Watch supply chains blow up and prices soar Step 3: Realise you've broken something and reach for some super glue Step 4: Celebrate the "fix" and market uptick It's a masterclass in economic theatre, create the problem then bask in the glory of partially fixing it. Meanwhile, business and consumers around the world navigate the whiplash, while underlying issues remain unsolved...are tariffs really going to replace income tax and/or fix the Federal deficit?

The Fed just hit pause. What does that mean for you as an investor in Asia? I was quoted in The Business Times today discussing how this impacts Singaporean stocks and bonds, and what everyday investors might want to think about next. Here’s the bottom line: - Equities may find relief, but not all sectors will benefit equally - For Bonds, the pause takes the pressure off Asian central banks to hike their own rates to keep capital from fleeing to the US. That's a plus for stability - It’s not just about interest rates anymore - Asia lives and breathes global trade. Ongoing trade tensions will impact export-heavy sectors like tech and manufacturing If you're curious to unpack these implications a little more, here’s the piece:

The S&P 500 is +22% from it's April low and is now in the black YTD, in one of the biggest short-term comebacks in market history. It's also now only 4% from its all-time high. This is just the 5th time since WWII the S&P has managed to erase a YTD decline of more than 15%.

Strange day in the markets on Wednesday. The S&P 500 managed to close in the green (just), yet there were 204 more declining stocks than advancers. That’s rare. Since 1990, we’ve only seen this kind of negative breadth on a green close seven times, and most of those occurred in just the past few years. So what drove the index higher? You guessed it: NVDA, GOOGL, TSLA, MSFT... (as if you needed to ask 😉) I was chatting with Ryan Gorman, CFA, CMT, BFA (highly recommend following him!) about whether Monday’s big gap up might be an exhaustion gap - a gap that forms near the end of a move, not the beginning. 5900 is shaping up to be both a ceiling and a magnet for the S&P this week. But after Friday’s options expiration? I'm open to the idea that Monday’s gap could be tested… or even filled. Keep your eyes open. Breadth could be sending a signal.

The Fed meets today. No one expects a rate cut, but Powell’s comments will be key. The market is pricing: - 2 cuts in the next 6 months - 4 cuts in the next 12 months That seems at odds with the Fed’s repeated insistence that they’re in no rush. Powell is caught between: - A market desperate for cuts - Political pressure (especially with Trump’s recent remarks) - Optics of staying independent Any deviation from the "four cuts in 12 months that markets are pricing could result in disappointment.