Stocks Slide After Catalyst Confirms It Was Behind The Market Ramp

Tyler Durden's picture

Confirming what we detailed previously, the levered option fund 'Catalyst' CEO just announced that their forced-buying has concluded.

In a statement issued to CNBC's David Faber, Catalyst Fund's CEO admitted that it had a number of short call options for Feb S&P500 expiration this week but that it no longer has kind of position "at this time", adding that it had taken action "to buy back options, though wasn’t forced to sell" which caused some losses to the fund and has had some drawdowns, though not under duress "or anything like that" currently and its positions are "pretty neutral."

Per the Catalyst statement provided to CNBC:

... we no longer have that type of short position at this time. Consistent with our overall risk management strategy we have some draw-downs where we decided to take action and we are pretty neutral with our positions at this point.  


We finished adjusting the portfolio.


I've seen some things in the press about the fund and short term forced-buying, we've had no margin issues.


The fund is under no duress or anything like that. We weren't forced to sell."

The Catalyst Hedged Futures Strategy Fund (HFXAX) net asset value has tumbled 13.5% YTD, and has $3.4b assets under management, according to Bloomberg data,.

And just as we warned was likely, once that forced buying ended, stocks tumbled:

So now we find out, just how much of the last 150 S&P points are due to the liquidation of 'Catalyst' (and strategies like it)?

As RBC's Charlie McElligott warned:

This equities upside short-gamma grab has taken out a ton of ‘bid on the downside’ in equities index, in the case that we were to see any sell-off post a Trump speech disappointment.  This lack of cover-demand on a vacuum-move could see sloppiness develop, as it seems that the data and Fed itself are no longer dictating the market story at this stage - whether stocks, fixed-income or vol.  “Policy” is now firmly “in the driver’s seat,” and that is where I see the least degree of confidence in the market.


I’m worried that this stock ‘melt-up’ move is extraordinarily mechanical right now - almost entirely the aforementioned forced-covering, not high conviction induced-buying - and may be sending a “false signal” which is potentially dragging-in new buying on the breakout to new highs.

As he concludes: "This could lead to a scenario where a market can “collapse under their own weight." Indeed, because if one removes the forced buying from the "blowing up fund", there is certainly a long way down.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
LawsofPhysics's picture

More on this guy? WTF tylers?


LMFAO!!!  carry trade on!

SomethingSomethingDarkSide's picture

Today is more like Carry Trade Off!  Just watch UUP slam and crash through those dma's..

LawsofPhysics's picture

Depends on the actual trade.  USD:YEN definitely done, as others around here already foretold.

spastic_colon's picture

100% BS.....great marketing for catalyst tho.......dow down 50; s&p down 8; nas down 20; and the VIX is up .80 when yesterday it was UP 1.3..........either catalyst is working with citadel and the fed or this story is fake......scapegoat much?


markets have probably already asked for self help as my screens keep blinking out with a -0.18% down!! the sanford berstein analyst was right about market marxism.

LawsofPhysics's picture

I don't see one firm doing shit, especially considering that these "dark pools" around the world may in fact be quadrillions of FRNs deep.  It's still a "race to the bottom" for fiat, but the Fed needs to be the "loser" in this race if they are to be the one that controls the "solution".

It is and has always been about maintaining power and control, period.  The ONLY thing the Fed really controls is in fact the Federal Reserve Promissory note.  Yes, ultimately they must defend the FRN to stay relevant in global trade.

GUS100CORRINA's picture

WOW!!! Really? One firm can move TRILLION DOLLAR markets?

This maybe BS or it may NOT be BS.

But if any part of it is TRUE, it just shows how fragile the markets (casinos) have become?

This kind of stuff is maddening because it shows just how corrupt the system truly is in the year 2017.


Vlad the Inhaler's picture

it's nothing new, read Reminiscence of a Stock Operator, the big boys moving the markets is old as the game itself.

xvvx23's picture

Indeed it does.


Algo's combined with stock options a recipe for mayhem.  Would not surprise me if this one guy was behind it.

GUS100CORRINA's picture

END THE FED and this nonsense!

Mr Pink's picture

What kind of suicidal maniac still has their savings in these "markets"?

SomethingSomethingDarkSide's picture


HenryKissingerChurchill's picture

"we've had no margin issues... We finished adjusting the portfolio... The fund is under no duress or anything like that."

while talking about BILLIONS??? that's gangsta !

buzzsaw99's picture

Too bad you're not on welfare (goldman sachs), I'd give you a freebie. [/Prostitute (fed & fedgub), Magnum Force ]

catalysis's picture
catalysis (not verified) Feb 16, 2017 11:14 AM

So many stories about Trump, I almost forgot this was a financial website.

Soul Glow's picture

When a $17 B fund is short this is bullish to the algos.  This is the insanity that we are dealing with when it comes to the rise of machines.  They do not rationalize market behavior, because they know there is no market.  They just want to flip bids and front run pennies.  Welcome to the Brave New World.

johnjkiii's picture

We know what they're doing and how they're doing it. If we follow the cash we're long or short when they are. Our job is to make money not worry about why it's going up or down. Just be happy to allow them to make you wealthy.

NoDebt's picture

"The fund is under no duress or anything like that. We weren't forced to sell."

Isn't that what you say when your fund is under duress and is forced to sell?

Mr. Bones's picture

Not in default, indefinitely in arrears.

Could definitely use a "what they said","what they really meant" dictionary.

ptoemmes's picture

So price discovery and correcly valuing equtities for the (long term) investor does work


/sarc off

chief's picture

there is a difference between a ramp stopping out someone and someone causing a ramp - clearly not this guy.

aminorex's picture

I think I just found Nav Sarao's lost 50 mm usd.

kahunabear's picture

So, if it's concluded and we aren't dropping, obviously, it didn't mean shit. Convexity and gamma must not be so important after all.

Dragon HAwk's picture

We Weren't Forced to Sell.

  we just thought it was a real fucking good Idea

Spectre's picture

The Crooked Casino will last indefinately, till it doesn't !

RogerMud's picture

well, it was fun while it lasted.

jamesmmu's picture

Sorry, Its hard to believe it. 

SumTingWongJr's picture

That fucking corrupt greedy weasel is probably full of shit.

Occams_Razor_Trader's picture

I knew the end was nigh- I just didn't know it was today!

Up Trend Still Intact.