Trader axiom: "The reaction to the news is more important than the news itself". That's now a problem, because the market is so highly levered that small news items cause outsized reactions. Take the 1/27 DeepSeek headline, which drop-kicked $NVDA 16% in one day (losing >$500bn in market cap) leading everyone to focus (and overreact) to it as this imminent threat. NVDA is a massively levered instrument as its the #1 options volume stock, and has billions in levered ETF's. The question is - if NVDA was down just 50bps on 1/27 would anyone have really cared? The takeaway here is that these levered, "reactionary" unwinds may present tradable opportunities (mean reversion) because levered flows may be making reactions more extreme.
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