Forward Note - 2025/05/13
Nightmares, rumours and prestidigitation.
Let’s start with the sequel: Trump blinked. And not just once — twice. Late last night, word came that phones would also be spared in his erratic tariff war, which has already twisted the market into knots over the past week.
While some were busy laughing, and others exhaling in relief, a few were doing something else entirely: counting dollars. Who, exactly? Good question. We’re wondering the same.
Let’s unpack what we saw as the most intriguing twist of the week.
We were just wrapping our pre-market call on Sunday night when futures opened deep in the red — down 5% overnight — with inferred VIX flirting with 70. It was a bloodbath, and the week hadn’t even begun. The eerie part? Despite Trump proclaiming it was a “great time to invest in America,” there were no signs of early bargain hunters. No dip-buyers charging in, even with steep discounts just days before Q1 2025 earnings season kicked off.
And Monday’s open didn’t disappoint — chaos across the board. VIX just shy of 60, and… the first rumor sent the market spinning. A tweet from Walter Bloomberg citing Hessent claimed Trump was considering a 90-day extension from its tariffs. The market ripped +4% in 20 minutes — only to give it all back within the hour when the White House confirmed (sic) it was fake news.
And yet:
– The account kept tweeting.
– No SEC probe.
– No retraction from CNBC, who aired it.
– No clarification from Reuters, the supposed source.
Pause here. Go back. Re-read that paragraph.
So… was it a rumor, or wasn’t it?
We usually stay clear of political takes, but given that just two days later — on Wednesday — Trump did announce a pause for every country except China, triggering a near +8% melt-up (third best daily gain since 2008), we have to ask:
Was this just peak amateur hour at the highest levels of power — à la Signal Group Chat gate? Or are we witnessing the most mischievous act of market manipulation… hidden in plain sight?
To be a good prestidigitator, one must occasionally agree to look like a fool.
“Isn’t it your card? No?? Really?? Damn… I was so sure it was…”
We remember a professor once telling us: it’s far easier for an intelligent person to play dumb than the other way around.
Twenty years later, we’d refine that:
It’s far easier for the most cynical among us to play dumb — and leave the table with the loot.
Think about it. When every word you utter can turn a mere nightmare into a full-blown horror story, it’s not that hard to run a live test on market reactions. Leak something. Watch the spike. Deny it. Then confirm it later — and soak up the heat from analysts, journalists, fund managers, and retail traders left dazed, disoriented… and, by the laws of the market, at least half of them empty-pocketed.
But hey — just a silly hypothesis. We, of course, have no proof.
We could go on with a blow-by-blow recap of the week’s events and the escalating U.S.–China tensions. But really, here’s all you need to know:
Trump struck a defiant tone on Tuesday, telling the nation “I know what the hell I’m doing” — only to do the exact opposite the very next day. Apparently under pressure from some very influential names on Wall Street — starting with the king himself, Jamie Dimon.
Throughout the week, analysts scrambled to locate the “Trump put” — that elusive moment where he’d step in to stop the bleeding. And while he held his cards long enough to make it seem like the put was dead, he eventually… folded.
If we keep toying with our totally silly hypothesis, it’s possible that Trump the businessman was the put all along — and that by Monday, certain players had already gotten the memo: S&P below 4900 was a deal too good to pass up.
But there’s another put worth considering: the words of Wall Street’s heaviest hitters — and their apparent influence on the President, should he decide to light another match. That would be music to the ears of one Jay Powell, the market’s usual savior, who didn’t even have to say a word this time. Though we wouldn’t be surprised if he broke a cold sweat or two on Tuesday, just like the rest of us.
After the Apple news yesterday, we now think that outcome is unlikely. But then again, we also thought it was impossible to see daily realized volatility hit 100.
And yet — here we are with a monthly realized just shy of 40 in the SPY.
In mountaineering, once you pass the 8,000-meter mark, it’s called the death zone — oxygen thins out, and your body starts to shut down. The same holds true for most retail traders: we’re not meant to operate at this kind of altitude for long.
Ideally, you want to trade just enough to stabilize the portfolio — position for what can be, maybe even wait out the resolution. And sometimes, the simplest move is just… to be long. That’s exactly what we did Thursday morning after China’s retaliation to Trump’s 104% tariff. The market’s reaction? Far tamer than earlier headline shocks — and that alone told us something.
In a week full of questionable decisions, that one may have been our best.
If there’s one takeaway from this manic stretch, it’s this: yes, fortunes can be made in moments like these. But if you’re not prepared to operate at this altitude, you might just end up saying goodbye to your savings. Choose wisely.
What’s next?
That’s hard enough to predict in normal conditions — and near impossible in a market ruled by headlines. Still, we’ll be watching Monday’s reaction closely following the latest trade war détente. From a pure data perspective, the most similar term structures to the ones of Friday points to moments when realized volatility faded, yet stayed high for a while. And this is definitely what we need to gear towards.
Technically, volatility will be dirt cheap to realize. But is this really the time to start buying again?
Let’s be clear: the trade war is far from over. China may have dismissed Trump’s tariff theatrics as a joke, but we doubt they’re laughing behind closed doors. If anything, they’ll take this round more seriously. And beyond Beijing, the real damage may already be done. At 145% tariffs, we’re not talking about a tiff — this is essentially an embargo.
Yes, global business leaders will welcome the 90-day pause. But it’s unlikely they’ll spend it banking on a rosy resolution. More likely, they’ll use it to reassess supply chains, rethink partners, and prepare for a world where the old playbook no longer applies.
From a trading standpoint, while insurance still looks expensive outright, it may be worth picking up a few extra long-term protections — especially around the 90-day mark, when the tariff pause is set to expire.
Why? Because the current assumption is that deals will be struck in time, or that Trump has learned his lesson and won’t pull another stunt.
We’re not so sure. We’ve always wondered: what’s more addictive — power, or making a lot of money?
Maybe it’s the thrill of cunning everyone… while doing both.
In other news
Several Wall Street heavyweights showed signs of disarray early last week — and made sure to voice it publicly. From Bill “crying” Ackman to, of course, the king himself: Jamie Dimon. In finance, credibility is currency — and Dimon has now reached levels worthy of the man whose name still graces the bank he leads: Jupiter Morgan. So when he stepped up to say the situation was putting everything at risk, people listened. Apparently, even the President did.
That’s good news — it shows some guardrails still exist outside the political circus. And it’s a notable shift: normally, it’s the Fed that plays party-saver-in-chief when things go south.
Yet this chaotic Q1 didn’t go to waste for JPM. The bank just reported surging profits from its trading division. Oddly enough, financials as a sector have been consistently punished by the market throughout Q1 — especially last week.
Let’s see if the rest of the earnings season brings the clarity the market’s been looking for.
Thanks for sticking with us to the end. As usual, we leave you with two articles we thoroughly enjoyed last week:
dives deep into the process of alpha generation — and doesn’t shy away from highlighting the limits of the terminal. A must-read if you're looking to rethink your data pipelines… and maybe, just maybe, bring LLMs into the picture?And while we're at it:
has a fantastic piece on what might become a fundamental building block for AI agents — the Model Context Protocol. Definitely worth your time.
That’s it from us this week. We wish you a smooth ride, far from the death zone — and as always, happy trading.
Ksander
Contact at info@sharpetwo.com.
Disclaimer: The information provided is solely informational and should not be considered financial advice. Before selling straddles, be aware that you risk the total loss of your investment. Our services might not be appropriate for every investor. We strongly recommend consulting with an independent financial advisor if you're uncertain about an investment's suitability.