TL;DR (action-oriented)

• Greed regime: tighten risk, require price confirmation, fade carry leverage; de-gross on plumbing stress.
• Fear regime: step in only with stabilization + improving liquidity; scale in (⅓-⅓-⅓).
• Always read context: extremes work best when aligned with regime and liquidity composites.

1) What “fear” and “greed” mean in a systematic shop

The quote is behavioral, but we make it operational by measuring two things:

• Sentiment: survey and options-implied risk appetite (put/call, skew, IV–RV).
• Positioning: flows and exposure proxies (futures positioning, breadth, fund beta).

Greed = consensus optimism + crowded risk. Fear = capitulation + under-ownership. Both are filters, not trades by themselves.

2) Measuring extremes (simple, robust proxies)

• Options tone: short-dated put/call, index skew, IV–RV spread.
• Breadth & momentum: % above medium-term MAs; thrust/overbought/oversold.
• Positioning: aggregate futures; ETF flows; fund beta.
• Credit & funding: HY spreads; funding stress/basis.

Compress to percentiles and tag regimes: calm, greedy (high tail), fearful (low tail).

3) Context first: liquidity and macro regimes

• Expanding liquidity + healthy growth: greed can persist—stand aside or scale out; don’t short strength without price confirmation.
• Contracting liquidity + slowing growth: greed is fragile—tighten stops; trim carry leverage; watch plumbing tripwires.
• Fear with improving liquidity: best hunting ground—look for stabilization patterns and scale into quality risk.
• Fear with worsening liquidity: not a dip, a trap—favor cash/duration; wait for funding normalization.

4) The Serapis playbook (auditable rules)

4.1 Entry & timing

• Against greed: only after price rolls over on your horizon and liquidity is at least neutral; start half size.
• Into fear: require capitulation + stabilization + non-worsening liquidity; scale ⅓-⅓-⅓.

4.2 Sizing & gross/net

Cap gross/net by the liquidity composite (contracting = low bands). Volatility-scaled sizing; “contrarian” ≠ “big.”

4.3 Overlays (tripwires)

• Funding stress override: if stress/basis breach thresholds, de-gross even during “fear.”
• Time stops: if the mean-reversion window passes, exit—don’t let “cheap” become a thesis.

5) Case studies (principle-first, abstracted)

Greed persists in easy liquidity: fading early loses; wait for momentum to crack. Lesson: extremes can persist; let price confirm.

Fear during plumbing stress: attempts to “buy fear” bleed when funding worsens. Lesson: plumbing overrides the heuristic.

Fear with improving liquidity: stabilization + neutralizing liquidity → scale entries. Lesson: context + staging win.

6) Checklists

Pre-trade (fading greed)

• Extreme high tail confirmed?
• Liquidity neutral or worse?
• Price confirmation present?
• Stops + time stop set?