Someone call a top!!

Posted by papermaker67 on February 05, 2012 (02:08PM)

Once you understand the time component of options trading, you can use it to your advantage. Fortunately, I’m not widely read, or else I wouldn’t admit that it is due to the time component that I am almost always a seller of options, not the buyer. 

If you are selling puts on SDS it doesn't help to be the seller.

Posted by spshapiro on February 05, 2012 (03:34PM)

Although decay accelerates as expiration approaches, it is present throughout the whole length of the contract, otherwise the whole notion of an option as a right to buy/sell so many shares for such a length of time, would not make any sense. Think of the decay as an asymptotic element, and you will get a good picture.

To me, stock choice should predate option choice. It is perfectly conceivable that I would find a good stock that either had no options or didn’t offer a rich enough premium to make the risk worthwhile. When it comes to stock choice, I recognize that there are many different roads (plug in R. Frost here.) My preference is usually for mature companies, with rising earnings and dividends, in industries where they have leadership qualities and/or a technology/patent that makes it likely that they can gain/maintain a leadership position.

And as far as SDS goes, I have not ever been a card carrying member of Students for a Democratic Society, nor would I ever trade a multiple ETF. Stock selection comes before option selection.    

Posted by papermaker67 on February 06, 2012 (12:58AM)

And as far as SDS goes, I have not ever been a card carrying member of Students for a Democratic Society, nor would I ever trade a multiple ETF. Stock selection comes before option selection. 

Sage wisdom---

Posted by RKKashmir on February 06, 2012 (11:30PM)

I am now understanding why you would never trade a multiple ETF.  Monday's market action price on UVXY was disgraceful.

Posted by Stevie B on February 18, 2012 (05:02PM)

The trend is still up until it isn't...

Alphatrends Stock Market Analysis Week Ending 2/17/12

Having said that I have been going against the "don't fight the trend" rule and buying small positions in a few short ETF's every time the market makes a 100 point or more run up, even a few June Calls. So far that has become an exercise in cost averaging though.

Posted by incubus on February 18, 2012 (06:29PM)

RKKashmir said: I am now understanding why you would never trade a multiple ETF.  Monday's market action price on UVXY was disgraceful.

 I responded to your blog, hopefully you sold, it's arguably THE single worst ETP on the market, it has roughly two times the level of decay of regular leveraged index ETF's.. (same as TVIX)

~~~

As for market direction, last I posted this thread the SPX was @ 1320 and I was pretty sure we had a little more upside to go, strictly guesswork on my part.

Mindful I'm long/short and direction is relatively moot to me, I think I'm going with Carter Worth's near term take - We're at the highs of last year and numerous buyers back in April/May 2011 are probably going to sell after waiting almost a year to get back some money.

I have no clue where we go after a near-term correction of 3%-5% (if we get one), my suspicion is that the big boys will use Greece as a reason to promote the bear as low as they can get it for more buying....but that trick is getting old, not sure how much paranoia the bond vigilantes can generate this time.

In an age when over 43% of the market is owned by 1% of the population and 70^ of all volume is HFT that trades for that select few that owns 43%, I have found it best to think like they might.


Posted by Stevie B on February 18, 2012 (07:24PM)

incubus said:


Mindful I'm long/short and direction is relatively moot to me,


That is a position that I have chased for the last few years of my self proclaimed swing trader  phase.

I am curios though; does your long/short position look for profits or are you just trying to preserve capitol?

Posted by incubus on February 18, 2012 (08:09PM)

Both, capital appreciation & yield is obviously less than being all long, though I do favor the long side.

I buy/sell incrementally based on market levels and other criteria,.I was much more long back in August through November, now my ratio of long/short is more bearish with the S&P up so much in such short time.

While the guys that are long make much better gains than I do to the upside, periods of decline are where I get to boast, it's been a great 6 months for me.

Posted by Janosik on February 19, 2012 (10:30AM)

incubus said:



I have no clue where we go after a near-term correction of 3%-5% (if we get one), my suspicion is that the big boys will use Greece as a reason to promote the bear as low as they can get it for more buying....but that trick is getting old, not sure how much paranoia the bond vigilantes can generate this time.



 Greece will default, won't it?  It's just a matter of orderly vs. disorderly.  I'm only 20% to the short side right now, so that could signal an upcoming correction (I'm usually directionally challenged).  We'll see Tuesday.

Posted by Market Pawn on February 19, 2012 (11:20AM)

Janosik said:


 Greece will default, won't it?  It's just a matter of orderly vs. disorderly.  I'm only 20% to the short side right now, so that could signal an upcoming correction (I'm usually directionally challenged).  We'll see Tuesday.

 I'd say Greece is fully baked in, and I wouldn't fight the tape for quite a while.  That 1340 level has held three times.  So much liquidity in the system.  What is the downside catalyst?

Posted by OldFart on February 19, 2012 (12:09PM)


everybody is bullish

Posted by incubus on February 19, 2012 (01:06PM)

With OF on that, plus, I can't remember the last correction that was advertised.

That said, SPX is up ytd 8% in 7 weeks, granted last year was flat and this is likely make-up, but a rate of 1%+ per week for the broad market isn't sustainable, the argument is that we"need a healthy correction"..

All we need is an excuse, I found this article interesting this weekend - http://www.gallup.com/poll/152753/Unemployment-Increases-Mid-February.aspx 

Posted by Stevie B on February 19, 2012 (02:45PM)

From Reuters

RPT-Wall St Week Ahead: Stocks may strain to hold 9-mo highs

This quote from thew article suggests to me that this market could head south just as fast as it climbed...

"The index ended Friday at 1,361, its highest since May 2011. That was above a Reuters poll forecast in December that the index would end 2012 at 1,340."

I wonder what the poll would return today.

Posted by spshapiro on February 19, 2012 (02:52PM)

I’ve seen too many years which started out well (like last year) and then the gains are dissipated, perhaps even more than totally lost (like last August.)  It gets a bit disheartening. I don’t know when this bull run will end. That it will end, is certain. I am convinced that timing the market, to jump all in or out, is a fool’s errand, at least for me.

When you take your ball and go home, you can be seen as a spoilsport, but they can’t take your ball from you, if you took it home. For that reason I think it never hurts to take a gain. In fact it often ‘does the soul good’. Yes, you have to pay taxes on a taxable account. But even for the fattest of fatcats, you get to keep a large percentage. In a traditional retirement account, you don’t pay tax on any gains until you withdraw, and in a Roth it is all yours.

Once you stop trying to guess the top, you can relax. You have given up on being the best, winning the whole thing, for the satisfaction of taking home something. Over time that something, might just be better than average. Hey, we can call it the Lake Woebegone School of investing.

Posted by Stevie B on February 19, 2012 (05:29PM)

Have you guys/gals seen this? Dr. Doom sounds the all clear bell? Now I am getting scared.




If Meredith Whitney starts talking about the strength of the financials I am so outta here!

Posted by spshapiro on February 19, 2012 (08:36PM)

There are some market pundits whose thoughts are of more interest to me than others. There are many who I think look at it as a mere means to mollify the masses (see, “Where are the customer’s yachts?”) But in the end, even the best of them, don’t/won’t/can’t take your or my interest to heart. Frankly, we don’t know if Dr. Roubini has dollar one in the market at this time, or not. So, at best they might serve as a sign post, but we have to decide whether someone fiddled at the intersection with the direction.    

Posted by Midneo on February 23, 2012 (05:43PM)

The top is coming... don't worry

Posted by incubus on February 23, 2012 (07:00PM)

Midnoe, right, we're due for a 5% or 10% correction.

The problem, that could be 5% down from 10% to 15% up from here.

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