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IDS World Markets Tues 27th October 09


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What do you mean? THere is a tremendous advantage is being the SELLER of options -- just ask Shorty, who sold naked BIDU calls yesterday -- pure profit for his gutsiness now.

Ah seriously.

 

Look at the pricing models that the market makers use.

 

This is not debatable.

 

Options are priced AT the cost of hedging.

 

Non-arbitrage pricing .. Finance 101 .. etc..

 

p.s. Please for one's own safety, learn this.

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Schwab: The S&P/Case-Shiller Home Price Index was released this morning and showed a decline in home prices of 11.3% year-over-year (y/y) in August – less than the 11.9% fall that had been expected.

Maybe news that's "less shitty than expected" no longer provides quite the same euphoric effect...

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I found a fly in the ointment. Despite all the selling that’s happened over the past 5 weeks, the market has hardly budged. It occurred to me this am that this is perhaps the most lopsided my distribution/accumulation counts has ever been! I even went back to the crash of ’08 and could not find any rolling 5 week period where the distribution days where higher than they are now.

 

Just for reference, we have now seen 9 dis days on the S&P, 8 on the DOW, and 6 on the NAS over the past 5 weeks. During the period from 5/30/08-6/27/08, when the markets topped and started to slide, there were 8 dis days on both the SP & NAS. During Aug-Sept months I could find 7-8, and during the Sep-Oct months I could find 8-9 days.

 

While this may sound like silly bean counting, what I’m getting at is that from my school of thought, we’ve seen as much selling as ever occurs in any 5 week period. I don’t know where the money would come from, but if this thing doesn’t collapse hard and fast over the next few days, I would have accept that the buyers could return and the accumulation days will start showing up. Unless there is a tsunami approaching, the tide will pull out. Historical precedents are rare.

 

I’m not going to lose my conviction over this. I really believe we are watching a top unfold. I have been building a short position and holding through the wild reversals with the conviction that the markets will break-down at some point. But as these distribution days continue to mount without the markets breaking down, it becomes increasing possible that the markets are not going to.

 

I will be treading lightly from this point on. I’m only posting this as a warning for bears to be safe.

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Ah seriously.

 

Look at the pricing models that the market makers use.

 

This is not debatable.

 

Options are priced AT the cost of hedging.

 

Non-arbitrage pricing .. Finance 101 .. etc..

 

p.s. Please for one's own safety, learn this.

What I am saying is, it is a good strategy to sell naked calls at elevated levels as Shorty did, and taking advantage of elevated premiums is smart. Or, sell naked puts if you are confident that a stock is going up. I agree, it is not debatable that Shorty and I have made money doing this. Trading 401.

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What I am saying is, it is a good strategy to sell naked calls at elevated levels as Shorty did, and taking advantage of elevated premiums is smart. Or, sell naked puts if you are confident that a stock is going up. I agree, it is not debatable that Shorty and I have made money doing this. Trading 401.

 

I agree.

It's all about making money.

Reading and underlying fundamentals isn't going to mean jack if you can't trade off of it.

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...

While this may sound like silly bean counting, what I’m getting at is that from my school of thought, we’ve seen as much selling as ever occurs in any 5 week period. I don’t know where the money would come from, but if this thing doesn’t collapse hard and fast over the next few days, I would have accept that the buyers could return and the accumulation days will start showing up. Unless there is a tsunami approaching, the tide will pull out. Historical precedents are rare.

...

From unloading non-guaranteed money market accounts?

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What I am saying is, it is a good strategy to sell naked calls at elevated levels as Shorty did, and taking advantage of elevated premiums is smart. Or, sell naked puts if you are confident that a stock is going up. I agree, it is not debatable that Shorty and I have made money doing this. Trading 401.

If you get the direction right, nothing much else matters. :lol: :lol:

 

If not, short options can be all kinds of "fun". Ask Shorty about the margin man last opex.

 

No mathematical advantage being dong or chort options.

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What I am saying is, it is a good strategy to sell naked calls at elevated levels as Shorty did, and taking advantage of elevated premiums is smart. Or, sell naked puts if you are confident that a stock is going up. I agree, it is not debatable that Shorty and I have made money doing this. Trading 401.

 

The problem with that Drano is that you are making a directional bet with an asymmetric pay off. With that method you can have 90% winning trades and still lose money if you get the direction & magnitude of the move wrong only 10% of the time.

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