Random Thoughts: Fear and Greed Face Off Into Quarter End

By Todd Harrison  SEP 21, 2012 12:16 PM

Will Pavlov's bulls buy another dip?



Editor's Note: Todd posts his vibes in real time each day on our Buzz & Banter.

I penned a Minyanville Market Overview late Friday.

It was a thoughtful column, shared in a voice of yesteryear when I often used Hoofy and Boo as metaphorical representations to make sense of the world’s wildest reality show. 

This was a throwback column of sorts, one that chewed through our four primary metrics—fundamentals, structural, psychology, technicals—with hopes of identifying an edge.  While I was gonna save it for this morning, I posted it in front of the weekend lest folks wanted to noodle our landscape in between football games.

At the end of the scribe, I referenced the fact that I bought QQQ (NASDAQ:QQQ) November 70 puts several weeks ago (note: I incorrectly identified these as October puts last week) when the QQQ was trading at $69.65. This morning, the QQQ opened below that level which, in a vacuum, would have gotten me back to the flatline from a P&L standpoint.

Not so fast, said the joker to the thief—any time you own an option, there is 24/7 time decay—or theta, in Greek parlance—which is (literally) the price you pay to own an option (for more on option basics, check out this six-part series by one of the best derivative minds that ever lived).

As such, while the initial downdraft helped my oh-by-the-way position, it wasn’t an outright win.  As my pal Swiper would say to Ms. Dora, who is ever-present in our home, “Aw, man!”

What I would like to do, if the price action allows, is get the theta gun away from my head and "roll" my downside exposure out from November to an expiration date well after the elections (volatility, as a whole, are still quite low).

I know, I know, politics and free-markets have nothing to do with each other, right?  You would be correct, friend--if only the markets were truly free.

Random Thoughts:

Twitter: @todd_harrison

Position in QQQ.