Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Buying Into a Slow Motion Rally

By

No reason to be hasty.

PrintPRINT
I bought some September gamma in SSO yesterday. It wasn't really to open, but rather to close out a combo where I was short calls in SSO and SDS.

The SDS calls are closing in on wallpaper status, so I've been buying strength here and there in SSO stock to hedge the short SSO calls. In light of both the volatility dip and the market (sort of) ramp, I changed course a little and went long SSO puts instead of short calls.

Now I'm not bullish on options volatility at this point, it's more a bet on realized volatility between now and September expiration. At 19 or so, volatility for ATMs, I just think it's a reasonable price for a little action next week, and I don't want to short it anymore.



As to that VIX and the 10-day SMA, it didn't quite close 10% below, so no trigger just yet. That being said, there's nothing magical that happens at 10% that doesn't happen at 9.5% or 9% -- it's an instrument that generally mean reverts, so a "stretch" away from an MA usually resolves fairly quickly.

Of course, it can resolve by simply sitting in a range for a few sessions, too. And that's what seems to happen when it's a counter-trend trigger, like this one.

The behavior this week does seem odd though. Classically, you would expect a cheaper VIX headed into a holiday weekend, followed by strength, which is really less than it appears.

Well, we got that Tuesday, but it's gotten clocked the last two days. So basically we spent all of August worried about a post-Labor Day market implosion, but when it didn't happen on Day 1, those worries are now gone?

Just odd. I don't think it's complacent so much as belated acknowledgment of reality. It's a slow motion, low volatility rally.
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
PrintPRINT
 
Featured Videos

WHAT'S POPULAR IN THE VILLE