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Random Thoughts: Social Unrest and Risk Rotation

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Volatility is a trader's best friend -- but be careful!

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Ditto the S&P retesting the breaking of four-year highs, per the chart below.


Click to enlarge

"Textbook!" say the bulls. "Only if we rally!" replies Boo, our suddenly brazen bear. He's still bruised, but he seems revived. He may have even showered. In the innards of his intuition, he knows the global pressures are cumulative. (He's never been known for his timing.)

I couldn't resist adding a 15-year chart of the NDX for schnitz and giggles. (I remember every harrowing step; each box on that bottom axis encapsulates a year full of life and experience-and those were some years!)


Click to enlarge

The most important takeaway of the above chart? The importance of syncing your time horizon and your risk profile. Somewhere, nestled in that timeframe, is a bloody fortune in Fannie Mae $70 puts that I left on the table. If you see it, lemme know.

In terms of my book, I booted my QQQ November $70 puts yesterday morning (time-stamped on the Buzz at QQQ $68; it was a LOT of work for little gain, but I will not complain). My YTD performance took a beat-down since I mentioned it on Twitter (big mistake) and there was a deep breath when I unwound that risk (which may also mean my short bet was too big).

(I will also note that I'm notorious for fighting cusps, catching cusps, and then taking bets off early as the tide turns in full-remember Oil of Oy Vey!?)

After a few breathing exercises, I bought some Facebook (NASDAQ:FB) at $20 (I've been waiting for a pullback and the stock has taken one in the kisser of late). Could it go lower? Sure-they all could, big--but with a stop set below recent lows, it's a decent risk-reward in my (usually early) view. Against that, into the late-day lift, I bought some December QQQ "underneath" puts dollar-neutral (read: I'm long Facebook with the same amount of money in downside exposure).

Finally, I nibbled ever so gently on some Google (NASDAQ:GOOG) November puts this morning with the stock up $7 as a pure spec after the larger-than-life run-up we've witnessed (the stock is up 35% since July). This, and all my short-term risk, is in the context of a pure trade; if we take care of the minutes, the hours will take care of themselves and I'm looking to squirrel some shekels in the process.

Good luck today.

R.P.

Twitter: @todd_harrison

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Position in FB, QQQ, GOOG.

Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at todd@minyanville.com.

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.

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