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Random Thoughts: Social Unrest and Risk Rotation


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

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.


Twitter: @todd_harrison

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Position in FB, QQQ, GOOG.
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