If you believe there is a high probability of a derivatives implosion, how does an average trader play it? It may go on longer than anyone expects, but if and when it breaks it will be too late to do anything. Anyone have some creative strategies they are willing to share?
I wouldn't wait around for it, the nature of these are very temporal, meaning that just play the trend, till daily, weekly, monthly resistance start failing. People are banking on Gold protecting them to some extent. From withdrawal of liquidity, Gold can falter too. But if a implosion starts, more liquidity will be used to flood the system and prop things up. Looking at everything, world, politics, and cycles in different markets, its still very early. I remember in the 90's people use to warn of the high valuations, but the valuations continued to get stretched even further for a few more years. People know that the paper is worthless, but they get slaughtered if they don't move with the market. Some major hedgefunds almost went bust betting against the market, trying to play reversion to mean valuation strategy. Just shows the market is stronger ultimately. The monster of all markets is the liquidity market. We still have atleast 4 years before things can get really stretched. Its still very early. I imagine Rudy Guiliani will be our next President, and his hair cut keeps reminding of the roaring 20's for some reason. How befitting if a market debacle starts at the later stages of his term in office. He will be a 2 term president.