Modifying position into CSCO and QCOM earnings: Flat delta, mildly short theta, mildly short gamma, mildly long vega, mildly short skew, mildly short kurtosis. CSCO earnings are likely to be stellar, but I think this market is already priced them in. QCOM earnings far more murky... Will reeval after these two. Will try to go mildly long gamma tomorrow/Thursday, but not sure... nitro BTW, all these positions are in Index options and their corresponding underlier.
Someone asked me how come I never say what is my exposure to rho. Currently, I mostly trade the first three months out. That will change soon. While interest rates affect all options (it is after all a parameter to Black Scholes) its effect on short term options is minimal. If you have option positions that go out to late 2008 or 2009, you absolutely have to hedge your interest rate exposure with ED futures. That said, I am short the roll, and therefore [synthetically] long Eurodollars, and therefore [synthetically] short the dollar, and therefore [synthetically] short interest (US) rates. But rho effect on my positions is minimal. nitro
Modified position: Mildly long delta, mildly long/almost flat gamma, long vega, flat theta, short skew, mildly short kurtosis. NQ will put a damper on any real rise today, unless bargain hunters come in and pour money into tech, in which case we recover 1/2 or more of what we lost yesterday. Hard to overcome CSCO down nearly 10% yesterday. QCOM earnings may spur tech. ER2 is now red on year. That has to be a mistake longer term, and contrary players will be pouring into that market any time. All that money came out of the stock market yesterday. Now we watch the bonds and currencies and oil and see where it goes, because there was no sign of where it went it AFAIK. nitro
Modified position: Mildly long delta, long gamma, long vega, long theta, short skew, mildly short kurtosis. nitro
Events on the tape and headlines lead me to believe that a rate cut may be in hand, and that it is likely the right thing to do. Question is, does it matter anymore to the equity markets? I am going to lean long as long as SPX doesn't close below 1400 . There is no question in my mind that there is lots of fear in the markets now, and that means no paper is coming into the markets to support them. That means that 1400 SPX may well get tested. I am now defending my long delta "extravagance" by being long gamma and long vol. However, that means I am also long theta. It is becoming more and more expensive to lean long. I may shift to being mildly long kurtosis, incurring more expense. Shorts are going to scare the markets with as many rumors as possible. As a trader, it doesn't matter if they are true or not. What matters is whether the market is coaxed into believing them. nitro
Flattened delta. Sold some vol theta and gamma, as I had plenty to spare. Options expiration week. Will see how this developes. QM feels like it goes to $85. The support I believe is right around $94. nitro
Intermediate term, the bear trend would have chart damage if we go back above 1500 SPX. It only makes sense to play defense, and only slightly so, as long as we stay below 1500 SPX. If we break that, imo this is full speed ahead again and 1600 SPX by year end is odds on imo. We play hard defence on a break below 1425 SPX, and of course, a close below 1400 SPX is where we would change course. We paid attention to mostly one time frame until Aug '07. Now we are on the brink of going back to leaning long strongly if we close above 1500 SPX and only worrying about 1400 SPX to change our long bias. I have made very little change to position: I am basically collecting mild theta, with a very mild long delta and very mild long gamma position. That will change if we go above 1500 SPX. nitro
No change to positions. I laugh when people write off retail and that these companies are exposed to rising inventories in a recessionary environment. Has anyone read about the technology and realtime data mining that WMT employs? This is not an isolated phenomena. If we get a recession, this will not be your fathers recession and people will be scratching their heads on the conflicting data. You still have to be careful because markets will overreact to the downside until they figure it out. But that means bargains will be even more so. nitro
Other than opts ex positions, no change. Just defending delta and vega. VIX is telling a very interesting story. Selling is barely moving VIX. That, coupled with action in MO and FCX, imo says that we are close to been done with selling. But I see no fear, no blood on the street. One big capitulation day on big volume, where the SPX goes below 1400 hard intraday, then closes above 1400, and it is buy hand over fist anything that moves. Even now, very selective buying is a must. When it goes higher, it will be so fast you blink you lose. Ignore the DJX technical break. Imo it means little. SPX is king, and only a close below 1400 SPX dethrones the king. nitro