The Most Crowded Trade

Discussion in 'Trading' started by chewbacca, Sep 8, 2006.

  1. What's the most crowded traded out there? I bet its betting against a major move in the market in either direction, whatever you call that. That has to be the most crowded traded out there because this market simply doesn't move. Natural disasters, terrorism, war - doesn't matter the market doesn't move. Its gone nowhere in 5 years.
  2. WTF do you call that trade?
  3. I can't even parse what you're talking about, much less be able to name a trade for you.

    Are you looking for contracts which have deep liquidity AND they tend not to move?
  4. No I mean something like selling options contracts in such a way that as long as the market doesn't move more than 5% up or down, you make money. 100% accuracy probably for the past 60 months.
  5. Most crowded trade right now IMO is short oil and long USD.

    Of course if/when the next terror event - real or staged - occurs this trade could blow up in their faces!
  6. You're talking about strangles.

    But your assertion certainly isn't true for the S&P, Nasdaq, Russell 2000, bonds, oil, euros, sugar, lumber, or practically any other market I follow.

    There were plenty of ways to get killed. When ES dropped from 1330 to 1220 in a month, not only did it move 9%, but implied volatility went from 12% to 23%. Definitely not a good time to be short vega or gamma.

    Still, your point about a lack of volatility is a good one in general. A peek at the VIX for the last 5 years shows a pretty distinctive trend.

    But really, selling volatility is a highly dangerous game. Surprise interest rate drops:

    Black Monday:

    Russian Debt Defaults:

    Kobe Earthquakes:

    All are great ways of blowing out. Of course, it's all a net zero game. Nassim Taleb promotes buying extremely out of the money options. He bleeds money almost continuously in the hopes of one big win. The other side (vol sellers) make money continuously in the hopes of avoiding the one big loss.
  7. You think? This actually is a super trade in the event of terrorist attacks.

    The open after 9/11, oil dropped 10%, the dollar dropped .8%

    This spread would probably work great.

  8. Long Equities
  9. Short yen carry trade. The 12 trillion invested is starting to unwind.
  10. agree yen carry trade
    #10     Sep 8, 2006