Or we could test 1075 for the same reasons. Best to plan for both scenarios rather than betting all on black with no back-up contingencies in case you are wrong.
I agree with you, but everytime I do what you do lately I lose my ass (long LEH, long market, etc)... I hope you are doing better with your (our) ideas than I have been. What seems to make sense has no bearing on what will happen on a short term basis.
http://online.wsj.com/article/SB122418087182841401.html Says that 100 Billion have been redeemed and there is 400 billion to go. Don't know how they got the 400 billion number. How would they know? There are many conflicting reports. I read 43 billion in the last quarter in one article. Can I get your opinion on this? Is it just bullshit.
Bear markets can take some time to play out. We will retest lows. The economy has been and is going into a further decline recession. Coming QTR's will show increasing unemployment, companies struggling to survive(GM, many more financials & banks, etc), declining earnings for 4th QTR and 1ST QTR 09 at least. Market will retest lows. We are in a bear market rally. Trade it accordingly. Happy Trades! 1flyfisher
I would suggest some Monte Carlo modeling to determine probabilities of touching certain price strikes before/ or at expiration before selling naked puts in this environment.
Here's what I did. On the day we had the rally to 1065, I sold a 1000 put for 12 (when S&P was at 1050 or so) for Oct 17 expire (a few days...). Lets just say S&P was at 860 a day or so later. I bailed around 940 and converted the position into a long call and managed to reduce the loss a little. My thought was that we'd probably bounce around 1000 give or take a little at worst, considering what had happened post that weekend. Logic (err gambling?) doesn't reward so easily near term. (the logic/gamble being that S&P vol wouldn't get back to the mid 70s)
Hedge Fund redemptions are an excellent case for an unsustainable rally. I work in the industry and over the last few months I have been seeing the largest number of fund closures ever. In itself this would suggest a bottom, however many of these funds are in the billions of dollars and it will take them time to sell off positions in an orderly manner. When you hear about Citadel being in trouble you should take notice. The next bulk of redemption notices will come Jan 1, due to the fact that investors usually have quarterly redemption schedules and have to provide 45 days notice. Beside hedge fund redemptions there is a massive deleveraging going on everywhere. This includes institutions and consumers. Unless Uncle Sam can reflate the credit bubble Americans will have to go from being net creditors to net savers, this does not bode well for our keynesian driven economy that relies on spending. I can't predict where the rally will top off, but I just don't see what will sustain it. How many value investors beside Buffet have been waiting on the sidelines? I hope I'm wrong, but I think the way up will be long and painful. After all we have all those baby boomers who are retiring. They have been hit hard on equities, bonds, commodities and real estate, now they just want to protect what little net worth they have left... Maybe Asian investors will take over, but alas they too have lost about half their market value since the top. -Neo
Buffet has not entirely timed this well. http://www.futureblind.com/2008/03/berkshire-part-2-selling-puts/ He's long the market big time from much higher levels....