Barron's did an article this week that projects a republican vicotry (keeping the house/senate) based on amounts of money spent. They said their predictions have been accurate with the exception of '58, '74 & '94 when popular sentiment was so strong to overwhelm the influence of money. What's sad to me is the most effective adds seem to be the negative one's filled with lies and half-truths, sound bites that sway the voter too lazy to do their own research and vote based on objective fact finding and which candidate truely represents the voter ideals. If Barron's is correct and there is no gridlock will the market go down? Do we believe this administration will give us peace and prosperity in the next two years?
i think what stunned people about his rally is the disconnect from some of the econ reports like gdp alst qtr and things like ism which are weakening fast and earnings which on the outside look good. also the lack of any real corrections in years have thrown people off. my opinion is these huge earnings come back to haunt next year as earnings fall. but right now the market could care less. who knows just as people are stunned we skied in aug,sept and oct they might be stunned as we fall in nov and dec.
I know Mav personally. I have great respect for him and he is able to justify his opinions. While Mav and I disagree sometimes, he is sharp and always approaches the problem from the Risk standpoint. That's very important to note, because while Mav maybe wrong sometimes - he knows where is risk lies and has addressed it. Soft Deltas are options without intrinsic worth - therefore you don't suffer from stock movement. You risk in OWNING softdeltas is Theta (daily) and being long vega.
Thanks...so what you basically said is if VIX goes to single digits then you will buy OTM puts (short the market with soft deltas). ?
Concure. That's why I mentioned the skew flattening and ISEE index. However July/Aug high to Oct was a 5% sell off 1240 to 1180. Let's not forget May of this year when ISEE hit 200+, skew flat, and VIX was wedging into the lower 11s. Will I be right? I don't know - but the converging forces has lead me to be long downside gamma, long downside vega, flat prem, and flat deltas. Thus no risk to the upside or flat market. If I can get the free directional bet on - why not.
Maybe the hedge funds are OUT of control - if they are being forced to cover their short positions. While most people I talk to agree this is not a fundamental rally (the geopolitical and economical stage is fragile). Being a spec. rally coupled with short-covering will drive this up to noise bleed levels, then the plug is pulled. Most people I talk to are making money hand over fist. Long, Long, Long, Covered Calls, short puts, etc. Even our (managed) accounts are making money hand over fist. The only people that are getting hit are the people that are trying to call the top (which happen to be the same group that try to call the bottom). Or those newbies that have been selling "STUPID" Iron Condors and have never seen a one directional market. Ask FB how their short NDX 1675-1700 c/s is looking (note sold at 2.80). It continues to shock me how people come in and learn something so simple "it seems like free money" Iron Condor and it works for months and then WHAM! Did they take an option course once and learned some basic strategy and then "POOF, I'm a trader!". I talked with MAV yesterday and he said that everyone is getting hurt, I was totally amazed. Majority of the people I am talking to are making money. Maybe (and I am new here) people on this message board are top and bottom pickers and are getting work. Important lesson - when the Freight Train is coming - GET THE HELL OUT OF THE WAY! Yeah - I could be a short-covering market, but it doesn't really matter who is driving the train. Wait tell we get some relief before you start getting short - or get short with soft deltas (not selling call spreads - DUH!) People selling call spreads up here (calling the top) have NO IDEA what Volatility is, how Vega effects their position, or very simply calls and puts are the SAME THING. Some one told me they noticed the VIX was VERY low and they think the market is going to sell off. Fine I said (now the important question), so what position are you putting on? They said selling OTM call spreads - ROFL (ahh ha ha ha - I had to put my phone on mute - because I was really laughing). My only response was "Thanks for Playing, No more bets, New Roller coming out!". Needless to say he didn't get the joke. Being the nice guy I am - I had to explain it to him. He had no clue! I had to share that with you - just to show you how people have NO CLUE!
I say the market doesn't begin a significant downtrend until after the first formal announcement of troop withdrawal from Iraq begins. IF, having the Dems takeover the house/congress next month is the beginning of this process then market tops will begin to form.