....bears don't get greedy here....I agree over the medium/longer term but it's overdone. A rally might be looming...
LONG CALLS @ SPX CASH 1246....
Started by
Macro Speculator
, Aug 03 2011 09:24 AM
12 replies to this topic
#2
fib_1618
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Posted 03 August 2011 - 09:43 AM
Always good to allow breadth to turn first under current conditions than to try to catch a falling knife.
Hopefully you don't get hurt too much...and you kept your stops close.
Fib
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#3
Pricewatcher
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Posted 03 August 2011 - 09:44 AM
....bears don't get greedy here....I agree over the medium/longer term but it's overdone. A rally might be looming...
I took the same trade. But I am out again... Not good!
#4
Macro Speculator
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Posted 03 August 2011 - 09:45 AM
I'm still holding...I think we'll move well above 1246 the next few days.
#5
Pricewatcher
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Posted 03 August 2011 - 09:46 AM
....bears don't get greedy here....I agree over the medium/longer term but it's overdone. A rally might be looming...
I took the same trade. But I am out again... Not good!
Looking real nasty actually...
#6
Macro Speculator
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Posted 03 August 2011 - 10:01 AM
I think this day could actualy finish in the green. 110 points is a big thrust down for less than 7.5 trading days. We are due and now we have the potential huge fear/washout/capitulation low in place....no I don't think it holds longer term....but I'm hoping to see 1275+ again at least before we fall again.
#7
Macro Speculator
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Posted 03 August 2011 - 10:11 AM
By the way, did you guys notice the volume on the SPY this morning? Extraordinary....highest hourly bar in several months.
#8
viccarter
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Posted 03 August 2011 - 11:29 AM
By the way, did you guys notice the volume on the SPY this morning? Extraordinary....highest hourly bar in several months.
Just curious as a non-options guy, assuming that you get direction correct, does rapidly falling volatility have a large impact on call option prices? I would think that buying calls with VIX so high doesn't perform as well as using a large amount of SPY or a 2X or 3X ETF. Certainly futures provides the most leverage w/out exposure to the changes in volatility. I have heard some other traders on here say the same thing, in terms of how they get a lot more bang from a TNA or something of the sort, than they ever did with calls.
#9
thespookyone
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Posted 03 August 2011 - 12:04 PM
"Always good to allow breadth to turn first under current conditions than to try to catch a falling knife."
DITTO.
Breadth is not saying we bottomed. 1222 looks likely-before tomorrow at 4:00
#10
Macro Speculator
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Posted 03 August 2011 - 12:06 PM
I guess that depends on when the move comes (because of the time decay on the options)...but assuming the move were to come soon, I think calls almost always outperform leveraged ETFs on a decent rally (assuming you invest the same amount in each), even if the VIX were falling heavily.
If the market were to rally 2% for example, and the a 3x leveraged ETF rose about 6%, the options should rise 25% or more in most situations, even if the VIX moves from say 24 to 20 or something during that rally.
Futures will do much better than the leveraged funds I think because your leverage there might be 10:1. So a $5000 gets you a $50000 contract. A 2% rise means $1000 on the $50000 or 20%. Still not quite as well as options in most situations I think, but better in some.
I'm using lots of options right now because given the amazing moves we're seeing I don't think a VIX of 23-24 is that expensive.
