Option buyers getting a bit carried away?
#1
Posted 13 May 2007 - 09:02 AM
From Market Harmonics:
#2
Posted 13 May 2007 - 10:31 AM
From MarketClues: "...The US market fell sharply Thursday. More troubling was the fact that option speculators bought call options on the dip. Normally, option specs buy puts on dips because they expect the market to continue down. Only very rarely are they so bullish as to actually buy calls, expecting the market to immediately turn around and rally to a new high before those calls lose a substantial amount of value (options are a wasting asset which decay with every tick of the clock and if a market doesn't move quickly in the "right" direction, they fall in value). In fact, we can only recall one other time when the option speculators bought calls on a dip. That dip was the one which followed the absolute high in the S&P 500 Index in March 2000. If the market is able to rally back here to a new high -- and we certainly wouldn't be surprised by such behavior -- it would indicate that the top being built now is a larger degree top than even 2000. And, of course, we know that last top was followed by an 80% decline in the NASDAQ."
From Market Harmonics:
This was written before the market recovered its losses on Friday. Just FWIW.
The future is 90% present and 10% vision.
#3
Posted 13 May 2007 - 10:40 AM
From MarketClues: "...The US market fell sharply Thursday. More troubling was the fact that option speculators bought call options on the dip. Normally, option specs buy puts on dips because they expect the market to continue down. Only very rarely are they so bullish as to actually buy calls, expecting the market to immediately turn around and rally to a new high before those calls lose a substantial amount of value (options are a wasting asset which decay with every tick of the clock and if a market doesn't move quickly in the "right" direction, they fall in value). In fact, we can only recall one other time when the option speculators bought calls on a dip. That dip was the one which followed the absolute high in the S&P 500 Index in March 2000. If the market is able to rally back here to a new high -- and we certainly wouldn't be surprised by such behavior -- it would indicate that the top being built now is a larger degree top than even 2000. And, of course, we know that last top was followed by an 80% decline in the NASDAQ."
From Market Harmonics:
This was written before the market recovered its losses on Friday. Just FWIW.
Edited by spielchekr, 13 May 2007 - 10:50 AM.
#4
Posted 13 May 2007 - 08:11 PM
#5
Posted 13 May 2007 - 09:00 PM
Edited by thespookyone, 13 May 2007 - 09:03 PM.