RSS available
| MarketTicker Forums Read Message in Ticker |
User: Not logged on
|
| Top | Forum Top | Login | Control Panel | FAQ | Register | Logout |
| User Info | Special Ticker Update - Wednesday Evening in forum [Ticker] | ||||
|
Genesis Posts: 71412 Incept: 2007-06-26 
KD^2 
|
http://market-ticker.denninger.net/2007/.... Just in case you're wondering about all the speculative frenzy..... ---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me
2007-07-25 18:24:30
Permalink | ||||
|
Synthetik Posts: 4359 Incept: 2007-06-26 
|
nice post Karl
2007-07-25 18:44:19
Permalink | ||||
|
Eleua Posts: 9906 Incept: 2007-07-05 
N 47.72/ W 122.55
|
I always used the analogy of "rats on a sinking ship.' As the ship sinks, the rats go to higher parts of the ship. The more that sink, the more rats chase the higher parts. Eventually the entire ship goes down and all the rats die at once. | ||||
|
Koolaid Posts: 3171 Incept: 2007-07-23
Atlanta
|
Great summary of market-top psychology. The other thing I think comes into play with some of these crazy P/E nasdaq stocks is that they are controlled by big institutional holders but are coveted by retail as well. Goldman and Fidelity could run RIMM to 300 if they felt like it, just by trading to each other. As long as enough momentum players grab on for the ride, they'll just keep doing it (while getting their put positions ready). Then at some point they dump, and momentum up becomes momentum down. Wash, rinse, repeat.
2007-07-25 19:32:44
Permalink | ||||
|
Bubblesee Posts: 3768 Incept: 2007-06-27
nyc
|
KD - great post! Here's my question: When the leaders have run out of steam, and the remaining bulls have nowhere to put their money which then results in the entire market going down: Does one short AAPL or the QQQQ's????? Or is either one an equally good bet???? ---------- Ticker Forum Special: "Bennie and the Feds" Melody:Elton John Lyrics:Bubblesee http://www.youtube.com/watch?v=etfVMtCq9Oc (Larry Kudblow eat your heart out)
2007-07-25 19:39:19
Permalink | ||||
|
Genesis Posts: 71412 Incept: 2007-06-26
KD^2
|
Broad-based declines benefit from diversification... just like longs do.
---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me
2007-07-25 19:43:44
Permalink | ||||
|
Bubblesee Posts: 3768 Incept: 2007-06-27
nyc
|
I think you are saying it is best to short the Q's AND a few choice stocks as well? ---------- Ticker Forum Special: "Bennie and the Feds" Melody:Elton John Lyrics:Bubblesee http://www.youtube.com/watch?v=etfVMtCq9Oc (Larry Kudblow eat your heart out)
2007-07-25 19:47:49
Permalink | ||||
|
Genesis Posts: 71412 Incept: 2007-06-26
KD^2
|
That's my view of it, yes. I'm front-running the Qs mostly because history suggests that IVs will spike when it starts, so if you're not in, you give up a large amount of the leverage. The problem with doing this is that you have to be willing to eat the losses due to being early. ---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me Last modified:
2007-07-25 19:51:40 by genesis
| ||||
|
Gwesten Posts: 496 Incept: 2007-07-04
Gulf Coast, AL
|
Karl I've seen you metion the IV's before, what are they? Thank You
2007-07-25 20:01:02
Permalink | ||||
|
Genesis Posts: 71412 Incept: 2007-06-26
KD^2
|
Implied Volatility. The higher they are, the more you pay for PUTs in time value (extrinsic value) CHEAP PUTs are only available when they're (1) out of the money and (2) the IV is low. When panic hits IV spikes precipitously and suddenly those cheap PUTs get VERY expensive. ---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me
2007-07-25 20:07:57
Permalink | ||||
|
Koolaid Posts: 3171 Incept: 2007-07-23
Atlanta
|
How far out of the money are you going on the front-month bets? Is the thought process basically "I think a sharp correction is likely to be X%, so I'll buy the strike that's just a little bit above an X% fall"? I was thinking you have to keep costs cheap each month, otherwise it gets rather painful.
2007-07-25 20:10:48
Permalink | ||||
|
Bubblesee Posts: 3768 Incept: 2007-06-27
nyc
|
With "falling" leaders like ICE, CPA,NVEC,AXP and GOOG (sliced thru its 50 day today) forcing investors to irrationally and exuberantly pile into the remaining few like AAPL, BA and AMZN the end is certainly near. And IF we are at the top and beginning to head down as an entire market (as opposed to a few chosen sectors) then the Jan. 09 QQQQ strike 45 put at 2.46 certainly does look attractive - I assume you would agree? ---------- Ticker Forum Special: "Bennie and the Feds" Melody:Elton John Lyrics:Bubblesee http://www.youtube.com/watch?v=etfVMtCq9Oc (Larry Kudblow eat your heart out)
2007-07-25 20:14:34
Permalink | ||||
|
Genesis Posts: 71412 Incept: 2007-06-26
KD^2
|
Correct. But - consider this. When the crack comes 10% is likely to come off the Nasdaq within two to three weeks. So - let's think this one through. 1. Buy Jan 08 45s for $1. Hope and pray the Nasdaq does not go up another 10% FIRST, because if it does, those 45s are WORTHLESS even if you then get a 10% correction! If we get a 10% downstroke, you do a bit better than break-even. With 20% down, you get a 5:1 payday. Not bad. 2. Buy FRONT MONTH (August) 46s for 13 cents. If the Nasdaq does go up for another month, they're zeros. If there's no correction, they're zeros. BUT - on a 10% down move they're 10 baggers, and on a 20% down move - oh **** - you just hit the ****ing lotto! If you don't get hit do it AGAIN next month for the same price. Now with (2), you are (a) protected against the 'Daq moving UP, because you buy post each OpEx ~8% down from the CURRENT level, and (2) IF the crash happens quickly you spend less. If it doesn't happen for six months you spend the same amount. I think strategy #2 is better. ---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me Last modified:
2007-07-25 20:25:09 by genesis
| ||||
|
Peace Posts: 688 Incept: 2007-07-09
San Diego
|
Can you clarify paragraph #2 for beginners? "Buy FRONT MONTH (August) 46s for 13 cents. If the Nasdaq does go up for another month, they're zeros. If there's no correction, they're zeros. BUT - on a 10% down move they're 10 baggers, and on a 20% down move - oh **** - you just hit the ****ing lotto! If you don't get hit do it AGAIN next month for the same price. Now with (2), you are (a) protected against the 'Daq moving UP, because you buy post each OpEx ~8% down from the CURRENT level, and (2) IF the crash happens quickly you spend less. If it doesn't happen for six months you spend the same amount."
2007-07-25 21:17:52
Permalink | ||||
|
Genesis Posts: 71412 Incept: 2007-06-26
KD^2
|
Sure. Right now the QQQ TTs, which are $46 Q PUTs for August, are 13 cents. So let's say you buy 100 of them. That's $1300 (+ commissions, of course) Now let's say the market goes HIGHER. Third Friday of August comes and goes, and the Qs are at $52! Damn - your PUTs are worth zero. That sucks. Ok, so you buy Septembers. But now you get the $48s or $49s, not the $46s! You pay roughly the same 13 cents, but you are still 10% down from the current price. If you buy the January 46s you're screwed; now you need a BIGGER move! Now let's say the market DOES crash. You bought the $46s, and the Qs are $44. Your puts are now worth $2 each but you only paid 13 cents for them! That's a 1500% profit! So as I see it, there are real advantages when speculating in this fashion to buy the front month. ---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me Last modified:
2007-07-25 21:25:36 by genesis
| ||||
|
Peace Posts: 688 Incept: 2007-07-09
San Diego
|
So you hold the August puts into September, and that's how the $46s I bought are worth $2? So I have August and September puts? How long are they good? You could also lose the $1300 each month, but I suppose that's a small price to pay for the upsdie. Why are they priced $48 or $49 for September? Is there a set schedule for the next few months? You can certainly make more money on these Puts than on the Nasdaq inverse fund, so that is appealing, but I don't understand it enough to actually do it. I even read a book on options trading, and I didn't understand it well enough to do it. I don't think Vanguard allows me to buy puts. I'd have to check into that.
2007-07-25 22:03:15
Permalink | ||||
|
Koolaid Posts: 3171 Incept: 2007-07-23
Atlanta
|
To be fair, the Jan 46s will pay nicely if we bleed down 5% per month. The front month strategy loses all your money. I'm not 100% sold yet but I'm beginning to see your side of things for the puts on the indices. I think for individual stocks the better play (or at least the play that helps me sleep easier) is to buy leaps that are in or at the money. If it goes against me I stubbornly buy the same (now much cheaper) strike to average down. I've had decent success with this strategy with both calls and puts. In general I feel better about my predictive abilities with single stocks than I do about making macro index bets. Option leverage is somewhat addictive. I have to keep reminding myself to keep this stuff at a reasonable level because it's so easy to go crazy and get in deep **** quickly.
2007-07-25 22:08:33
Permalink | ||||
|
Bubblesee Posts: 3768 Incept: 2007-06-27
nyc
|
KD - thats absolutely fascinating and it is certainly worth being wrong on the front month 2, 3 even 5 times or more if you stand to make $20,000 a POINT on the month that you are right!!! What is amazing to me is how much we have been able to profit from 1 or 2 sectors WITHOUT the general market averages joining us in the downturn. In trying to figure out how much of a meltdown it will take for the rest of the general market to follow my intuition is to look toward the leaders thinking in this case if the head is chopped off the body will be sure to follow. Here are a few market leaders besides the ones i mentioned above that are currently holding up very well: RIMM, VSEA, NCTY, MT, MA, LFL, ISRG, GRMN, BIDU, CPO, LFL I am still inclined to think that some more leaders may need to fall for the Bullish money shifters to really run out of room. However the psychotic over-reaction with aapl and amzn is certainly a sign of desperation. ---------- Ticker Forum Special: "Bennie and the Feds" Melody:Elton John Lyrics:Bubblesee http://www.youtube.com/watch?v=etfVMtCq9Oc (Larry Kudblow eat your heart out) Last modified:
2007-07-25 22:26:25 by bubblesee
| ||||
|
Rmonical Posts: 2155 Incept: 2007-07-04
Omaha
|
I agree with Karl of the broadest indices - huge bang for the buck running the front month and I am doing that with my speculative plays. For the hombuilders and financial ETFs (XHB and XLF), I have been buying in the money puts far out for the following reasons: -- More conservative -- There is not a large premium over today's cost. I thought it was remarkably small. -- I am absolutely convinced that these sectors will go down, so it seems to me to be a very safe play. The downside is that I tie up a lot of cash that is not available for more specualtive investments. I also have Jan-Mar ITM puts on KHB and CTX. I do have a few OTM long puts: Mar 17.5s on BZH and Mar 25s on XHB - I bought the last on the top of the bounce today and they are already up a bit. One other thing with buying long puts is you have to know yourself and how you handle a bad trade. I bought Jan 08 40s and 30s on CFC that were down 50%. I believed in the trade and stuck with them and now they are paying off big. If you cannot stand looking at large losses and start second guessing yourself, then another trading style might work for you. Everybody has a different style and risk profile. ---------- The truth is out there
2007-07-25 23:51:04
Permalink | ||||
| Top | Forum Top | Login | Control Panel | Logout |