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When should we get greedy?

Investment discussion for beginners. Why you should invest your money, get help getting started
GoSeigen
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Re: When should we get greedy?

#359805

Postby GoSeigen » November 25th, 2020, 7:18 am

GoSeigen wrote:
GoSeigen wrote:Quick update, as I'd covered my short puts earlier I reopened a short Nov slightly OTM put into yesterday's weakness. Just seemed more sensible than closing the calls with quite a bit of time value left and only a week to expiration.

GS


Added a short Nov strangle. Silly prices for expiration in 3 trading days. Might regret it come Friday though :-o

Expiration at 3600 or just below would be ideal.

GS


Expiration last week was as good as could be hoped with the S&P opening around 3580 on Friday bringing a good chunk of profit. I still hold a net long Jun position with two straddles. I've written Dec strangles against these positions. I still feel the market is bullish: if we get a strong Santa rally the Jun positions will protect against big rises.

GS

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Re: When should we get greedy?

#375066

Postby GoSeigen » January 9th, 2021, 11:09 am

GoSeigen wrote:
GoSeigen wrote:
GoSeigen wrote:Quick update, as I'd covered my short puts earlier I reopened a short Nov slightly OTM put into yesterday's weakness. Just seemed more sensible than closing the calls with quite a bit of time value left and only a week to expiration.

GS


Added a short Nov strangle. Silly prices for expiration in 3 trading days. Might regret it come Friday though :-o

Expiration at 3600 or just below would be ideal.

GS


Expiration last week was as good as could be hoped with the S&P opening around 3580 on Friday bringing a good chunk of profit. I still hold a net long Jun position with two straddles. I've written Dec strangles against these positions. I still feel the market is bullish: if we get a strong Santa rally the Jun positions will protect against big rises.

GS


Sorry, no update in December after being tested positive for Covid, from which I've mostly recovered now. December expiration went well, with a decent profit on positions. However, I rolled my positions much more cautiously than previous months, partly due to being sick but also because of a general uneasiness which has now developed into a solid decision to change strategy.

Previously I have been happy to write options, earning money from the time value and (hopefully) falling implied volatility which I have noted has been at historically high levels. I was happy to do this because I was somewhat uncertain as to how the market would evolve, and indeed I have been pretty surprised. The S&P has risen fast and persistently, hitting new post-COVID highs and maintaining this momentum with regular new record highs. Its strength certainly justifies the premium on the VIX: calls were the way to go but options buyers had to pay up for them. OTOH the FTSE has surprised by remaining weak, only gaining positive momentum in recent weeks.

Since December I have reassessed and feel I have a solid new strategy which I have already been following.
-I have taken positions in long FTSE futures and short-put positions (a strongly bullish view) to add to my previous leveraged long position on UK stocks and hybrid securities.
-I will no longer write S&P straddles and strangles, instead taking a cautious watching remit with options and perhaps purchasing long-dated options as market moves dictate i.e. will buy puts after extended rises and buy calls on sharp falls. Given the still-high implied volatility this must be done cautiously over an extended period. If I note an inversion of the volatility term curve I will perhaps buy straddles again. Similarly, if contango rises strongly from it's current low levels I may restart the option writing.
-In the short term I'll try to increase exposure to bank equity and China/Emerging markets as conditions permit. Over time I will also seek opportunities to increase cash levels by taking profit on UK positions and increase my short exposure to the US.

These changes are prompted by the following observations:
1. I was wrong about VIX. It has not broken its rising trend and my view now is that it will remain elevated in a warning of bubble conditions.
2. The CBOE has updated its web pages and in the process screwed up its term structure data and chart page. I haven't an alternative source so this has removed a major data input to my option writing strategy and I'm no longer confident I can time it correctly.
3. The S&P has broken out to all-time highs; the FTSE has broken out of its consolidation. These events add too much risk to a short-options/short-vol strategy IMO, while at the same time allowing transition to the above alternative approach.
4. VIX contango has remained stubbornly low, making me nervous about a short vol strategy.
5. My view is that the US is entering bubble territory. This is a time to start thinking about more defensive positioning even as one's portfolio is looking in increasingly good shape. In our case we are now well up on last year's highs so I am conscious that I need to progressively rein in my bullish impulses.
6. All over I see signs of late-bull danger. Last year in Feb I called a secular bull. For the FTSE I think that is still possible, but equally we may see an extreme late-stake acceleration of prices which will be difficult to trade. The signs I am seeing are the long-awaited IPO frenzy with ISTM an increase in M&A, and insane movement in risky and obscure assets like Tesla, bitcoin and US small caps. Also this year has seen the first signs of a rotation from growth back to value -- or to be fair the first signs of bottoming of the previous trend. I'm already positioned towards value so not really concerned at what I'm seeing and I have to say, the way the market evolves might simply turn out to be a massive rotation rather than a crash of the entire market.

Sorry long post, but there were a few things to put in there. Given the change in strategy I'm not sure it would be appropriate to keep updating my posts here, so unless there is strong demand to the contrary I will make this my final update.

GS

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Re: When should we get greedy?

#375103

Postby TheMotorcycleBoy » January 9th, 2021, 12:14 pm

As far as I'm concerned you can keep posting just here, if you like!

Matt

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Re: When should we get greedy?

#375140

Postby MaraMan » January 9th, 2021, 1:27 pm

TheMotorcycleBoy wrote:As far as I'm concerned you can keep posting just here, if you like!

Matt


Me too. I hope you continue.

MM

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Re: When should we get greedy?

#425779

Postby GoSeigen » July 8th, 2021, 9:00 am

GoSeigen wrote:
Sorry, no update in December after being tested positive for Covid, from which I've mostly recovered now. December expiration went well, with a decent profit on positions. However, I rolled my positions much more cautiously than previous months, partly due to being sick but also because of a general uneasiness which has now developed into a solid decision to change strategy.

Previously I have been happy to write options, earning money from the time value and (hopefully) falling implied volatility which I have noted has been at historically high levels. I was happy to do this because I was somewhat uncertain as to how the market would evolve, and indeed I have been pretty surprised. The S&P has risen fast and persistently, hitting new post-COVID highs and maintaining this momentum with regular new record highs. Its strength certainly justifies the premium on the VIX: calls were the way to go but options buyers had to pay up for them. OTOH the FTSE has surprised by remaining weak, only gaining positive momentum in recent weeks.

Since December I have reassessed and feel I have a solid new strategy which I have already been following.
-I have taken positions in long FTSE futures and short-put positions (a strongly bullish view) to add to my previous leveraged long position on UK stocks and hybrid securities.
-I will no longer write S&P straddles and strangles, instead taking a cautious watching remit with options and perhaps purchasing long-dated options as market moves dictate i.e. will buy puts after extended rises and buy calls on sharp falls. Given the still-high implied volatility this must be done cautiously over an extended period. If I note an inversion of the volatility term curve I will perhaps buy straddles again. Similarly, if contango rises strongly from it's current low levels I may restart the option writing.
-In the short term I'll try to increase exposure to bank equity and China/Emerging markets as conditions permit. Over time I will also seek opportunities to increase cash levels by taking profit on UK positions and increase my short exposure to the US.

These changes are prompted by the following observations:
1. I was wrong about VIX. It has not broken its rising trend and my view now is that it will remain elevated in a warning of bubble conditions.
2. The CBOE has updated its web pages and in the process screwed up its term structure data and chart page. I haven't an alternative source so this has removed a major data input to my option writing strategy and I'm no longer confident I can time it correctly.
3. The S&P has broken out to all-time highs; the FTSE has broken out of its consolidation. These events add too much risk to a short-options/short-vol strategy IMO, while at the same time allowing transition to the above alternative approach.
4. VIX contango has remained stubbornly low, making me nervous about a short vol strategy.
5. My view is that the US is entering bubble territory. This is a time to start thinking about more defensive positioning even as one's portfolio is looking in increasingly good shape. In our case we are now well up on last year's highs so I am conscious that I need to progressively rein in my bullish impulses.
6. All over I see signs of late-bull danger. Last year in Feb I called a secular bull. For the FTSE I think that is still possible, but equally we may see an extreme late-stake acceleration of prices which will be difficult to trade. The signs I am seeing are the long-awaited IPO frenzy with ISTM an increase in M&A, and insane movement in risky and obscure assets like Tesla, bitcoin and US small caps. Also this year has seen the first signs of a rotation from growth back to value -- or to be fair the first signs of bottoming of the previous trend. I'm already positioned towards value so not really concerned at what I'm seeing and I have to say, the way the market evolves might simply turn out to be a massive rotation rather than a crash of the entire market.

Sorry long post, but there were a few things to put in there. Given the change in strategy I'm not sure it would be appropriate to keep updating my posts here, so unless there is strong demand to the contrary I will make this my final update.

GS


Quick update on the above.
1. The short FTSE Puts mentioned have almost all been closed now, all of them OTM, so good trade there. I've replaced them with further long FTSE index futures to the same nominal value, which show a small profit.
2. VIX has dropped a bit remains higher than it deserves to be IMO. As before I think this reflects ongoing anxiety about US stock values. I'm short the S&P but have also bought straddles which are now far above their strike but still slightly under water. These will provide some protection if the market moves higher, hence...
3. Given the steepening term structure of the VIX I have renewed my taste for short S&P straddles. Thus today opened a position in the August contracts. Obviously I'm hoping the Summer season will produce limited overall movement up or down in the S&P. However given the ITM long straddle already held this trade is overall still bullish -- I'll be much happier with a rising than a falling market.
4. Banks have done very well. Some will know I have been focussing on Manchester Building Society stock which has done very well after a win in Court, they now account for about 25% of net worth so I'll look to liquidate some of these gradually into strength, probably adding to other UK bank positions.
5. Value had a good run and has paused, may be a good time to look at it again. I like UK and emerging stock markets. Also looking to buy a bit more property, but not in the UK -- where I am now 20% gross yields are common, we are grossing that on the property we bought a couple of years ago without trying. The world is leaving the COVID problem behind now and there should be a good bit of growth in the next few years IMO and profit margins are strong.
6. Metals, mining and commodities have taken a rest. Glad we took profit earlier this year, the remaining positions have gone nowhere. Just being patient with this area.

All the above is my own ramblings. I fully expect to be proved wrong in a number of ways within days of making this post so please, as usual, Do Your Own Research.

GS

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Re: When should we get greedy?

#425812

Postby TheMotorcycleBoy » July 8th, 2021, 11:19 am

GoSeigen wrote:2. VIX has dropped a bit remains higher than it deserves to be IMO. As before I think this reflects ongoing anxiety about US stock values. I'm short the S&P but have also bought straddles which are now far above their strike but still slightly under water. These will provide some protection if the market moves higher, hence...

My reading of the current S&P behaviour is that inflation worries seem to have subsided based on the premis that "the Fed knows what it's doing". In the sidelines there are doom and gloom monger predicting big corrections, possibly triggered by exit from memes, which could be unnerving some.

https://markets.businessinsider.com/new ... ash-2021-7

6. Metals, mining and commodities have taken a rest. Glad we took profit earlier this year, the remaining positions have gone nowhere. Just being patient with this area.

I read an interesting post somewhere in here.

Trump's trade war smashed commodity prices. In time though every time you hold back commodities you just store up a bigger problem down the road. Arguably the spike in commodity prices we are seeing today is in part a result to his trade war.

Extrapolating upon that, I'm curious that recent global equities run could stem as much from the exit of Trump (and his effect on global trade) as from the Covid vaccines rollout, and the removal of the pandemic threat.

Matt

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Re: When should we get greedy?

#426013

Postby TheMotorcycleBoy » July 9th, 2021, 6:10 am

I'm familiar with the idea that rising bond yields may precipitate a sell off in equities. But this pundit is suggesting a recent fall in yields has resulted in the same thing.

Bond yields continued to fall on Thursday, with the yield on the benchmark 10-year U.S. Treasury note holding well below 1.3%, down dramatically from 1.45% at the beginning of the week and 1.6% just last month.

This has, in turn, pummeled Dow industrials DJIA, -0.75% and the S&P 500 SPX, -0.86% index, while the Nasdaq COMP, -0.72% and its tech stock favorites, such as Amazon AMZN, +0.94%, have fared relatively better.

When bond prices are high — signaling strong demand — yields, the interest paid to a bond holder, fall. Strong demand signals a decline in economic-growth expectations among investors, who wish to lock in future gains by owning bonds.

This has a knock-on effect for the blue-chip companies with earnings tied to economic growth, which populate the Dow and S&P 500. It’s a better picture for growth and tech stocks — the likes of Amazon, Apple AAPL, -0.92% and Tesla TSLA, +1.27% — because their share-price performances rely on future earnings expectations, which get discounted as yields rise.


Actually perhaps I misunderstood his message: expectations of slower growth, result in some portfolios increasing their fixed income allocations, which in turn push up the bonds, and depress some parts of the S&P500.

https://www.marketwatch.com/story/why-e ... 1625743122

Matt

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Re: When should we get greedy?

#426029

Postby GoSeigen » July 9th, 2021, 8:29 am

TheMotorcycleBoy wrote:
Actually perhaps I misunderstood his message: expectations of slower growth, result in some portfolios increasing their fixed income allocations, which in turn push up the bonds, and depress some parts of the S&P500.

https://www.marketwatch.com/story/why-e ... 1625743122



As always, a reminder that "some portfolios increasing their fixed income allocations" will have zero effect on price on average -- because some other portfolios are decreasing their allocations simultaneously.

It is when ALL portfolios in aggregate are increasing their allocation that the price rises. In other words it is about the market's valuation of the asset, not about what a certain class of investors is doing at the relevant time.

I think it's also true to say that one can largely dismiss the ruminations of journalists on why prices are rising or falling, no matter how well-informed: there are many reasons why prices might change -- who's to tell that only one is predominating? -- and it's just opinion and often wrong, so one should form one's own view.

Bond yields don't simply move up or down, as we know there is a range of maturity and credit risk to bonds represented by the yield curve and risk curve respectively. Those curves may be bull steepening, bear steepening, bull flattening, bear flattening, or moving up or down or even something else. The interpretation for shares varies accordingly and also according to where we are in the business cycle. So for a journo to make a bland "bonds did X so shares did Y" statement grossly simplifies the reality.

My view, as shared in a PM earlier with TheMotorcycleBoy is that we are in the early to mid stage of the business cycle where bond and share markets are alternately fretful and cheered by interest rate news with prices jumping around accordingly. Personally I prefer to look through these zigzags and recognise that by the end of the cycle, rates will have already risen significantly and markets will not give a hoot, and then it's time to be really cautious. I believe we are far far from that point right now.

GS

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Re: When should we get greedy?

#426116

Postby TheMotorcycleBoy » July 9th, 2021, 11:10 am

GoSeigen wrote:My view, as shared in a PM earlier with TheMotorcycleBoy is that we are in the early to mid stage of the business cycle where bond and share markets are alternately fretful and cheered by interest rate news with prices jumping around accordingly. Personally I prefer to look through these zigzags and recognise that by the end of the cycle, rates will have already risen significantly and markets will not give a hoot, and then it's time to be really cautious. I believe we are far far from that point right now.

That's a fair comment.

Matt

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Re: When should we get greedy?

#473082

Postby GoSeigen » January 14th, 2022, 2:26 pm

I've entered a new phase of my strategy now where I am gradually reducing leveraged long positions by closing a very small tranche of bank share forward contracts.

I'm doing this just to assess how wrong/premature the change will prove to be.

:-)

GS

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Re: When should we get greedy?

#474643

Postby GoSeigen » January 20th, 2022, 8:49 am

GoSeigen wrote:I've entered a new phase of my strategy now where I am gradually reducing leveraged long positions by closing a very small tranche of bank share forward contracts.

I'm doing this just to assess how wrong/premature the change will prove to be.

:-)

GS


With the S&P pullback and a bit of fear showing there I recently bought some Sep Straddles to add to a small June Straddle position.

This morning I've taken the unusual trade of short S&P500 Feb puts and short FTSE100 Feb calls, a kind of US/UK arbitrage short straddle. There's been a strong divergence in the US and UK markets in recent weeks which has been wonderful for me as I am short the former and long the latter, but this latest trade is a bet that there will be a breather in UK outperformance or at least the two markets will trade in tandem for a while. It the FTSE outperforms S&P by more than 3.5% over the next 4 weeks I lose money on the trade (but my other positions do really well).

GS

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Re: When should we get greedy?

#474820

Postby GoSeigen » January 20th, 2022, 6:10 pm

GoSeigen wrote:I[f] the FTSE outperforms S&P by more than 3.5% over the next 4 weeks I lose money on the trade (but my other positions do really well).

GS


No-one has pulled me up on this yet, but it is of course rubbish. There are other ways to lose money on this trade in isolation; however given my existing short S&P futures and long FTSE futures positions I am not actually too concerned about each of the markets going the "wrong" way. This trade can be seen as a hedge or short term income-generating strategy.

GS

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Re: When should we get greedy?

#474863

Postby GoSeigen » January 20th, 2022, 9:10 pm

GoSeigen wrote:
GoSeigen wrote:I've entered a new phase of my strategy now where I am gradually reducing leveraged long positions by closing a very small tranche of bank share forward contracts.

I'm doing this just to assess how wrong/premature the change will prove to be.

:-)

GS


With the S&P pullback and a bit of fear showing there I recently bought some Sep Straddles to add to a small June Straddle position.

This morning I've taken the unusual trade of short S&P500 Feb puts and short FTSE100 Feb calls, a kind of US/UK arbitrage short straddle. There's been a strong divergence in the US and UK markets in recent weeks which has been wonderful for me as I am short the former and long the latter, but this latest trade is a bet that there will be a breather in UK outperformance or at least the two markets will trade in tandem for a while. It the FTSE outperforms S&P by more than 3.5% over the next 4 weeks I lose money on the trade (but my other positions do really well).

GS


Doubled my S&P straddle positions on this (NY) afternoon's weakness. VIX term structure is inverted. IMO we'll either get a collapse in sentiment now or strong rebound.

GS

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Re: When should we get greedy?

#474941

Postby TheMotorcycleBoy » January 21st, 2022, 9:10 am

Vix=26 right now. Bear market for the SP500?

Bitcoin price (my new risk on/off indicator :lol: ) is now beneath $40k, and 10yr TB yields fell sharply since Wednesday, perhaps folk are running for cover.

Matt

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Re: When should we get greedy?

#475258

Postby GoSeigen » January 22nd, 2022, 7:40 am

GoSeigen wrote:
GoSeigen wrote:
GoSeigen wrote:I've entered a new phase of my strategy now where I am gradually reducing leveraged long positions by closing a very small tranche of bank share forward contracts.

I'm doing this just to assess how wrong/premature the change will prove to be.

:-)


With the S&P pullback and a bit of fear showing there I recently bought some Sep Straddles to add to a small June Straddle position.

This morning I've taken the unusual trade of short S&P500 Feb puts and short FTSE100 Feb calls, a kind of US/UK arbitrage short straddle. There's been a strong divergence in the US and UK markets in recent weeks which has been wonderful for me as I am short the former and long the latter, but this latest trade is a bet that there will be a breather in UK outperformance or at least the two markets will trade in tandem for a while. It the FTSE outperforms S&P by more than 3.5% over the next 4 weeks I lose money on the trade (but my other positions do really well).


Doubled my S&P straddle positions on this (NY) afternoon's weakness. VIX term structure is inverted. IMO we'll either get a collapse in sentiment now or strong rebound.


Still buying straddles. The S&P has broken down technically. Bloomberg is calling a bottom; similarly in other media I see little angst either about the falls or about any underlying issues. Price action is dire and I see no extremes in bottoming indicators so I'll stick my neck out and say the S&P is headed for the 3400-3200-3000 area with a collapse in sentiment the verdict for now. There's really no technical support above that.

Don't mind a big move either way though. Worth noting that with S&P modified duration of around 75 years extreme volatility must be expected.

GS

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Re: When should we get greedy?

#475336

Postby TheMotorcycleBoy » January 22nd, 2022, 2:56 pm

GoSeigen wrote:
GoSeigen wrote:
GoSeigen wrote:
GoSeigen wrote:I've entered a new phase of my strategy now where I am gradually reducing leveraged long positions by closing a very small tranche of bank share forward contracts.

I'm doing this just to assess how wrong/premature the change will prove to be.

:-)


With the S&P pullback and a bit of fear showing there I recently bought some Sep Straddles to add to a small June Straddle position.

This morning I've taken the unusual trade of short S&P500 Feb puts and short FTSE100 Feb calls, a kind of US/UK arbitrage short straddle. There's been a strong divergence in the US and UK markets in recent weeks which has been wonderful for me as I am short the former and long the latter, but this latest trade is a bet that there will be a breather in UK outperformance or at least the two markets will trade in tandem for a while. It the FTSE outperforms S&P by more than 3.5% over the next 4 weeks I lose money on the trade (but my other positions do really well).


Doubled my S&P straddle positions on this (NY) afternoon's weakness. VIX term structure is inverted. IMO we'll either get a collapse in sentiment now or strong rebound.


Still buying straddles. The S&P has broken down technically. Bloomberg is calling a bottom; similarly in other media I see little angst either about the falls or about any underlying issues. Price action is dire and I see no extremes in bottoming indicators so I'll stick my neck out and say the S&P is headed for the 3400-3200-3000 area with a collapse in sentiment the verdict for now...........

That's a yes to the bear market question then!

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Re: When should we get greedy?

#475338

Postby TheMotorcycleBoy » January 22nd, 2022, 3:03 pm

This dude shares my new improved opinion of BTC

He says that signs that bullish appetite is waning is one reason, and that includes the decline in bitcoin BTCUSD, -4.09%, which he says isn’t an asset that he’s a fan of but does gauge it as a good sign of investor attitudes. He says that bitcoin sentiment has also aligned with technology, suggesting that those assets are moving more in tandem.

“The Nasdaq’s breaking down…technology is going to pull us down, and bitcoin below $40,000 is a significant breakdown for sentiment,” Acampora said.


from https://www.marketwatch.com/story/godfa ... 1642790170

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Re: When should we get greedy?

#482180

Postby GoSeigen » February 22nd, 2022, 4:58 pm

GoSeigen wrote:
GoSeigen wrote:
GoSeigen wrote:
GoSeigen wrote:I've entered a new phase of my strategy now where I am gradually reducing leveraged long positions by closing a very small tranche of bank share forward contracts.

I'm doing this just to assess how wrong/premature the change will prove to be.

:-)


With the S&P pullback and a bit of fear showing there I recently bought some Sep Straddles to add to a small June Straddle position.

This morning I've taken the unusual trade of short S&P500 Feb puts and short FTSE100 Feb calls, a kind of US/UK arbitrage short straddle. There's been a strong divergence in the US and UK markets in recent weeks which has been wonderful for me as I am short the former and long the latter, but this latest trade is a bet that there will be a breather in UK outperformance or at least the two markets will trade in tandem for a while. It the FTSE outperforms S&P by more than 3.5% over the next 4 weeks I lose money on the trade (but my other positions do really well).


Doubled my S&P straddle positions on this (NY) afternoon's weakness. VIX term structure is inverted. IMO we'll either get a collapse in sentiment now or strong rebound.


Still buying straddles. The S&P has broken down technically. Bloomberg is calling a bottom; similarly in other media I see little angst either about the falls or about any underlying issues. Price action is dire and I see no extremes in bottoming indicators so I'll stick my neck out and say the S&P is headed for the 3400-3200-3000 area with a collapse in sentiment the verdict for now. There's really no technical support above that.

Don't mind a big move either way though. Worth noting that with S&P modified duration of around 75 years extreme volatility must be expected.

GS


I've been steadily buying SEP S&P straddles over the past month and now have an uncomfortably large position. If the S&P goes nowhere I'm going to make painful losses on these positions with strikes ranging from 4275 to 4575.

Also been slowly closing some of my leveraged long FTSE stock positions, using the profit to buy stuff that has fallen hard. I think this bull market still has legs so happy to stay bullish.


GS

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Re: When should we get greedy?

#482416

Postby GoSeigen » February 23rd, 2022, 8:32 pm

Further technical breakdown in the S&P500 today. Target looks like 3500 area. VIX is subdued. Little sign of panic. VIX term structure inverted. Have added more straddles.

GS

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Re: When should we get greedy?

#482456

Postby vand » February 24th, 2022, 7:26 am

Buy when there's - literally - blood on the streets...

I do think that a lot of frothy sentiment has blown off since the start of the year. Today should push the pendulum very much into the fear zone.

Tensions will undoubtedly escalate over the next few days, but wouldn't surprise me if the market tries to rally from today's gap down


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