Ideas for short-term trades? Where are markets headed?

[cooperthedog]

I have been selling front month OTM put options on SPY (S&P 500 index ETF) since late October, due to the record volatility and corresponding fat premiums, which IMHO appeared to be the safest way to play such an oversold, yet unprecedented bear market. You may want to consider this as a lower risk alternative to a pure directional trade or sitting in cash.

This assumes you are willing to own the SP (or whatever index you choose) at the strike listed and that the strike provides enough premium to make it worthwhile. The last 5 days have reduced the VIX quite a bit, as well as driving puts deeper OTM, so one will have to accept less premium or incur more risk (higher strike).

As an example, the Dec31 SPY 80 put was ~2.55 at Friday’s close. This provides ~3.2% (38% annualized) premium for one month of risk and provides protection/break even at ~SP770 (you can opt for more “protection” and lower premiums or vice versa). The risks are that the market falls significantly below this level by year end. Also, closing the position before expiration could cause a loss even if the price of SPY is above the strike. You should familiarize yourself with the basics of options before considering such a strategy, and I would strongly recommend cash secured puts (i.e. no leverage). I would also avoid options on the 2x index ETF’s, as the dynamics of matching the daily movements at 2x can cause poor correlation over weeks or months and the b/a spreads can be wide.

[cooperthedog]

[quote=peterb]Next big overhead is 10000. If it get anywhere in the high 9000’s, I’m loading up on the new triple short ETF’s out there.[/quote]

I would stay away from the 3x ETF’s for several reasons.

*Liquidity & b/a spreads
*2x funds can suffer poor correlation over weeks & months, with high volatility exacerbating this. E.g. – SDS (2x short SP500) is up 35% over the last 3 months, and the SP is down 30%, which is not even close to 2x… I imagine 3x will behave even worse.
*Broker margin can be had for < 2% currently. *3x leverage is alot, especially with high volatility and surprise events compounding overnight risk. *If you really want high leverage, and can accept catastrophic loss, then you may want to consider index futures, as these would obviate the first 3 issues. There is a professional futures trader who posts here. He would be an excellent resource to ping.

[cooperthedog]

[quote=peterb]Next big overhead is 10000. If it get anywhere in the high 9000’s, I’m loading up on the new triple short ETF’s out there.[/quote]

I would stay away from the 3x ETF’s for several reasons.

*Liquidity & b/a spreads
*2x funds can suffer poor correlation over weeks & months, with high volatility exacerbating this. E.g. – SDS (2x short SP500) is up 35% over the last 3 months, and the SP is down 30%, which is not even close to 2x… I imagine 3x will behave even worse.
*Broker margin can be had for < 2% currently. *3x leverage is alot, especially with high volatility and surprise events compounding overnight risk. *If you really want high leverage, and can accept catastrophic loss, then you may want to consider index futures, as these would obviate the first 3 issues. There is a professional futures trader who posts here. He would be an excellent resource to ping.

[cooperthedog]

[quote=peterb]Next big overhead is 10000. If it get anywhere in the high 9000’s, I’m loading up on the new triple short ETF’s out there.[/quote]

I would stay away from the 3x ETF’s for several reasons.

*Liquidity & b/a spreads
*2x funds can suffer poor correlation over weeks & months, with high volatility exacerbating this. E.g. – SDS (2x short SP500) is up 35% over the last 3 months, and the SP is down 30%, which is not even close to 2x… I imagine 3x will behave even worse.
*Broker margin can be had for < 2% currently. *3x leverage is alot, especially with high volatility and surprise events compounding overnight risk. *If you really want high leverage, and can accept catastrophic loss, then you may want to consider index futures, as these would obviate the first 3 issues. There is a professional futures trader who posts here. He would be an excellent resource to ping.

[cooperthedog]

[quote=peterb]Next big overhead is 10000. If it get anywhere in the high 9000’s, I’m loading up on the new triple short ETF’s out there.[/quote]

I would stay away from the 3x ETF’s for several reasons.

*Liquidity & b/a spreads
*2x funds can suffer poor correlation over weeks & months, with high volatility exacerbating this. E.g. – SDS (2x short SP500) is up 35% over the last 3 months, and the SP is down 30%, which is not even close to 2x… I imagine 3x will behave even worse.
*Broker margin can be had for < 2% currently. *3x leverage is alot, especially with high volatility and surprise events compounding overnight risk. *If you really want high leverage, and can accept catastrophic loss, then you may want to consider index futures, as these would obviate the first 3 issues. There is a professional futures trader who posts here. He would be an excellent resource to ping.

[cooperthedog]

[quote=peterb]Next big overhead is 10000. If it get anywhere in the high 9000’s, I’m loading up on the new triple short ETF’s out there.[/quote]

I would stay away from the 3x ETF’s for several reasons.

*Liquidity & b/a spreads
*2x funds can suffer poor correlation over weeks & months, with high volatility exacerbating this. E.g. – SDS (2x short SP500) is up 35% over the last 3 months, and the SP is down 30%, which is not even close to 2x… I imagine 3x will behave even worse.
*Broker margin can be had for < 2% currently. *3x leverage is alot, especially with high volatility and surprise events compounding overnight risk. *If you really want high leverage, and can accept catastrophic loss, then you may want to consider index futures, as these would obviate the first 3 issues. There is a professional futures trader who posts here. He would be an excellent resource to ping.

[cooperthedog]

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[socrattt]

I think the confidence is all but gone in the markets. ST, I think you made a poor decision in selling gold at $810/oz, although nothing wrong with a little profit taking. I have a sneaky suspicion we are going to start seeing the markets make some heavy corrections in the near term because there are very few strings left to be pulled by our government and corporations will have little to cheer about for quite some time.

I am loading up again on silver and gold as I feel we truly are now at a time where the Fed can no longer take action to stop this crisis. What will unfold in the next 6 months will be quite alarming and my belief is gold and silver won’t see many more of these recent downward corrections.

I also believe that some gold and silver mining stocks could also have some incredible potential. It really interesting to see how the markets now react to rate cuts and infusion of funds into our failing system. It is a matter of time before unemployment hits 15% and our currency becomes worthless or at lest worth less!

Welcome home!

[socrattt]

I think the confidence is all but gone in the markets. ST, I think you made a poor decision in selling gold at $810/oz, although nothing wrong with a little profit taking. I have a sneaky suspicion we are going to start seeing the markets make some heavy corrections in the near term because there are very few strings left to be pulled by our government and corporations will have little to cheer about for quite some time.

I am loading up again on silver and gold as I feel we truly are now at a time where the Fed can no longer take action to stop this crisis. What will unfold in the next 6 months will be quite alarming and my belief is gold and silver won’t see many more of these recent downward corrections.

I also believe that some gold and silver mining stocks could also have some incredible potential. It really interesting to see how the markets now react to rate cuts and infusion of funds into our failing system. It is a matter of time before unemployment hits 15% and our currency becomes worthless or at lest worth less!

Welcome home!

[socrattt]

I think the confidence is all but gone in the markets. ST, I think you made a poor decision in selling gold at $810/oz, although nothing wrong with a little profit taking. I have a sneaky suspicion we are going to start seeing the markets make some heavy corrections in the near term because there are very few strings left to be pulled by our government and corporations will have little to cheer about for quite some time.

I am loading up again on silver and gold as I feel we truly are now at a time where the Fed can no longer take action to stop this crisis. What will unfold in the next 6 months will be quite alarming and my belief is gold and silver won’t see many more of these recent downward corrections.

I also believe that some gold and silver mining stocks could also have some incredible potential. It really interesting to see how the markets now react to rate cuts and infusion of funds into our failing system. It is a matter of time before unemployment hits 15% and our currency becomes worthless or at lest worth less!

Welcome home!

[socrattt]

I think the confidence is all but gone in the markets. ST, I think you made a poor decision in selling gold at $810/oz, although nothing wrong with a little profit taking. I have a sneaky suspicion we are going to start seeing the markets make some heavy corrections in the near term because there are very few strings left to be pulled by our government and corporations will have little to cheer about for quite some time.

I am loading up again on silver and gold as I feel we truly are now at a time where the Fed can no longer take action to stop this crisis. What will unfold in the next 6 months will be quite alarming and my belief is gold and silver won’t see many more of these recent downward corrections.

I also believe that some gold and silver mining stocks could also have some incredible potential. It really interesting to see how the markets now react to rate cuts and infusion of funds into our failing system. It is a matter of time before unemployment hits 15% and our currency becomes worthless or at lest worth less!

Welcome home!

[Author]

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