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Prepared by the good people at Random Walk, LLC. (and Scott)
ISIS, EBOLA, OCTOBER FEARS, AND ELECTIONS
Great Morning
Closing Prices From Yesterday
NO NUMBERS
Yesterday
Kaboom Part IV
The return of volatility
It was a quiet day with the market spending most of the day with the Dow up about 40 and the E-minis down about -4.00. It was not until the end of the day and the endless talk about the 200-day moving average being at 1904 that the markets went to the magnet.
LESSON
This is a PERFECT example of how numbers are worthless, meaningless and stupid ā BUT if enough people are looking at them they become a self-fulfilling prophecy at times.
TODAY
The SPX closed at 1906.13, but about $2 away from the moving average everyone is anticipating. The Dow is now down for the year. The RUT is way under water. Now everyone is starting to get concerned. IN the past you could tell the sell-offs we have had were stupid because the VIX could barely get to 17%. No one was really scared, instead of looking at selling as a ābuying opportunityā. Now the VIX traded on Friday above 22%, and is probably going to open at 24% today.
I felt (on Friday) we had to open a little weaker today because we didn’t officially test the 1904 number. Some people get real picky with those numbers. We now have ISIS cooperating with the markets going lower as they approach Baghdad and major battles going on. I can’t say the word āwarā because Obama said that this is not a āwarā. But then he did say it was? Then he said it wasn’t. Kind of sounds like Vietnam, huh?
There are no numbers out today, and news that the market is not officially down for the year may get some people selling out of their positions on the open. This will force the markets down, and we will see where we go from here.
Do keep things in perspective. The Dow is only 460 points away from 17,000 still. That means you can say we are still in the bull market, or you can say we have a lot of room to fall. For POT people, it doesn’t matter. See below.
POT is held each Wednesday night at 7:00pm eastern.
You will recall from Friday’s update I wrote: āSweet things if we are down 20 SPX points today.ā
We were down 22!
Like an idiot I sold out the hedge and only took in $8,500 when I could have made $19,800, BUT had we closed where the market was most of the day, the thing would have expired worthless. In hindsight I knew better, but I didn’t want to have to explain why I let $8,500 go away.
It doesn’t matter because I legged into a new one as well. I bought 10 contracts of a $20 spread when the E-minis were down -$4. I didn’t spread them off until the close (-$22) so I took a NICE ride.
The spread purchased for $5.20 closed at $7.40, and then I sold 20 contracts of a $5 spread against it. And since I anticipate the market opening down at least another 10 SPX points, we can have a leg on for 30 points in our favor and spread this thing off like a champ ā or let it run.
FRIDAY’s HEDGE that CLOSED (BELOW)
ThisĀ began last week.
Sold an ittsie ā bitsie spread on Friday. Will sell more premium today.
Too True To Be Funny
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Attorney Stuff
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