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SPY Option Skew Steepening Significantly Ahead Of OpEx
With At The Money vol dropping markedly over the past 4 days, and the VIX plunging, the green light to buy stocks ahead of OpEx was given by those who traded 25% of the market volume in just 5 financial stocks purely as a result of yet another massive squeeze, dragging the balance of the market. Yet observing the wings indicates a significant steepening of the skew, especially in the last day. On the other hand, it could be simply churn moving away from stocks and into options. However, with today's bleak jobs data, offset by optimism out of Philadelphia, while China is doing all its can to preserve the bubble one more day, at this point there is no question that fundamentals have no bearing whatsoever in this market and momentum drives all. Every trade is merely a coin toss.
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From arguably the best market speculator of all time.
Never follow the crowd.
Bernard Baruch
The main purpose of the stock market is to make fools of as many men as possible.
Bernard Baruch
"at this point there is no question that fundamentals have no bearing whatsoever in this market and momentum drives all. Every trade is merely a coin toss."
We, as thinking humans, cannot fathom how a school of a thousand fish can turn right within a second, or how a species of birds sprawling a nation can collectively take flight southward all at the same time, so we attribute it to a mysterious form of super intelligence; to nature's magic. Perhaps we don't want to belittle our own place in the Universe, by entertaining the reality that intricate, beautiful and complex patterns of herding are not caused by hyper-intelligence, but rather by our collective stupidity.
Animal herding is not magic, it is the lack of magic. Humans are not immune to instinctive herding behavior, to the contrary, we do little more than execute our unchangeable genetic program during the majority, if not all of, our social and economic interactions. The key to making money in the stock market is understanding that the human herd is not a thinking body, no more than a school of individual darting fish navigate by collectively reasoning. We as individuals, and also as a group, simply execute our unchangeable genetic program in a probabilistically determinative way, every instant of our lives.
The essence of magic is uncommon knowledge, no matter how uncomplicated the underlying reality. The less common the knowledge, the more powerful the magic. In the stock market, the ability to perform magic = money. Complex fractal patterns are scratched into the ages when almost-identically programmed individuals move in herds. It is not magic, but understanding the innate behavior of the herd is magic indeed.
On the subject of how quickly a herd can change its behavior, an elderly couple in Georgia were killed this week by a pack of feral dogs.
http://www.ajc.com/news/dog-attacks-as-unpredictable-119340.html
The Schweders often walked the dirt road where they were attacked. The dogs were familiar to them and others who lived in the area, neighbors say.
“We never had a problem with them,” said Lanier Bridges, who lives on Elberton Road in Lexington.
But canines are keen to even the slightest changes.
“In a wild group of animals, members of the pack will spend different parts of the day in different territory,” Beaver said. “If their walks normally came at a different time of day, this may have been perceived as a threat by the dogs.”
Packs are considerably less predictable than individual canines. If one dog acts irrationally, the others are likely to follow.
“Often it takes only one or two dogs to spark the kind of attack you’re describing,” Ciribassi said. “It doesn’t take much.”
Originally, he was frustrated and agitated, but that soon faded to a level of comfort knowing intuitively that his formula
excellent thoughts, though I'd like to add that today's market is not driven by the herd, or the school of fish. It is total bullshit no doubt funded by the banksters, pulling a Jesse Livermore style operation which lures the school of fish...into a net, draws the herd to the barn...for slaughter.
Never underestimate how far the tape can run on fumes and POMO cash.
BTW, three more POMOs through Sept. 1st - oh, goodie....
Uh, can you point to a time that the market has ever traded on fundamentals. Hell, I remember in 1999 talking to a friend and discussing how out of hand the market was getting. It's always the same. The thing is that all computers are pretty much set to buy dips now and then the momentum players go in. The only way to play this market is to let the computers do their thing and then be overhedged with cheap out of the money puts, as the VIX drops and the market rises, you take small losses and roll the options up. If you play a few months out, it is not an expensive strategy.
People need to differentiate between investing and trading; personally I almost never touch public companies, they make terrible investments, save for a few times a decade.
I wonder, would it be more correct to say that "Fundamentals only matter at market tops?" If true, then the only time we are being rational is when we capitulate.
I'm confused.
:)
When really investing fundamentals always matter. But most people think they are investing while they are actually trading. Unless you know a business in and out, including how it should behave during different cycles and what management can do to prepare and ride out those cycles, unless you have done cash flow projections based on knowing or being familiar with the first point; unless you are treating your purchase like you are buying the entire business with the only money you have left and are willing to hold on indefinitely (we own a few private businesses and just because we've had a bad year, we arent just going to panic and sell), you are not investing.
I'm pretty sure that if you went through this excercise in the public market you would not find much to buy.
Who is selling these "cheap OTM puts?" Are they the fool?
They are not fools, option market makers hold large books and are always trying to get delta neutral with the least amount of gamma possible. You bought a cheap out of the money put then it is most likely that he bought an even cheaper one to cover or has a spread that makes him money. I have a ton of respect for option market makers, those guys are sharp and are playing a different game than we are. Unlike HFT market makers, their shennanigans do not affect us as much and they are truly providing liquidity.
Yeah a coin toss, ever seen 'Rosencrantz and Guildenstern are Dead'?
skip to 0:45 to get to the point
http://www.youtube.com/watch?v=RjOqaD5tWB0
Anybody get that DVN gap at the NYSE close? Sweet free money. Swept down to 61.25 from 62 then gapped up and closed at 63.50 Havent got one of these this year yet. Miss them
Anybody get that DVN gap at the NYSE close? Sweet free money. Swept down to 61.25 from 62 then gapped up and closed at 63.50 Havent got one of these this year yet. Miss them
Let's see...
A triple top on the S&P with lower highs and lower lows with all highs showing low volumes and virtually all slow stochastics above 5 min showing severe overbought (>75%) conditions.
Hmmm... what COULD that mean???
Mr. Sulu... ahead. Warp factor 10. Engage!
Financing and the markets should be a commodity like roads in an ideal world enabling commerce to blossom. I am afraid the owners of the printing press have given their friends free monopoly money to play with. What would you do with paper monopoly money with no interest - you would speculate and gamble, with no need for analysis - it's not like you actually worked for the money and risked anything by speculating.
Credit is no longer the lifeblood of the economy, it is the noose of the economy. A small group of dominant men have turned the economy on it's head. Where they were to support the economy, they now lead it around on a leash. It is madness and chaos.
But that's the plan, order out of chaos - I am waiting for their pre-set solution - world currency, more fed authority, less country self rule, more BIS.
“Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done.”
John Maynard Keynes
Thank you, I had not read that before, apt & succint.
An exceedingly appropriate quote, indeed.
Code does not dictate a specific timeframe in which a non-debtor party must terminate a swap contract to preserve
Why are you showing today's IV on only the ASK, while the other days' are the midpoint?
ah, fuck it.
so we attribute it to a mysterious form of super intelligence; to nature's magic. Perhaps we don't want to belittle our own place in the Universe
Cognitive dissonance whispers "let go, stop believing yourself and submit to the irrational. You are an outlier, a sucker who believes seemingly objective, reasoned thought should lead to successful outocmes, when in fact you don't see deep enough to understand the facts upon which to draw your conclusions. Those Ivy League party boys at GS understand - how are you keeping score? Being right, or getting rich? S-U-C-K-E-R."
Trouble is, I don't really know how to trade "irrational." How do you pick door No. 1 or door No. 2 in a house of mirrors? Is the ongoing collective assumption that all this must crash, based on all that seems rational, just some smug, disguised utopianism, some tin hat knucklehead drivel, some thin hope that in a just world bad guys get what they've got coming? Are we just kidding ourselves? Ben can print forever.
Off to play "The Ocean" again.
Thank you for quoting me.
short squeeze indeed, the pretended discovery of a shortfall in American oil inventory, then translated IMMEDIATELY into a story of oil service companies return to play upside, and oil price internationally shooting back up,
while yet Dubai's property market crashes, all fall down, like the Black Plague in the Oil Patch of the Middle East...
just a story, but enough, 'tis but a scratch, but enough' thats our FRIENDS AT GOLDMAN and a few OTHERS doing their dirty market Options Friday - dirty work this intelligence/counterintelligence operative stuff....
AND NOW the 'overnight trading' expect opening gaps, expect Options to suddenly 'take an unexpected turn' expect massive profits on Options expiring Friday, purchased on Wednesday....
expect that...but it remains the last hurrah for Goldman, end game - by years end, there will be many many pink slips AND worthless 'employee options' TOO...how i loath Goldman, and a few others - 'suits' at their worst
What??? The skew steepens and becomes more smile-like EVERY SINGLE MONTH as options approach their expiration. This happens all the time and in every single options product.