Spread Compression Time With ES "Fair Value" About 15 Point Lower

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Fri, 08/26/2011 - 13:47 | 1604852 mynhair
mynhair's picture

Might have to hold it into Monday, though.  Seems everyone has evacuated.

Fri, 08/26/2011 - 13:48 | 1604855 narapoiddyslexia
narapoiddyslexia's picture

Excuse my ignorance, but how do you, "long the Contextual Risk leg?"

Fri, 08/26/2011 - 13:49 | 1604859 HelluvaEngineer
HelluvaEngineer's picture

Not sure it's as important this time, frankly.

Fri, 08/26/2011 - 13:50 | 1604863 redpill
redpill's picture

Couldn't tell you, I'm still dumbfounded as to why this stupid stock market is green today.

Fri, 08/26/2011 - 13:51 | 1604870 HelluvaEngineer
HelluvaEngineer's picture

Didn't this happen last time Bernanke disappointed?  I seem to remember the floor falling out shortly thereafter.

Fri, 08/26/2011 - 13:56 | 1604888 Cognitive Dissonance
Cognitive Dissonance's picture

Sell the rip. Disappointment will arrive Monday along with the pumping out of the NYC subways.

Fri, 08/26/2011 - 14:06 | 1604934 WestVillageIdiot
WestVillageIdiot's picture

It might be interesting trying to get back onto Manhattan Monday.  The PATH, Long Island RR, Jersey Transit and subways could be very difficult.  Even Metro North could get screwed up. 

And yet the NASDAQ just keeps climbing.  Yoga pants, burrito joints and even banks are just going straight up.  As is gold.  The dollar is dead. 

Fri, 08/26/2011 - 14:26 | 1605007 slaughterer
slaughterer's picture

People want to be fully invested during the hurricane so that they can rest assured that their money at least is in a safe place. /sarc

Fri, 08/26/2011 - 14:28 | 1605017 slaughterer
slaughterer's picture

Yup, last time the floor fell out for two days after the JH EOD rally. 

Fri, 08/26/2011 - 14:14 | 1604964 espirit
espirit's picture

Compare $CH30 and $INDU - at resistance.

Fri, 08/26/2011 - 14:56 | 1605148 freethinker4now
freethinker4now's picture

I know. Goes up on printing speculation. Then goes up when no printing? Skitzo

Fri, 08/26/2011 - 18:06 | 1605870 blingblingbert
blingblingbert's picture

Man, have you not heard about the invisible hands?

Fri, 08/26/2011 - 15:03 | 1605171 pvzh
pvzh's picture

I'm still dumbfounded as to why this stupid stock market is green today.

1. Hurricane -- Bullish (lots of broken windows).

2. Stockpiling on stocks (they are non-perishable too, and unlike gold you can eat them ;-) ).

/ sarc off

Fri, 08/26/2011 - 14:05 | 1604900 B-rock
B-rock's picture

...Buy TZA...

 

Or TZA Sept 2 $50 Calls.... ??

Fri, 08/26/2011 - 14:13 | 1604961 nobusiness
nobusiness's picture

I love this trade. 

Out of the money call options on a triple inverse of the most volitile market the small caps with only 5.2 trading days left.

Nice.

Fri, 08/26/2011 - 14:15 | 1604966 French Frog
French Frog's picture

Posted a few times but still awaiting some sort of reply ....

Dear ZH,

I'm very much enjoying those arbitrage trades between the ES and your RISK index. I suspect that the vast majority of readers or traders in here do not have access to a RISK chart let alone being able to trade it.

It would be good if you could run some charts to see what other more 'common' instrument is currently the most corelated to the RISK index (it used to be Aud/Jpy I believe).

Once we know that, I feel that more people would benefit from this info as you could then do the pair hedge/trade with minimal risk (ie. short ES & long 'that' instrument), rather than simply going for the more risky 1 trade (in this instance, short ES, as many people have probably been burnt shorting the indices 'naked', especially when one remembers the many meltup mondays that we've had).

Just a thought, because the 'easy money' title is only correct IF you are able to trade it in reasonable safety by being hedged.

Thanks in advance

Fri, 08/26/2011 - 14:39 | 1605073 disabledvet
disabledvet's picture

Or just buy gold of course. Sometimes it really is all about the entertainment value...as in "u followed our advice and lost everything? HRdy Har Har!" something tells me " they aint broadcasting from topeka here." one more thought: if i have a billion dollars in the bank or a billion dollars worth of gold which do i get back if the bank fails? Not that banks fail of course. At least that's what the government guy told me back in 2007. "Banks dont fail anymore."

Fri, 08/26/2011 - 14:19 | 1604976 arm50
arm50's picture

the spread is (12*lqd-9*ief-4*spy)/4=x, can be found on their site. It is a good trade, just eats cap req.

 

Fri, 08/26/2011 - 15:14 | 1605211 gguillory75
gguillory75's picture

huh?  is that buy 12 sh LQD, sell 9 sh IEF and 4 sh SPY?  What's the "/4" part?

Fri, 08/26/2011 - 16:05 | 1605031 citrine
citrine's picture

As Tyler mentioned at the beginning, the risk leg of the "Context" index is a basket consisting of risk assets. Few weeks ago he let us know what is included in the basket, but I can not be completely certain at this point.

Fri, 08/26/2011 - 13:54 | 1604878 Rick64
Rick64's picture

Maybe or they're waiting for the selling to start.

Fri, 08/26/2011 - 14:07 | 1604940 WestVillageIdiot
WestVillageIdiot's picture

Like a fucking idiot I bought some puts on QQQ today.  I can feel my ass getting rimmed.  Anybody else as stupid as me? 

Fri, 08/26/2011 - 14:09 | 1604945 --Freedom--
--Freedom--'s picture

Bought some sqqq when the NASDAQ was at 2.5% up, so am even today on that. Can't fucking believe it will close that high, but who knows?
Nice move in gold, though.

Fri, 08/26/2011 - 14:36 | 1605055 slaughterer
slaughterer's picture

The floor will fall out next week, do not worry. 

Fri, 08/26/2011 - 14:42 | 1605086 disabledvet
disabledvet's picture

I do worry. I'm a worry wart. And a mr. fidget as well.

Fri, 08/26/2011 - 14:21 | 1604972 B-rock
B-rock's picture

nevermind

Fri, 08/26/2011 - 14:24 | 1605000 WestVillageIdiot
WestVillageIdiot's picture

Not if it is with a tire iron.

Fri, 08/26/2011 - 14:21 | 1604990 economists_do_i...
economists_do_it_with_models's picture

Not stupid at all.  Look at the 3yr chart of SPY:$DAX on stockcharts.com.

Things have gotten so far out of line that it's pitiful.

Setting up for another major 2008/flash crash type correction.

Fri, 08/26/2011 - 14:27 | 1605015 nobusiness
nobusiness's picture

I actually caught the low today within 45 seconds.  trouble is I bought IWM Puts.  So yes I'm just as dumb as you.

Fri, 08/26/2011 - 15:08 | 1605186 caerus
caerus's picture

patience

Fri, 08/26/2011 - 14:13 | 1604960 slaughterer
slaughterer's picture

The gap between ES and risk will be closed in futures before open on Monday. 

Fri, 08/26/2011 - 14:35 | 1605053 B-rock
B-rock's picture

True.

Fri, 08/26/2011 - 13:49 | 1604860 Cognitive Dissonance
Cognitive Dissonance's picture

Spread Compression Time With ES "Fair Value" About 15 Point Lower

I'm no longer flexible enough to play those Twister games. But I could try something close with Mrs CD tonight if that's OK?

Fri, 08/26/2011 - 13:58 | 1604895 anynonmous
anynonmous's picture

speaking of twister

WTF happened to operation twist and extended duration

all the prick did was extend the duraation of the next FOMC

Fri, 08/26/2011 - 14:02 | 1604916 centerline
centerline's picture

Yeah.  Total nothing burger today.  I guess I could say I am bit confused - but really nothing surprises me anymore.  I suspect today is a deer-in-the-headlights moment.  I don't think any of the markets know how to react right now... all looking for some sort of direction.  Sort of like the volume lately (aside from bursts of selling activity), the bots are levitating the market in abscense of actual volume trading.  

Fri, 08/26/2011 - 14:11 | 1604951 SheepDog-One
SheepDog-One's picture

Doesnt take hardly anything at all for them to pop ES .5%, big deal, the dump is coming soon.

Fri, 08/26/2011 - 14:24 | 1604997 centerline
centerline's picture

I wouldn't want to be long into the weekend.  As such, a minor selloff could be in order this afternoon.  Compression trade should be complete here in the next hour or so.

Fri, 08/26/2011 - 15:35 | 1605290 TwelfthVulture
TwelfthVulture's picture

Many moons ago I was taught to trade the INITIAL market reaction to Fed announcements.  Initial reaction this morning was violently down. 

Fri, 08/26/2011 - 14:11 | 1604952 AnarchoCapitalist
AnarchoCapitalist's picture

It will come. The market needs to go lower before Bernanke's hand is forced.

Fri, 08/26/2011 - 13:49 | 1604861 So Close
So Close's picture

15 mins ahead of you.  Finally.  ;-)

Fri, 08/26/2011 - 13:52 | 1604869 centerline
centerline's picture

I dont think one of these trades has failed in a very long time.

Fri, 08/26/2011 - 13:55 | 1604877 Zeilschip
Zeilschip's picture

Unless Trichet and Lagarde pull a rabbit out of their hats this weekend, I can't see how the two-day September FOMC hopium can carry this market permanently higher. 

Fri, 08/26/2011 - 14:11 | 1604955 WestVillageIdiot
WestVillageIdiot's picture

And gold is laughing at Bernanke once again.  Go ahead launch QE3 at the FOMC meeting.  We can get the DXY into the 60s.  We can get WTI over $100.  As much as I have difficulty admitting this I think the American public is waking up.  Add to this Obama's coming handouts and the groups such as "The Tea Party" are going to be handed a lot of power back to them.  The ridiculous blame they took over the "debt hole" debate will wash away like a pigeon on The Hudson this weekend. 

Fri, 08/26/2011 - 13:56 | 1604887 B-rock
B-rock's picture

Hey, it's been a while...  How ya'been Compression Trade?

Fri, 08/26/2011 - 14:00 | 1604893 WoodMizer
WoodMizer's picture

Is the physical premium the difference between apmex spot and paper futures on the comex?

i know it's off topic, but gold over 1800 caught my eye.

Fri, 08/26/2011 - 13:58 | 1604894 besodemuerte
besodemuerte's picture

Excuse my ignorance, but what exactly is the .CONTEXT Index?  I love watching these trades over the months but I don't know what the hell that Index is.  I've seen these done before with other benchmarks, maybe I'm just falling asleep at the wheel lately.  Thanks.

Fri, 08/26/2011 - 14:02 | 1604911 Zeilschip
Zeilschip's picture

Maybe someone can paste the CIX formula from Bloomberg into this thread?

Fri, 08/26/2011 - 14:48 | 1605113 disabledvet
disabledvet's picture

Sure. It's a trade "put in context." as in "this is really good" when in fact in the immortal words of the Goldman Saxony "it is shit." any other questions?

Fri, 08/26/2011 - 13:59 | 1604901 John McCloy
John McCloy's picture

  Im looking for that EUR to nosedive 

Fri, 08/26/2011 - 14:00 | 1604903 kahunabear
kahunabear's picture

Nah, everybody's buyin' the huge economic benefits of the hurricane demolishing the eastern seaboard.

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