ES Journal Archive (2009 - 2010)
- Thread starter Jahajee
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This is an interesting comment . . . I get the implied vol vs actual vol comment and MMs being short options . . . . but what is so important/special about ES/SPX 1000 that it makes perfect sense . . . why not 980, 990, 1010, 1015,1020?
The MMs have now returned price to the 1000 area, so objective one accomplished, but what other objective have they accomplished? Returned Implied Vol to near/equal to actual vol?
If the put interest stays high, bears will be hard pressed to get cash under 977 by friday. What you want to watch is if there were a lot of new writes at 99 and 100 today on the calls, which we won't know til tomorrow. If there was, then we hold 1004 and could fall back down to 977 by expiration.
Nothing inherently special about 1000, just like there isnât anything inherently special about Dow 10,000 but everyone will be talking about it when we hit it again. There is always higher open interest and trading activity in round number option strikes, and combine that with many people considering 1000 to be a significant level to the market as a whole gives you added relevance. Watching the trading over the past several weeks has made it apparent that âtheyâ didnât want it to go too far above or below 1000. SPX open interest on 1000 is 197,578 while the open interest of the 980, for example, is 30,299.
The other objective they accomplished was getting an immediate 20-30 point rally after a two day pullback. The market is and has been following patterns repeatedly since this current rally began. What percentage of days have we rallied at the end of the day? That alone tells you that this is not a randomly distributed market right now. The VIX is currently over 26, while the 20 day historical is only about 17.
I certainly hope that something unexpected happens to shake things up, because we traders have more opportunities that way, but I have yet to see anything surprising happen since July 10th. I am not at all saying I know what will happen or when, just that nothing surprising has happened to make the bulls even bat an eye.
China goes down about 5%, then we rally today.
China goes up about 2.5%, then futures rally even more tonight.
Go figure.
Almost everyone I hear and read is just debating whether we will be at 1050 at the end of the year or higher than that. No consideration is being given to being down on the year â which we would need to fill the large gap down below. Just like I pointed out that no one was giving credence to a 950 expiration on Friday when LC brought it up. I was not trying to say it wouldnât or shouldnât happen, only that since no one expected it you could make a very large amount of money betting on it and it would finally be something to shake things up. The majority clearly believed we had to go lower today since Asian shares were down so much, so when that clear majority expectation was not fulfilled you ended up with an outsized reaction the other way. Just a simple example of why I consider consensus expectations important.
Can you smell 1001 ?
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