Kudos to MMs

It is interesting to me, but psychology in markets is similar to the way we describe mass in physics through the Higgs boson. That is, mass (as we undertand it from a Higgs perspective) is a field interacting with itself. It is telling you how much energy you need to spend to drag an excitation out of the background field.

I don't currently have a "mass" term in the model (momentum is the closest thing that would describe mass psychology) because I don't like (a way of saying I don't have a clear picture) pure mathematical ways of measuring it. Consensus is a better estimator, and I do have those, but they seem to lag. In fact, I can "feel" it better than I can describe it.

The clear signs that "a higher energy to drag an excitation out of the background field" is required in a low psychology environment. Thing is, you would think that low volatility would dominate in this regime.

Anyway, free-form thinking here.
 
An update that I can't help making. After so many years of doing this, one begins to get a feel for patterns and price action, and what it means for short term direction. I have seen this kind of price action countless number of times, and it almost always ends up breaking support. That means that my intution says this goes to somewhere in the low to mid-low 1300s. To reiterate, in the longer term, this is very undervalued, so a chance to get in cheaper is welcome. This is more of a post for people that have existing positions and have to manage it.

With that in mind, it may be better to sell the ratio'ed calls against a long call now instead of waiting for another 10 handles or so to squeeze every last "penny". You are giving up upside, but you are gaining downside and protecting primo.

"FV" gives SPX at 1503. That means SPX is hugely undervalued. On the other hand, short term drafts can take us anywhere. Very tough here imo...
 
More art than science on where to start getting long again, but the logical places are 1320 ish, then 1302 ish. Since nobody on heaven or earth knows exactly where market go, you have to have some plan of getting in at both minor support points with some weighting.

I would get a little nervous if we broke 1300, but 1272 is the pivot.
 
Strange dichotomy between NDX, and SPX and DJX today. Nothing can withstand tech selling, and I would not be surprised to see NQ and YM lose the ghost before the close, hard.

When (if) SPX gets to 1320, we have a possible decision point.
 
SPX is flirting with 1320. Imo you have to start getting delta long here again, but don't go all in. Go long in a measured way, so that if we drop lower, we can pyramid more delta long at 1302 ish. I would say we should be 50 delta long here, and 75 delta long at 1302.

If you sold the 1425 calls against a long DIM call, another way to get [more] delta long is simply to buy some of those back, but that may not get you much deltas.

Some people don't like getting long in a dropping market. They prefer to get long in a rising market. So for example, they would go long on a crossing of 1320 from below, not above. Tough to say, and it depends on time frame and style. But it is a safer way to trade.
 
So, what do we do here if we bougth 1320? God only knows right? But a possible strategy is to sell (ratioed) calls against our long deltas that we bought around 1320, when SPX goes somewhere in the range 1342 to 1350, this time probably selling the 1400s. This protects primo against sideways movement to down movement, and giving up the upside (locking in some profit in the meantime).

So what? If the SPX goes through 1350, we buy the short calls back and let our now DIM calls with lots deltas ride to 1365-1372, where we would again sell short (ratioed) calls (the 1425s), again against long deltas, the act of which protects primo against sideways movement to down movement, and giving up the upside (locking in some profit in the meantime).

So what? If SPX goes through 1372, we buy back the short calls and let our very DIM calls with lots of deltas ride to 1425.

Note that we protect primo and give up on one direction at resistance, and admit we are wrong on that direction on breakouts. Simple and clean. Keeps us mostly in the trend but minding that options are decaying assets, and putting probability on our sides when technicals concur, all the while keeping risk tightly under control. We do this by alternating between ATM/DIM long options and OTM short options to complete spreads.

Who says traders can't surf the waves, tactically and strategically?
 
Other than selling (ratioed) calls against a long 1320 call position to hedge at a resistance threshold [if that action has not already been taken late yesterday], no action is required here.

We give up on [more] upside until the market goes through resistance and proves it has the energy to progress to a new level, in which case we "unhedge" and let DIM options run. That "unhedging" action would be taken if 1350 was taken out.
 
The one parameter has inverted again. However, "FV" still comes in at ~1485. While the inversion of this parameter has taught me that it carries critical information, the strength of FV this time around imo means that any sell off as a result is going to be very minimal and won't cause a great deal of volatility the way it did last time. Also, remember that there appears to be a phase lag, so the effects may not be seen for a week or two.

Therefore, we stay the course for now, and continue with the strategy outlined above.
 
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