Kudos to MMs

"FV" ~ 890.

BTW, one way to interpret SPX values away from "FV" is to think of it as interest rate imbalance. So for example, FFs are at 0 to .25. Let's take the average of that, or .125. Take the current value of SPX, say ~1060. So 1060 - 890 is 170. One interpretation backed out from the market then is that if rates are raised rates to 1.70%, we would be approximately at 890 SPX.

That is not quite correct because of non-linear feedbacks, but it is a ball park.
 
Quote from nltro:

Covered and reversed long @ 1059.50
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Even though my "FV" is hugely flawed, the better part of me as a "trader" dictates that I not be a total 'tard. Sure glad I'm long now!
 
Quote from nitro:

"FV" ~ 890.

BTW, one way to interpret SPX values away from "FV" is to think of it as interest rate imbalance. So for example, FFs are at 0 to .25. Let's take the average of that, or .125. Take the current value of SPX, say ~1060. So 1060 - 890 is 170. One interpretation backed out from the market then is that if rates are raised rates to 1.70%, we would be approximately at 890 SPX.

That is not quite correct because of non-linear feedbacks, but it is a ball park.
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The problem is that cash doesnt have to earn 0% in the bank. It can earn 5% in IG corporates or 10% in HY bonds, the fact that people bought corporate bonds as much as they bought equities shows to me that its not a chase for income with idle cash balances(if it was they would have stayed in bonds) but its risk chasing, a speculative boom that is feeding on itself. Private real interest rates are still high by historical standards
 
Quote from nitro:

"FV" ~ 890.

BTW, one way to interpret SPX values away from "FV" is to think of it as interest rate imbalance. So for example, FFs are at 0 to .25. Let's take the average of that, or .125. Take the current value of SPX, say ~1060. So 1060 - 890 is 170. One interpretation backed out from the market then is that if rates are raised rates to 1.70%, we would be approximately at 890 SPX.

That is not quite correct because of non-linear feedbacks, but it is a ball park.
More...
Take a look at these historical values:

http://www.newyorkfed.org/markets/statistics/dlyrates/fedrate.html

http://finance.yahoo.com/q/bc?s=^GSPC&t=1y&l=on&z=m&q=l&c=

http://finance.yahoo.com/q/bc?s=UUP

We see that the last time the rates were approximately 1.70% (1.50 %) was in Oct '08. Look at the SPX chart, the value then was ~900 (the left of the chart boucing back and forth from about 850 to 1000).

So we cannot be terribly off...People will argue that the difference is the dollar was much stronger back then (third chart). Perhaps. It would be great to have a dollar index chart, a FFs chart, SPX chart, and gold chart all one chart...
 
Quote from nitro:

S ES 1054.50
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BTW, I am going to be taking short term gains. I am done giving back 20+ handles of profit.

I will see what happens at 1035, but that is my target.
 
Unreal. This market refuses to go down. Not only that, "FV" has gone down another 10 since this morning to ~880, and _still_ this thing goes higher.

:confused:
 
"FV" ~877

Ok, I have a pretty good idea what is going on. Most SIF MMs are long gamma. As some of you may be aware, one of the things you do when you are long gamma is you hedge at certain points, and gamma scalp the market. This works really well on markets that are expected to be range bound. If the markets continue to be directional, they let their deltas run. [The only downside to being long gamma is you have to pay to be long gamma, i.e., theta.]

So one thing you have to know is to compute a 1 Std move on the SPX every day. This is likely to be support/resistance, even though there is nothing in the charts to suggest that S/R there.

So you should be computing the following number (alpha, or "gamma rent") every day, at least when you have been made aware that MMs are long gamma:

Alpha = (modifedTheta) / (shadow Gamma)
Theta = -½Γσ^2S^2
Alpha = -½σ^2S^2

You will now need to look at SPX option chains (at least ATM and NTM) to trade SIFs.
 
Quote from nitro:

BTW, I am going to be taking short term gains. I am done giving back 20+ handles of profit.

I will see what happens at 1035, but that is my target.
More...
Out S ES at 1041.50 + 13.

If the market breaks down again, I may sell it, but at this point it is unlikely.
 
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