Time to go long again, S&P target=1572
- Thread starter michaelscott
- Start date
In another thread originated by Mike:
"Therefore the SPX will retreat back to 1150 before moving forward to 1550 once again. This wont happen in 2 years, but in the months to follow and by the end of this year we will be wondering what in the hell happened."
http://elitetrader.com/vb/showthread.php?s=&threadid=98045&perpage=6&pagenumber=1
Can't make up your mind, huh?
Quote from austinp:
The SPX 1575 call (SXM) is trading near $600 per on Friday's close. If the S&P hits 1572 by mid-August, that contract should be good for $3,000 or so.
Cheap to play, dear to win. Dare to play?
That's about my fill of troll milk here for the weekend. Enjoy
$60 for the 30-day ATM straddle after a rally of 125 handles? More like $20 on that call. The Sep call overwrite is an ok trade here. Calculate strike risk at any future date and hedge with ES. I'd assume a very remote possibility of NHs within 30 days, or 60 for that matter.
$14 in strike-risk per contract on a $6 credit received. Not optimal -- I try not to exceed 2:1. Solving for strike-risk results in a 5:1 ES/call ratio -- long one ES per 5-lot SPX 1575C sold.
in fairness of discussing arbitrary data with the assumption that history repeats itself, the market peaked in 87 around 2 months before the 87 crash. it was approaching a double top that even failed to gather any momentum.
here we had a market top about 5 days before. thats a different story, technically, at least.
it took from aug 25th 87 to oct 5th for the failure to even double top occur before the 10 day fall you mention to commence.
Michael, I would simply like to point out that there is _no_ chart that always works out. The market can and does do what it wants, period.
That being said, I am in agreement with you regarding the likelihood of a bounce; so much so that I actually bought some long ER2 contracts just near market close Friday, so I am already committed, at least somewhat.
But here's the deal. Either the trend is over or it's not. No one can say yet with any certainty. For the trend to be over, the market must first make a new swing low, which on ER2 is below 762.40, say trade around 760 would do that. But, and here's the thing, the market can even then go up (rejection trade) and make new highs. Only _if_ it fails to make a new high on the rally attempt can the trend be declared dead.
Even then, it could consolidate and trade sideways or drop. Who knows?
FWIW, I also added substantially to my MU trade at 11.96 average on Friday towards market close; I would have done a little better waiting till close but what the hell... That's a long term trade for me from the outset--thanks again.
That being said, I am in agreement with you regarding the likelihood of a bounce; so much so that I actually bought some long ER2 contracts just near market close Friday, so I am already committed, at least somewhat.
But here's the deal. Either the trend is over or it's not. No one can say yet with any certainty. For the trend to be over, the market must first make a new swing low, which on ER2 is below 762.40, say trade around 760 would do that. But, and here's the thing, the market can even then go up (rejection trade) and make new highs. Only _if_ it fails to make a new high on the rally attempt can the trend be declared dead.
Even then, it could consolidate and trade sideways or drop. Who knows?
FWIW, I also added substantially to my MU trade at 11.96 average on Friday towards market close; I would have done a little better waiting till close but what the hell... That's a long term trade for me from the outset--thanks again.
<i>"$60 for the 30-day ATM straddle after a rally of 125 handles? More like $20 on that call. The Sep call overwrite is an ok trade here. Calculate strike risk at any future date and hedge with ES. I'd assume a very remote possibility of NHs within 30 days, or 60 for that matter.
$14 in strike-risk per contract on a $6 credit received. Not optimal -- I try not to exceed 2:1. Solving for strike-risk results in a 5:1 ES/call ratio -- long one ES per 5-lot SPX 1575C sold."</i>
Forget the OP topic, it's meant to incite. The option #s brings back memories of old.
I used to trade long gamma back in the go-go days of 1999 - 02. My play here if "clairvoyant" would be deep OTM calls guessing where ATM might be at time of sale. ATM's always most bloated with juice.
I neglected to factor a deflated VIX if they ramp +125 from here. Puts are skewed worse, but calls are bloated too. That would suck some life out of the play. Then again, when I traded options we saw 50pt to 200pt range months (weeks, couple of days) as a general rule. VIX was 20s to 60+ and juice was thru the roof, but time the turns right and 500% gains intraday (expiry) to couple of weeks was common.
Then again, I owned many 15pt long calls or puts that leaked value and then went to <2 on some overnight gap. Long gamma is a gambler's game, which is why I switched to eminis. Takes decay out of my equation, and leaves it for pro option traders to work the other side of [laugh].
$14 in strike-risk per contract on a $6 credit received. Not optimal -- I try not to exceed 2:1. Solving for strike-risk results in a 5:1 ES/call ratio -- long one ES per 5-lot SPX 1575C sold."</i>
Forget the OP topic, it's meant to incite. The option #s brings back memories of old.
I used to trade long gamma back in the go-go days of 1999 - 02. My play here if "clairvoyant" would be deep OTM calls guessing where ATM might be at time of sale. ATM's always most bloated with juice.
I neglected to factor a deflated VIX if they ramp +125 from here. Puts are skewed worse, but calls are bloated too. That would suck some life out of the play. Then again, when I traded options we saw 50pt to 200pt range months (weeks, couple of days) as a general rule. VIX was 20s to 60+ and juice was thru the roof, but time the turns right and 500% gains intraday (expiry) to couple of weeks was common.
Then again, I owned many 15pt long calls or puts that leaked value and then went to <2 on some overnight gap. Long gamma is a gambler's game, which is why I switched to eminis. Takes decay out of my equation, and leaves it for pro option traders to work the other side of [laugh].
I'm not predicting the future - merely mentioning that out of sample data shows the OP's premise to be less robust than presented.
"Those big red volume bars may not be just the legitimate selling of regular shares, but all out shorting too. The crowd is probably shorting all they can and surely the trade will turn against them. "
The only thing that I know of that causes those long red candles on high volume is institutional distribution. Day trader shorts or "the crowd" just don't pack that much punch.
Buy all the calls you like, but I'm with the guy who wishes he had clairvoyance like yours. Will we see a bounce some tme this week? Probably. Will it mean anything? That remains to be seen.
The only thing that I know of that causes those long red candles on high volume is institutional distribution. Day trader shorts or "the crowd" just don't pack that much punch.
Buy all the calls you like, but I'm with the guy who wishes he had clairvoyance like yours. Will we see a bounce some tme this week? Probably. Will it mean anything? That remains to be seen.
Its all about common sense.
All that volume and it was only able to sell it down to 1458. Is that all the market has to toss at us? I surely thought we would go much lower and a possible crash would take place. The SPX blew it on Friday, it failed me. They could only sell it down to 1458.
The old SPX chart remains in place. Im on a different computer right now and so I drew a rough sketch of my thoughts. If it is able to hold the line next week then good things will come, but if it doesnt then it will fall to the lower lines on the chart.
My common sense approach is the following:
- the market has scared us every summer without fail, but then came back strong. This time is no different.
- Every time since 2002 the market has reached a notable bottom on the moving average chart it has come back strong
- The market is pivoting off of trend lines and waves that originate from the crash of 1987. We can still see pivots occuring today from the crash of some 20 years ago. The market wasnt able to go through a trend line on heavy volume on Friday.
- The majority of trading is done by computers and that is why the charts look so symetrical. The computers have a chart like mine, an even better one in fact. They will see the pivot point.
The nightmarish scenario is if the trend line fails next week then there will surely be the grim crash scenario to follow as market makers will be unable to absorb the losses. Then we will sell down to the lower trend lines on the chart very rapidly.
However, I dont think this time is any different then in the late 90s. I circled two places on the chart that seem similiar to today's times. Internet growth stocks like Amazon are starting to gain strength while traditional insurance plays like All-State are selling off.
The last time the market tried to break through the trend line in the late 90s it pulled back half of the height of the channel. This time wont be different.
All that volume and it was only able to sell it down to 1458. Is that all the market has to toss at us? I surely thought we would go much lower and a possible crash would take place. The SPX blew it on Friday, it failed me. They could only sell it down to 1458.
The old SPX chart remains in place. Im on a different computer right now and so I drew a rough sketch of my thoughts. If it is able to hold the line next week then good things will come, but if it doesnt then it will fall to the lower lines on the chart.
My common sense approach is the following:
- the market has scared us every summer without fail, but then came back strong. This time is no different.
- Every time since 2002 the market has reached a notable bottom on the moving average chart it has come back strong
- The market is pivoting off of trend lines and waves that originate from the crash of 1987. We can still see pivots occuring today from the crash of some 20 years ago. The market wasnt able to go through a trend line on heavy volume on Friday.
- The majority of trading is done by computers and that is why the charts look so symetrical. The computers have a chart like mine, an even better one in fact. They will see the pivot point.
The nightmarish scenario is if the trend line fails next week then there will surely be the grim crash scenario to follow as market makers will be unable to absorb the losses. Then we will sell down to the lower trend lines on the chart very rapidly.
However, I dont think this time is any different then in the late 90s. I circled two places on the chart that seem similiar to today's times. Internet growth stocks like Amazon are starting to gain strength while traditional insurance plays like All-State are selling off.
The last time the market tried to break through the trend line in the late 90s it pulled back half of the height of the channel. This time wont be different.