What, Me Worry?

Frankly I’m stunned by the level of complacency among market participants right now. Just a bit over a week ago the world was about to end and since then volatility dropped a whopping 40%? Maybe I am not seeing the forest for all the trees but I may I not so humbly submit whether or not this in itself is a representation of a healthy equities market? Just saying…

Despite the fact that our own SPX point & figure chart is insisting on a bullish price objective of 1600 I could not fathom recommending to short vega unless you really really know what you are doing and are capable of cutting your positions in a heartbeat as soon as you spot the heat coming around corner. You have been warned and don’t come crying to me if you find one of your cherished body parts twitching on a chopping board (graphic omitted).

Of course we always keep ourselves entertained here at Evil Speculator. But make sure you keep a delta neutral portfolio, or if you know your way around options then may I recommend some long delta plays –  there are many variations on the theme:

Long Call: Positive
Short Call: Negative
Long Put: Positive
Short Put: Negative
Long Straddle: Positive
Short Straddle: Negative
Long Strangle: Positive
Short Strangle: Negative
Put Credit Spread: Negative
Put Debit Spread: Positive
Call Credit Spread: Positive
Call Debit Spread: Negative
Call Ratio Spread: Negative
Put Ratio Spread: Negative
Calendar Spread: Positive
Covered Call Write: Negative
Covered Put Write: Negative

This is just a limited sub sample – there are many ways to skin this cat and I recommend you bulk up on option greeks to acquire some familiarity with how to take advantage of an increase or decrease in vega. What may be surprising to option noobs is that an increase in vega will actually benefit both put and call premiums. So assuming price remains the same you will profit from an increase in vega, no matter if you are long a put or a call. The simplest way to benefit from a rise in volatility is to be long puts, but unfortunately I don’t see a compelling reason to get short equities without being properly hedged.

On to Forex – GPB/USD – sitting on its 100-day SMA and I still think this is a great setup. If you’re not in then wait for a breach of the 25-hour to grab an entry.

Facebook now painting an inside day – you know the rules, so have at it. If not then I recommend a visit to the cheat sheet.

Crude – a quick update. Our long play is in pretty good shape at this point and I recommend you use the 100-hour SMA to slowly advance your stop.

More charts and non-biased commentary below for anyone donning a secret decoder ring. If you are interested in becoming a Gold member then don’t waste time and sign up here. And if you are a Zero or Geronimo subscriber it includes access to all Gold posts, so you actually get double the bang for your buck.

Please login or register for Zero Data Feed (non-recurring) or Zero Data Feed (recurring) or ES Gold (non-recurring) or ES Gold (recurring) or geronimo/ES (recurring) to view this content.

Cheers,

This entry was posted on Tuesday, January 8th, 2013 at 2:31 pm. Both comments and pings are currently closed.



  • Pervergence

    Nice break down……see if we can take out LOD

  • Pervergence

    For one candle…..sheesh

  • itslance

    Please excuse my ignorance, but instead of fussing around with options, couldn’t you just buy $VIX and still go long volatility?

  • http://dartht.blogspot.com/ Evil_Gerb

    just an idea..
    break imminent, no bias.  Delta Neutral, yep, definitely.
    [AUD/JPY]http://s2.postimage.org/ylubsj589/crossfire.png

  • Pervergence

    Looking like a wollfe wave on the 15 min…….would be an interesting bear flag

  • AMCabrera

    Indeed, thank you mole.

  • Joe_Jones

    I have my stop at ES 1453.50 if it isn’t

  • Skynard

    Damn, stopped out

  • http://dartht.blogspot.com/ Evil_Gerb

    flip it?

  • Skynard

    Put another on @ 52

  • captainboom

    Based on the hourly, I don’t think short /ES is a good idea.

  • http://dartht.blogspot.com/ Evil_Gerb

    he trades on indicators, so I trust the bot.

    but /ES has been on a slide since Sunday, more potential up than down, me thinks.
    so, I zip my lip.

  • Pervergence

    That should be no 5 on the wolffe…..see if we drop from here

  • Pervergence

    target 1447ish

  • Skynard

    Hourly, setting up lower highs and lows. Added another step to HELL:)

  • http://evilspeculator.com molecool

    Ignorance excused. Trading leveraged VIX ETFs is a bad idea – they often don’t track it properly. Just stay away from that. Here’s a pretty good article on the subject:

    http://sixfigureinvesting.com/2010/01/how-to-go-long-on-the-vix-index-2/

  • http://dartht.blogspot.com/ Evil_Gerb

    but today’s fall thru the ice at 1451…..it’s been inside hourly candles the rest of the day.
    you can’t fall through the ice twice, can you?

    Sell the Fear you told me.

  • captainboom

    Guess I should go back to the lab.  Who was I to question the evil trading robot from the future?

  • Skynard

    Those are hourly bear flags.

  • itslance

    Thank you, mole!  I figured there was a reason you didn’t recommend that.  As usual, thanks for the education! :)

  • http://dartht.blogspot.com/ Evil_Gerb
  • Joe_Jones

    A.K.A.: widowmakers

  • Joe_Jones

    Glad to be still in the game :-)

  • Pervergence

    Wollfe wave worked……got the 5 and the drop……..sweet

  • http://evilspeculator.com molecool

    In general I would recommend staying away from most ETFs – in particular leveraged ones. If you want to trade volatility then learn about derivatives. That’s in part what they are designed to do. And with the new short term (weekly) options you can pretty much ignore theta, gamma, etc.

  • newbfxtrader

    Tell me about it. Pull up a chart of TVIX to see the carnage.

  • Skynard

    Whipsaw alley today:) Geez!

  • http://ibergamot.blogspot.com/ i Bergamot

     On low volume too.

  • newbfxtrader

    Low volume is good for levitation….

  • bdoone

    Yeah. big buyer in SPOO pit(big contract) last 15 mins, 3k-4k cars so far.

  • http://ibergamot.blogspot.com/ i Bergamot

     I would rather see one of the sides trapped.

  • http://ibergamot.blogspot.com/ i Bergamot

     Listening to that pit audio?
    Can you make out who is the buyer?

  • bdoone

    They’re not sure.
    Looks like a nice VWAP levitation up to the 25hr sma.

  • Skynard

    That is the question, are they long or short:)

  • BobbyLow

    Choppy, choppy choppy.

    I almost crapped a little when you posted that you went Short a Full Load the first time because I was Long at the time.  This was my second ES trade of the day.  The second trade was going good for a while but I eventually got stopped for just a Quarter Point Gain.

    Of course as of right now, I (Coulda, Woulda, Shoulda,) have picked up another 3 Points but a Stop is a Stop is a Stop.  :)

  • http://ibergamot.blogspot.com/ i Bergamot

    /ES
    Is that a H&S on hourly with target in 1440ish ?
    Looks to be testing neckline now

  • http://ibergamot.blogspot.com/ i Bergamot

     I listened to pit audio in my day-trading days. Usually that announcer can tell who is buying and how much. But you have to understand that whatever that floor trader is doing, people upstairs can do 100x or more in E-mini.
    I see 2.766mil cars on ES today and if people getting short it will show more tomorrow.

  • Skynard

    Hehe, was already short half pos. Added on the ramp and was taken out. This chop fest is for a reason, it generally represents some sort of top. Bots battling it out, went short again and still in the trade. Think we move down as those bulls want to take profit and buy low:)

  • bdoone

    I understand completely and use it as a tool and couldn’t trade without it.  It definitely can give me a heads up to movement.
    Also I like/need the noise/action otherwise I might fall asleep in a quiet office.
    I was a floor trader/MM for 11yrs so it at least gives me the feel of the floor environment if that makes an sense.

  • Skynard

    Check out TRANS, RUT, /NKD daily charts. Some kind of top is in me thinks. Big boys are selling into this crap.

  • bdoone

    Sounds like the buyer was a seller at these same levels last Thursday and is getting out.

  • http://dartht.blogspot.com/ Evil_Gerb

    I believe it.  but I’m waiting for the updraft when they load up short.
    days from now.

  • Skynard

    Ah, jumped ship:)

  • Skynard

    That VIX rubber band will take effect sooner than you may think:)

  • http://ibergamot.blogspot.com/ i Bergamot

     I am not sure. Trans (IYT) has been left for dead for months. Breakout.
    R2K (IWM) had a monster rally, regardless of neg div, overbought etc. Breakout. VIX, A/D and so on… all this is crazy bullish. And we didn’t close the gap, we didn’t even check that New-Year open yet. “Yet” is the key word here.
    The way I see it, whatever correction we will get here – it has to be bought with reckless abandon. I will trade accordingly

  • Joe_Jones

    hehehe, looking forward already to tomorrow

  • http://ibergamot.blogspot.com/ i Bergamot

     Lucky you. I am not allowed to have any radio or headphones in this place.

  • Skynard

    /ES daily NLSL @ 1450. Anyone else concur with that?

  • http://twitter.com/NobodyTrader Nobody Trader

    My question here, and maybe it’s form-fitting my bias, but IF the big guys wanted to shake retail/weak hands off the bus before cranking, what would that look like? Wouldn’t it look like today’s tape? Frustrating, more bark than bite, yet another non-move by the bears who can’t close. You forex traders know damn well the impact of POMO; have you taken a look at the schedule for this week? It’s chunky on buys. That money gets put to work. Meanwhile, media is again doing their part; both moves and non-moves alike seem to be cited as cause for concern, as is either obvious volatility OR THE LACK OF IT (the latter maybe even more so). And it seems  so clever as to be believable. I guarantee the bus is more empty today than it was yesterday.

  • captainboom

    Roger that.  1450 daily NLSL.

  • http://dartht.blogspot.com/ Evil_Gerb

    this is a shot of the bear bus.
    they were having a great time on new year’s eve.
    and then the predator strike happened.
    fortunately, JJ has the flu and couldn’t attend. ;-)

    http://www.oxford-chiltern-bus-page.co.uk/upload%20060806/TT%20155%20burnt%20out%20Ben%20Morroll%20050806%20mc.jpg

  • Skynard

    OK, thanks Captain. Always nice to double check.

  • Skynard

    LOL! Damn dude!

  • Skynard

    Would be a bear on /CL, have a look. Generally, in most cases this would be an early indication of a failed div. A failed move if you will. Lets see what happens:)

  • Skynard

    Here is the /DX hourly chart, interesting that price settled on the vertex of my trend lines and happens to be the NLSL with the 100/25 just below. Allot of support there, especially with my trend lines:)

  • http://dartht.blogspot.com/ Evil_Gerb

    remember, crossing trend lines turn into bow ties.
    ….and that creates chop. (IMHO)

    http://ecx.images-amazon.com/images/I/51xynk6hmYL._SL500_SS500_.jpg

  • AMCabrera
  • http://dartht.blogspot.com/ Evil_Gerb

    long? looking for a bollinger push/run..

  • http://dartht.blogspot.com/ Evil_Gerb

    as a good bot from the future taught me.

    http://s8.postimage.org/pnvqkw8md/temp2.png

  • newbfxtrader

    Short I am sure.

  • http://dartht.blogspot.com/ Evil_Gerb

    that’s why I asked.
    I can see both sides (scary)

  • newbfxtrader
  • http://ibergamot.blogspot.com/ i Bergamot

     Wait, so you dont see this as H&S top?

  • http://dartht.blogspot.com/ Evil_Gerb

    on this time frame, I don’t see it.
    I see a support level, and I see a failure of the bears to do squat (on this time frame).

    this is fitting with delta neutral and head fakey territory.

  • Skynard

    Still holding long a Yen lottery ticket. Can still run:)

  • http://ibergamot.blogspot.com/ i Bergamot

     Here
    (Chart porn)

  • Skynard

    DG,

    I was still admiring those trend lines and you removed it. WTH!

  • AMCabrera

    short my good friend short.

  • Skynard

    My GBPUSD pos turning tail already, showing dollar strength.

  • AMCabrera

    very nice little link. Just today I was thinking parity would be absolutely perfect to buy after I done wearing my shorts.

  • AMCabrera

    http://content.screencast.com/users/AMCabrera/folders/Jing/media/4b662bec-3746-47e1-9eb8-5d31d890e22a/2013-01-08_2004.png

    I would really stop and wonder “expansion of range” just be careful in these HIGH risk trading instruments.

  • AMCabrera

    actually no never mind fuck that just keeping to my core plans

  • http://dartht.blogspot.com/ Evil_Gerb

    No likes…no stay. CAptain runs a tight ship.

  • http://dartht.blogspot.com/ Evil_Gerb

    Aud & yen down!?! Currencies stink.

    Alcoa?

  • Joe_Jones

    You’re right about the flu. LOL!

  • http://dartht.blogspot.com/ Evil_Gerb

    Zen Gerb knows all.
    or should I say Volar_Gerb took a chance? ;-)

    worst Flu in a decade:
    http://www.businessweek.com/ap/2013-01-08/illinois-sees-no-vaccine-shortage-as-flu-picks-up

  • http://dartht.blogspot.com/ Evil_Gerb

    hey, is that a real print down on the 25th?

    http://s8.postimage.org/6614sho6d/harry.png

  • itslance

    How did you get net lines on your chart?

  • Skynard

    Check it out, can only see this one on the daily. Weird!

  • chrisgoldman

    Are people really still long on equities? I’m at a loss to figure this out. We just had a massive move up.

  • Skynard

    AUDJPY turned tail on that hourly signal, perfect opportunity:)

  • newbfxtrader

    Aussie trying to go up in spite of weak retail sales. No way thats gonna fly.

  • newbfxtrader

    http://www.forexfactory.com/calendar.php And negative trade balance.

  • http://evilspeculator.com molecool

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    ¸„ø¤º°¨ P O S T “°º¤ø„¸
    ¸„ø¤º°¨¤ø„¸¸„ø¤º°º¤ø„¸





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