Comments on: Get ‘em while they’re hot http://sovereignspeculator.com/2010/01/12/get-em-while-theyre-hot/ Thoughts on the markets and the decline of the west Mon, 20 Dec 2010 18:20:10 +0000 http://wordpress.org/?v=2.6 By: Pej http://sovereignspeculator.com/2010/01/12/get-em-while-theyre-hot/#comment-8168 Pej Wed, 13 Jan 2010 21:49:24 +0000 http://sovereignspeculator.com/?p=3302#comment-8168 Yes agreed. I didn't mean that VIX was a good market timing tool or anything. I just wanted to point out his theory, which I find credible. Another big up day, though. When no news or good news, the market jump. Extremely bad news and the market barely declines. That's been the trend for the past month and shows that bullishness is still extreme. Yes agreed. I didn’t mean that VIX was a good market timing tool or anything. I just wanted to point out his theory, which I find credible.
Another big up day, though. When no news or good news, the market jump. Extremely bad news and the market barely declines. That’s been the trend for the past month and shows that bullishness is still extreme.

]]> By: Mike http://sovereignspeculator.com/2010/01/12/get-em-while-theyre-hot/#comment-8167 Mike Wed, 13 Jan 2010 21:37:39 +0000 http://sovereignspeculator.com/?p=3302#comment-8167 Sure, but that dynamic is always at play, and rates have been extremely low for over a year. If those sellers perceived more risk in their strategy, they would demand higher prices for options. Babak points out that the VIX itself is a poor timing vehicle for market tops. The put:call ratio is not, since regardless of the price paid for options, it reflects only the relative appetite for puts vs. calls. Sure, but that dynamic is always at play, and rates have been extremely low for over a year. If those sellers perceived more risk in their strategy, they would demand higher prices for options.

Babak points out that the VIX itself is a poor timing vehicle for market tops. The put:call ratio is not, since regardless of the price paid for options, it reflects only the relative appetite for puts vs. calls.

]]> By: PEJ http://sovereignspeculator.com/2010/01/12/get-em-while-theyre-hot/#comment-8166 PEJ Wed, 13 Jan 2010 20:58:26 +0000 http://sovereignspeculator.com/?p=3302#comment-8166 Babak over at Trader's Narrative (http://www.tradersnarrative.com/sentiment-overview-week-of-january-8th-2010-3451.html) has a good explanation for the drop in volatilities: Again, I’m not sure if this is a full explanation but it is something to consider. There is always a portion of the investment community that requires yields and when interest rates are this low, selling covered calls suddenly becomes very popular as there are no viable alternatives. The basic laws of supply and demand take over as the sale of calls (and puts) pushes down their prices and therefore, volatility. Babak over at Trader’s Narrative (http://www.tradersnarrative.com/sentiment-overview-week-of-january-8th-2010-3451.html) has a good explanation for the drop in volatilities:

Again, I’m not sure if this is a full explanation but it is something to consider. There is always a portion of the investment community that requires yields and when interest rates are this low, selling covered calls suddenly becomes very popular as there are no viable alternatives. The basic laws of supply and demand take over as the sale of calls (and puts) pushes down their prices and therefore, volatility.

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