Thursday, March 31, 2011

Current market thoughts & observations

As you all know the market has been trending higher and is exhibiting very bullish tape action. My thoughts are that we are going to continue to see more stimulus from central banks and continued liquidity in the form of bailouts etc etc. This is all reinforcing the risk trade and that's why we continue to see equity markets higher, oil higher, gold higher etc etc even though fundamentally something like oil really shouldn't be higher given that inventories came in yesterday well above expectations (2.9 mil versus 1.6 mil). The mentality of late that I've been seeing in the early morning futures trade has been to wait for the flush out early in the morning and then buy the lows as we have ripped every time.

Really, really tough to trade option income trades in this environment in my opinion. The best trades for the last 2 weeks have been to sell puts or buy call spreads. I will update later with a trade that I have on the SPX which is a unbalanced iron condor but I have had to keep massaging it by buying call spreads just to keep the deltas in line with my theta. At this point, we are so close to retesting the recent highs of 1344 on the SPX that it would absolutely shock me that we don't get there. I think it's a given that the market wants to go there. This might set up some interesting spec trades like long some cheap out the money call spreads as we head into the last 2 weeks of expiration.

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