Today volume came in on the same level as yesterday volume - sell off and buy back at good volume levels. We are living in interesting time :)
Fear is moving out of the market - my main indicators are the TLT and the VIX. Both fell and both are short in my portfolio. I have the TLT short straight out. While the VIX is short via a SPY strangle.
Did you follow me when I blogged to get long delta's IBM. Hope you did.
How did I trade it? I started of with a combo short the FEB 85 put and long the FEB 85 calls. When the IBM moved up last week I sold 20% of the trade for a profit. Then IBM was giving me the creeps for a day or two. I sold the Long calls for a loss - to reduce the risk in the trade. Leaving me with Short atm puts (naked). The trade was sized that in the event of a further sell off I was going to roll the Feb to March - coming expiration. Today with the pop in IBM I closed the put for a handsome profit.
The trade came on my radar because IBM was up while the market was very soft last week. The put became profitable due to the upward moving in the underlying but also because front month IV drop after the earnings announcement. All in all not to bad.
The butterfly is active for one week as of today. We are up approx $600.- which is little over 13%.
So far no adjustments in consideration - we are nicely centered and the greeks are under control.
Do you still think the fear is leaving the market? To me it feels like it just wants to go lower and lower.
Posted by: Ameen Kamadia | January 22, 2009 at 11:54 AM
Ameen: I "measure" fear by looking at trends in the bond market (proxy TLT) and the vix.
As long as those two indicators are in a down trend - I will not anticipate a melt down.
Having said this; I also have to live with the reality of the market as it is. On a portfolio level I have moderated my deltas and as you can read I am very quick in taking a (small) profit - not to have it taken away from me.
Posted by: Ernst Tanaka | January 22, 2009 at 05:05 PM