Monday, February 13, 2006

Areas of Pain and Opportunity

Interesting to see NDX-100 down 22 in this quiet, almost placating fashion. Forget panic, I don't even sense any significant degree of fear out there. VIX rallied to 13.56 but it's not reflecting the level of immediate anxiety that should be present in an obviously delfating index.

Do we buy this? Yes, very soon I think. To reiterate, I do think we're range bound and this leg will run into buying pressure at the lower levels.

Most painful areas in our portfolio presently are:
  1. Semi SOX.X index. We're beginning to see short gamma.

  2. Metal Miners: CLF and PD. Major weakness here but I don't think there is much downside left. If we do see a move lower I will position us to capitalize on an ensuing rally.

  3. Internet: GOOG. Of course. Again, gaining short gamma, but also continuing to see a deal in both directional and vol views.
On other fronts:

Oil is heading lower after trying to rally once more in the morning. We're looking to buy some stock lower to hedge short deltas. Again, it's our APC/OIH favorite combo.

Japan (ITF) is looking pretty terrible here. In fact, I am sensing that Japan may be presenting an opportunity very similar to that of Oil. We're are seriously considering a directional play here by shorting ITF (options are too illiquid on the index) and also looking for other vehicles.

Cheers,
/Dmitry

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