Wednesday, February 08, 2006

Traders Are A Fickle Bunch

Guess what I am going to talk about his morning.

Yep, Oil.

However, before I get into that there are a few other things worth attention:
  • We are now long initial delta in BZH and GOOG (both of them went through the 65 and 365 strikes and our model got us long). We'll be looking to add into further weakness.
  • We've liquidated credit spread in PD for a substantial loss. We also rolled PD short spread to 135/130 strikes.
Now, on to Oil. The sector dropped sharply at the open and then rallied just as sharply back. As I am typing this, it is selling off again. Naturally we like the volatility... a lot. Our trades are centered around long gamma in OIH and APC and I am also trading short stock into every rally.

I am still an Oil bear but I make no predictions as to my disposition for tomorrow :) What can I tell you, traders are a fickle bunch.

However, if you do want a prediction from just another guy out there, then I'll say that there is a very good chance that Oil will continue lower in a rolling trend. So, selling rallies (hopefully around a long options position) is a good stance to take. Besides, owning vol in OIH and friends into this downtrend is an excelent idea.

By the way, our PD trade was very frustrating and I'll make sure to write about it in the next blog entry. Lesson learned there.



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