Tuesday, March 14, 2006

Trade OEX: Buy Puts!

OEX is at 589.37 as of this writing. We are short 590/595 March call vertical. Yes, it's painful. Here's why we're keeping the position:

As soon as OEX gets through 590, we will be buying April 590 puts. I still maintain that this rally won't hold with the Nasdaq in the bear trend. So, the headfake above 590 (or higher) is sell-able via cost-averaged put premium.

And, with the VIX at 10.59. I want to be long vol anyway. This is a scary play and that's how I know it's the right one.



At 5:01 PM, Blogger Trading Nerd said...


I applaud your ability to look past the Dow and S&P 500. It seem as though "everybody" is bullish again.

Another blog that I read stated that today was a an IBD follow-through day from last Wednesday's "strong upside reversal day."

After reading his commentary, I looked at a chart to see what happened last Wednesday (I've slept since then). My "default" chart (on bigcharts.com) is the SOX. I didn't notice anything impressive (not only that, but the lows have since been undercut, which is a violation of the IBD rules). So, I though, "ok, the market has been able to rally without semi's before, so I'll check out the next index that I watch -- the NDX." Nothing impressive there either, so I checked out the next (in importance) on my list, the Russell 2000. Again, nothing really impressive. I then checked out the Dow and S&P 500 and what do you know? The market looks impressive from that point of view.

Don't get me wrong ... If I were a newbie and a complete amateur, I would be very impressed by this "rally." The fact is, as you stated, the market cannot rally after a selloff like we had without tech. Period.

Additionally, the action (relative underperformance) in Google (with the exception of today, which is understandable, given the news today) isn't indicative of a bottom.

Another "fast money" stock that I watch is Aapl. Although Aapl has outperformed the NDX & NASDAQ over the last 2 days, its gains over the last 2 days, in relation to how much its off of its highs doesn't impress me (ideally, I would like to see the "fast money" stocks retracing their losses at a faster rate than the NDX and NASDAQ).

Siri and Brcm are the other "fast money" stocks that I watch. Wow, would you look at that? Brcm was up ALMOST as much as the SOX today. Now, seriously, if this market were truely in Bull-mode, Brcm would have outperformed the SOX (especially coming off of a bottom).

Hmmm, this comment was a lot longer than I expected. Oh well, keep up the good work.

At 9:36 AM, Blogger Dmitry said...

Thanks for the comments. We'll see how this rally pans out but given the lack of "trendinenss" and volatility, I hold any significant move suspect. Of course, with the underlying weakness as a backdrop I am even more inclined to fade the move.

But, before we do, I would like to see OEX above 590!


At 11:08 PM, Blogger TradingCourses said...

Great blog. Nice job you've done here.

elliot wave


Post a Comment

<< Home