Thursday, May 18, 2006

Pin Risk

For long players it's a real thing - having your underliers pinned to strikes. Happens all the time and I think that some of our holdings are experiencing the effect.

The point here is - if you want to buy here, wait till Friday close - there is no reason in paying theta (and vega with new shorts hammering the vol) by getting in at today's levels that are likely to be here tomorrow.

We're looking to pick up more size here but the above is keeping us away. Surely not a strategic decision but this close to expiration tactics prevail.



At 7:25 PM, Blogger market operator said...

New to your blog but enjoy seeing a professionals prespective on the markets. I was curious what your medium term outlook on the market is, you are positioning yourself for a bounce in the market, will you then unwind your position and short the rally? Thanks!

At 12:09 PM, Blogger Dmitry said...

I doubt I'd short the rally. If it does come a long gamma position would be much better. A rally will implode vol somewhat so owning new options will be ok from the vega risk perspective. So, wait for a rally, pick an index or a sector and do a synthetic strangle on it. This market is destabilized and I doubt it's going to "stop moving" at this point.

As far as "mid-term" view on the market - I really don't have one. This could be the beginning of a bear market (or the second leg of the existing one) or it could be a headfake before we go higher. I don't have a way to know that so I have no view.



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