I Shall Sell into Any Rally

(for details pls visit www.OptionPundit.net)

It may turn out a wrong move but this is the stand I am going to take for my today’s trading. This is option’s expiration week and to add further volatility, the week is packed with lot of market moving data (PPI and retail sales on Wednesday, CPI on Thursday and Industrial production on Friday). One day it may be up just to settle lower the other day. OPN Nov’07 is delivering great results and I don’t want to give it back to Mr Market (granted that I may lose a few points during the time I am closing). I would rather sit on sidelines with cash to open December positions vs being mused by theta gains. This week, I don’t like theta for the delta and vega risks.

Gold is going down, let it go (My thought only). It needs to relax to strengthen its muscles so that it can rise even further. I have been mentioning my “Bullish” gold perspective and that it won’t stop before $850. December futures nearly touched that before retrieving. Hey, give it a break! It needs lot of force to get away from 28years of slavery (last time it touched 850 in Abs $ was in 1980s). There is huge interest built-up for December contracts and so many more theories. I think it will find support around $800. For those who may not be familiar with my approach of “long”: When I refer to “long”, it means I am positive “delta” (Vega and Theta are my buddies). Pls don’t think I buy GG, GLD or ABX etc. stock straight. I buy spreads on gold and I am quite pleased with its move in either direction that resulted in 11% in Sept, 41.8% in Oct and 14% in Nov (still open).

I am still firm on my perspective on markets for its direction. If it closes below Aug lows, I am out of Bear’s way (that doesn’t mean I won’t respect Bulls). I shall have short delta portfolios (vega and theta still buddies) in case that happens.

Trade carefully, trade profitably, OP







4 responses to “I Shall Sell into Any Rally”

  1. […] I shall sell into any rally (Nov 12) rally took place before faltering. Gold stopped losing around $800 (Nov 12). […]

  2. jordan Avatar

    When you say your long and buy spreads to achieve positive delta with theta and vega on your side, correct me if I’m wrong but if you have a verticle on as a debit theta won’t be on your side.
    Thnks keep up the good fight

  3. OptionPundit Avatar

    It depends.

    If you have a vertical debit call spread, theta will be on your side in most of the cases. However, one needs to pay attention to IV of individual option as well, it is possible that Theta may not be on your side.

    For instance, check out MA 160/165 Dec Call Debit spread.

    Profitable trading, OP

  4. […] March 31, 2009 · No Comments It seems to me that more contrarian-minded investors have been successful over the long term than common wisdom would suggest. Take a long hard look at where the crowd is headed, and run as quickly as possible in the opposite direction. Bet against MBS’s? You betcha! Sell into a rally? Gotcha covered! […]

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