Yes, shorting got too easy, and now a lot of the shorts are getting their heads handed to them. Just like in January. These rallies happen periodically in bear markets, just like we get 20 or 30% pullbacks during bull markets. It's impossible to know in advance, how high the rallies go, or how low the dips will go, in this highly volatile market, with the macro picture so unclear. I'm assuming it's still a bear market, and acting accordingly. If I'm wrong, I'll lose money.
Last I heard, margin debt was down about 40% from the peak. (The peak in margin, of course, corresponded to the peak in stock prices, just as the trough in the stock market will coincide with the trough in margin debt and large outflows from stock mutual funds.) However, since the Nas is down a lot more than 40%, investors (at least in Nas stocks) are more leveraged now than at the peak of the bubble. Margin has to decrease at a faster rate than the indexes, for deleveraging to occur.
And, yes, this stock could go a lot higher very quickly. I am scaling in gradually, and could continue to buy more puts at higher prices. I prefer puts to shorting the stock: there is a pre-determined max loss I can incur. That's also why I chose 2002s, because I can be wrong for months, and still be eventually right.
I would suggest that this rally in techs is an opportunity (like the January rally was) to decrease (long) tech holdings, at relatively good prices. This would be especially true for anyone using margin or options. |
