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Strategies & Market Trends : The OEX... gasp!
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To: Steve Fancy who wrote (45)8/5/1996 4:37:00 AM
From: shadowman   of 658
 
Steve:

I've been taking my chances with spx and oex options on and
off since 1987. Can't say I've got it figured out yet.

It appears to me that lately Perceptions have been the primary
mover of the market. These Perceptions seem to change dramatically
every week or two.
Example:

1. Inflation is on the rise...interest rates will rise...money will
become tighter.

2. Inflation is under control....interest rates will stabalize or fall...money will become more easily available.

You mix in the perception that the market has been flying too high,
based on pe ratios of certain tech and bio-med stocks....general
uneasyness about inevitable correction. Earnings paranoia.

What you have is volatility. Not a bad environment for oex and s&p
options.

The last couple of weeks I have been buying puts on large up moves and
calls on large down moves and waiting for the market to come back. It
has worked reasonably well ...so far. I expect that it will continue
to be viable until the market decides which direction it is going
and moves strongly in that direction. I figure one side of my play
is going to be a serious loser eventually. In the meantime it is hard not to take some profits from this strategy, as long as short term volatility remains high.

One of the frustrations you run into with this approach, is when to take a profit or when to let it run. I'm sure you have sold some profitable positions only to see the call or put quadruple in value
that same day or the next. It is impossible to maximize your entry
or exit positions.

Random thoughts...Dennis
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