I would not at all be surprised by a rally that left my slightly in the
money SOX puts worthless when they expire on Sep 19. But I
believe that the general trend in SOX has to be down from here to
the end of the year (nearly wrote world), and I will rely on dead-cat
bounces to parlay my puts. (That is, sell in the money puts at the
apparent bottoms of severe drops, then buy at the money puts when
the dipsters partly reverse it.) In a normal market my tendency is to
buy low valued, high volatility stocks. The idea is that they have
more room to rise than fall. But with this market, I feel safer trading
puts.
Options are brutal to trade, as they have big spreads, and time
premiums that decay quickly. So if I'm going to do them, I'm going
to give myself as many advantages as possible. SOX is the most
over-valued of the optionable indexes I could find. Because of the
spread and commision, (but mostly spread) You need about a one
point move in the SOX, perfectly timed, to break even.
You could make money betting on a sucker rally, but one of the
things I learned (hard) from my chess playing days is that you never
make the assumption that your opponent (i.e. the other people in
the market) is going to make a mistake. But you could easily make
a 10x return on a well timed rally to 920, or 20x on a rally to 930.
I'll go over the CBOE web site and look at the OEX September
calls, and if anything interesting comes up, I'll post the numbers for
the use of the sucker rally types here.
Personally, I think its time for the SOX to say "Bye bye". The reason
the semiconductors wrecked last night in Tokyo is that their earnings
estimates were lowered. You have to expect some of the same
around here. On the other hand, Europe was generally up.
-- Carl |
