The Epic American Credit and Bond Bubble Laboratory Message Board

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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: John Vosilla who wrote (69028)	8/29/2006 10:49:34 AM
From: ild	Read Replies (1) of 110194

I regard current trader's sentiment as neutral. Message 22758173 You forgot to mention quite high market-wide short interest. VIX is low because funds keep selling options. This is what they have been doing for the last 3 years as the market have been in a trading range. They see no reason to stop. This is how I see it: Fund ABC wants to make $$ and at the same time be "market neutral". So they buy "good" stock and try to sell covered calls on it on upticks plus they short "bad" stock and sell covered poots on downticks. They are fine as long as both stocks stay in ranges. They are screwed otherwise, but they have "smart" computer trading software which does "dynamic hedging". Existence of QQQQ options which have huge liquidity allows for this. Just a few years ago all options were illiquid, so no fast trading was possible. Of course as the market breaks down all such funds will blow up.

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