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Strategies & Market Trends : John Pitera's Market Laboratory

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Hawkmoon

To: Elroy who wrote (18987)

4/8/2017 1:56:57 AM

From: John Pitera

1 Recommendation of 33421

Elroy thank you.... good pick up...... I was trying to get that post up as I was getting ready to walk out the door and was in hurry up mode..... The professional investors are BUYING the calls and shorting the stock to be delta neutral...... I suspected I got a bit of his talk wrong. He speaks with a Hungarian accent and his phrasing is a little unusual.

So Since the Professional investors have purchased the calls they make money when the stock goes up... they lose money when the stock or ETF goes down since the call they have bought is worthless. And the Professional and Institutional option buyers are capturing the.

The biggest premium is usually at the money calls or slightly out of the money calls... If they are buying at the money calls... they are long the ETF and to get neutral they have to short it.

many thanks for picking that up.

the 5 minute segment is well worth watching...

video.cnbc.com

Thomas Peterffy said : For Investor, it has been a successful strategy to buy ETF's and High Market Capitalization stocks on Margin and right call options over them. And so who buys these call options,

it's professional investors It's professional investors who buy the call options ....they hedge it by selling the
underlying security and there by getting into a delta neutral position.

Now as the the underlying now as the underlying stock ticks up they ( the Professional Investor) becomes long and they sell into the market and as it drops they buy into the market , so they sell upticks and buy downticks... and as a result they bring the volatility down..There for volatility has been at a historical low even thoough in many investors minds the Trump presidency holds all kinds of uncertainties.

So this is a great contradiction and how is this going to be resolved? I have some ideas and then he does a
sustained chuckle.

So he is asked the question how do you think this will be resolved. .. So as you see the market usually opens where it closed the day before...it does not really move much right ( he is talking about the overnight globex session) since the are selling on upticks and buying on downticks they are basically bringing the market to a halt. (I not sure exactly what he means by that ... I encourage everyone to watch the 5 minute video and see if his Logic is intact.... This guy's got 96.5 Billion of investor equity trading through his firm and so he can look run all kinds of statistical analysis of what his account holders are doing.

He goes on to say that if you have a sudden move of 2 to 3 % due to some fundamental development .... (possibly overnight or during the trading day, I'm not sure which he has in mind... probably either) .... then the investors run out of gamma and they have run out of delta and can no longer trade against the market and at that point we will be staring into a vacuum the market could easily in the next several minutes move 5% ...

and it would be at that time that a smart investor would have to go in and trade against the market.

Thomas Peterffy commented that he bought the Trump market at 11 pm the night of the election and that he has been lightening up his positions ...... that was a key take away from one of the fast money traders.

(Normally to me when a vacuum in a market occurs.... airpockets develop and prices can gap down I remember it happening on April 4th of 2000.)

April 4th of 2000.....

everyone should go back and read through the posts on that day (04/04/2000 ) from that day alone

Message 13346691

Chip points out the Clinton Blair killing of the bull with their joint announcement that the human genome research should be free

Message 13347879

Message 13347897

I think we need someone to talk about some Low Levels on the
Nasd to really get the fear in the mkt.

IF we went as far below the 200 dma as we did in the 1998
Q3 decline then we will go to around 2900 on the NASD.

So there now that it's been said..... is this throwing
enough virgins into the volcano?? -ng-

ng = nervous grin

that was my comment on how far down we would need to go put some fear into the market...

I said 2900, the May 25th low was 3042... not that far...we then had the summer rally

April 4th of 2000.... 1400 points down at the low of the day on 4/4/00 in 7 market days......... yep that was a day that GZ, Chip, Jorj , myself and a number of other people here remember well.

John

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