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Technology Stocks : INTEL TRADER
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To: smolejv@gmx.net who wrote (4394)10/17/1998 3:15:00 PM
From: Gersh Avery  Read Replies (1) of 11051
 
I will send you a chart. It is a continuation out about one month based on a continuation of the current 20 day simple moving average of the S&P 500. The chart is inverted, meaning that near the zero line is implied volatility and away from the line is stability.

The volatility of the last few weeks have caused option sellers to be cautious creating a shortage of options. This makes a situation that favors the seller. By the time that this caution goes away the favor will be more neutral, better odds for the buyer. Not in favor of the buyer, of course, just better. Then as we return to the period of volatility premiums will again rise. The trick would be to have the options when the premiums rise again. (as the chart goes back to the zero line)

I watch the e-wavers. Interesting to watch them. I think if you put more than three of them in the same room together you would have to have armed guards to keep things peaceful.<g>

What got me bullish a few days ago is:

Broad based buying: small caps, large caps, bonds .. everything seemed to go up at the same time.
Volume on the up moves.
Duration of up moves verses duration of down moves.
The mind picture of JT serfin' <g>

We had been going through a "trading range" period of time where the range was getting tighter and tighter. The bottom of the range seemed to stay the same while the top was getting lower and lower. I think that this formation is called a descending triangle which is always bullish.

Then the fed stepped in and seemed to decide that the market has bottomed enough. The current expectation is that the fed will lower more. I would not be surprised to see another lowering before the next fed meeting. The market has shown that while a lowering is expected stocks are bought on hope. Then when the lowering takes place a selloff follows. I would guess that if a selloff were to start now the interest rates would be dropped back another 25 basis points.

If that does become the common perception then the only perceived direction of the market is up. Premiums on puts will lower. How far out is the question. I've seen some hint that this two weeks out may be good timing.

Now .. which options? welll .. my home made tool is based on the S&P.

FWIW

Gersh
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