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Strategies & Market Trends : Systems, Strategies and Resources for Trading Futures
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To: Mary A Young who wrote (8959)11/24/1998 8:08:00 AM
From: Patrick Slevin  Read Replies (2) of 44573
 
<Camp had bought puts on Friday>

I wasn't around on Friday but I'm sure Camp suggested the purchase of puts. I know Rita, one of his partners, bought puts. Hank took this week off though so whether or not he did personally I am uncertain.

I was with a third partner who I know refuses to have anything to do with OEX so he did not. However, he and I went through a zillion possible scenarios and the patterns all came up with an over 80% probability that Monday should have climbed up and collapsed or just sold off from the beginning. In the longshot case where Monday went pretty much straight up and killed the trade the result usually was that Tuesday one could get out of the puts for roughly a breakeven at worst.

So it was a calculated risk to take the position; a high % shot at making out by Tuesday and a low % risk at getting crushed if it did not pan out.

It had less to do with the concept of it being a Monday after expiration and more to do with the way the patterns were forming for this particular post expiration Monday.

EDIT: TICK can often be misleading. For example, there is a school of thought that believes extreme TICK readings on any particular day lead to a short term reversal. I would not trust that, as I have seen people get burned on it often. Including Mark Cook, who first brought the theory to my attention (through his newsletter) last summer. He postulated it and someone on SI said the same. Two trading days later the TICK was 50% higher and the next day was another 150, 200 points higher with the market still chugging along in the same direction.

I believe the time frame was around the July high.
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