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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (29810)	4/1/2005 8:34:00 AM
From: russwinter	Read Replies (1) \| Respond to of 110194

The Pig Men will spin this any which way, and will do what they will do. For the rest of us (as I've been getting PMs on how to play these), here's a trading set-up if it's an early emotional ramp. Notes on May SPY puts: There are two overhead resistance points, the 1189 area, and 1197. Obviously if the market trades up to 1189, that would be your standard complacent dumb money opening trading pattern this market is so well known for. 1197 would be a spike, far more emotional. Here's what to key on if it's some kind of favorable to Bully speculators only, Goldilocks, too cold, blah, blah, blah ramp: there is a 9.5 billion Fed repo rolling over today, and another 13.0 billion TIO coming off. So the Wizards will need to be fairly aggressive with this. We will get the 9.5 replacement by 10:00 EST, and I will post it. The Treasury TIO will be in a couple hours later. There is also a bunch of securities lending in place, which normally would suggest dealers are willing to play for higher rates short term, thus whatever the perverse job results are, the bonds most likely will sell off later from here. If the Fed is light on heroin replacement, then you can use the 1189 and /or 1197 for put entries in one or even two split trades. Here's how the SPY at the money put looks pre-open: implied volatility (IV): 11.5, means puts are very cheap delta: 49, means move about 50 cents per 1 point in underlying theta: 2, means time decay will be very slow, good bang for buck vega: 17, means premium will nicely expand if there is a pick up in volatility from current low VIX levels. gamma: 8, means delta will go to about 57, if the underlying moved one point more in the money More explanation: marketscreen.com