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

To: russwinter who wrote (66425)	7/19/2006 6:41:28 PM
From: yard_man	Respond to of 110194

keeps on working, why stop??

To: russwinter who wrote (66425)	7/20/2006 8:27:41 AM
From: Rarebird	Read Replies (1) \| Respond to of 110194

>>Same ole same ole<< Wall Street has the Running of the Option Speculators, a monthly event. Wednesday was the day the option writers set the bulls loose on the put buyers. The OEX Index, as you know, is very popular with option speculators, especially so for put buyers. For a modest entry fee, speculators can win big if the market moves down substantially. And, this month, that was the case -- until Wednesday. Put buyers had big, fat premiums on their mostly in-the-money puts. The problem is that the creators of those puts -- the OEX option writers, or short sellers, which is actually what they do -- were looking at paying out quite a bit of cash to the put buyers on Saturday. Unless, that is, those puts could be made to expire worthless. And, thus, the monthly expiration game of rallying the market 300-400 Dow points to make those puts worthless came about. It has become an almost monthly tradition, also called "Maximum Pain" for the effect it has on option buyers. In any case, the exercise was performed on Wednesday as the market retraced much of the recent trading range from bottom to near the top. In fact, the OEX landed almost squarely on a price which makes most puts, as well as most calls, virtually worthless. Don't you love tradition? There is a critical trendline -- a real "Line in the Sand" -- which the market must test to determine whether the rally was the start of something bigger, or whether the bulls were just out for a brief run at those option speculators. If this was just a brief, options-related rally, we should see the market stall soon and start pulling back again. But, if we see some real strength -- including strength in the NASDAQ-100 and the Semiconductors -- we will have assurance that the outlook is brightening for the stock market and the economy. At this point, that's probably wishful thinking, but I'm willing to be convinced by market action. On a more somber note, the market may just continue to gyrate within the range of prices it has already traced out. That would mean that both permabears and permabulls would both get hurt in this environment, if the bears sell every dip and the bulls buy into every rally. Money-market funds will likely beat the indices in 2006 as well as most bulls and bears. Only a very small percentage of very nimble traders would outperform if they timed the vast majority of these wild swings perfectly. Most people don't realize that Bear markets do not only destroy most permabulls, they inflict great damage on other Bears too.