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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (37532)	7/23/2008 10:08:59 PM
From: Rolla Coasta	Read Replies (1) \| Respond to of 217561

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To: TobagoJack who wrote (37532)	7/24/2008 3:05:00 AM
From: energyplay	Read Replies (2) \| Respond to of 217561

It took me awhile to figure out how this works. If financials drop and uncertainty increases, SKF goes up, and the puts will not be exercised. On a macro level, if stability increases and financial rise (note that these two conditions are tied together) the volatility premium goes away, and you can cover the short profitably. As the news of financial issues moves along, Fannie and Freddie get fixed, then American Express reports bad news on credit cards. Since SKF is a composite of many elements, when the elements move in different directions, SKF does not move, and volitility drops sharply. So this can work on a stock by stock basis. Meanwhile, time decay is on your side. Impressive.