Pre Market

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AAPL up; the US broad Market Equity Indexes up; Gold and Silver up; Crude up; the Euro up; Bonds and Notes down; the Yen down; US Dollar down.

Pre-market, it appears the US markets are headed for another trend day up. It will be interesting to see if the bears can break it back and down. I doubt it. But there are many news events this week that give bears some hope. This hope turns into real promise when the Russell reaches 930. I imagine that a thirty point trading range might be enjoyed by many parties.

For me, the key indicator remains volatility, both in the short- and long-term.  I remain short volatility; I may be able to close my VXX trade today. Any volatility rips this week could provide other opportunities.

I also hold a solid short position, hedged with some short options. I don’t know when a decisive mid-range turn around will begin; but my strategy calls for readiness. When this move starts, I’ll have a position, and I will increase the size.

There are three ways to make money as an options trader: from direction, time, and volatility. I prefer to play seriously only the big directional moves. The preferred tactic is the simple credit spread. Time decay is relatively constant, and options traders like to control Delta and Vega to realize gains. Volatility is the most explosive of the three (it takes the elevator up and the escalator down– unlike stock). When implied volatility shoots upward, short VIX positions and condors and butterflies work very well. A simple toolkit, simple orientation, and simple imperative: keep your eyes and ears open to the market. It sends its crucial signals for those appropriately tuned.

78s

His Master’s Voice

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