Thursday, September 18, 2008

Market Action

The volatility was ridiculous today. S&P was down 40, then back up 60 to close up 3% or so. VIX off the charts as well, spiking into 52-wk high territories above 40. The "fear" is here. It seems that the breakdown of the SPY is failing, but that's what I said a few days ago before it dropped into the 116s. Huge news regarding shorting all over the place today, most notably the UK banning short selling of financials, which quickly prompted shorters to run for cover and marked the significant reversal today. After hours, rumors of the SEC to temporarily ban short selling (on financials only?) as well, has created a positive opening for tomorrow.

I took a significant position in SPY puts today and will likely hurt for a few days as the market responds to possible short selling rule changes. I still remain significantly bearish on the market, and there is probably temptations to get on the bull train and ride this rally for whatever it's worth. But, just as quickly as the indices reversed today, it could be just as fast and hard to reverse the other way.

I have some LDK 40 calls expiring tomorrow with a cost basis of $5. Prior to today, it looked like the best I'd be able to get was around $2, a loss of $3 per contract. But, hopefully with the gap up in the morning, I will be able to get out with even a profit! If the calls are above $5 at open, I will likely exit half the position, and set a trailing stop on the second half.

Good luck, happy tradings!

No comments: