Sent to you by Dominic via Google Reader:
via Think BIG by Bespoke on 5/20/10
One day in early April, 93% of stocks in the S&P 500 were trading above their 50-day moving averages while 7% were below their 50-days. Now the exact opposite is true -- 7% are above their 50-days, while 93% are below. And just like the reading rarely stays above the 90% level for long, it also rarely stays below the 10% level. As shown in the chart below, the indicator is currently at its lowest level since March 2009 when it hit 5%. During the depths of the collapse in late 2008, the reading got down to zero percent. At this point, investors have to decide whether or not they think things could get as bad as they did in late 2008.
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So with current high premiums, shouldn't pick a lower than current strike and sell an SPY put spread? A little relief rally should also bring IV in a bit so you make money on delta and vega. As long as it happens fast enough to offset theta you should profit. I'm going to take a look at some ideas on this.
ReplyDeleteI'm thinking that there is something more scary going on here. If there is a double dip recession, and it sounds like the concept of Europe facing it is increasing rather quickly, then we've already shown that its difficult for that to be an isolated incident. If they drag the rest of the world economies in to a double dip, where is the money for a traditional stimulus for a recession? We would have to tough this one out, and given the current fiscal situation worldwide, who knows how painful or long this might be.
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