Vix options in March 17 2008's vix spike

unusual correlation between vix and spy
http://www1.bbsland.com/stock/messages/24438.html
http://hutong9.com/viewthread.php?tid=9472&extra=page%3D1
http://hutong9.com/viewthread.php?tid=9475&extra=page%3D1
http://hutong9.com/viewthread.php?tid=9421&extra=page%3D1
http://hutong9.com/viewthread.php?tid=9454&extra=page%3D1

What a volatile time!

A spy condor strategy.

Spy has excellent liquidity and small ask/bid spread for its options. It's price range is also easy to predicate than other equities, therefore a very good candidate for candor strategy. Fig.1 shows spy oscillated between 132-138 in the last several weeks, so let's choose the following calls and puts to build the candor (see Fig.2) . As shown in the summary, if the position is held into expiration, it has a maximum profits of 141$, and a maximum loss of 59$ (the total investment), reward/loss is not too bad.



However, as the market is so volatile, we can even further take advantage of the volatility, by simply exiting the condor partially to take profits early. How do we do it then?

1. Assume the market moves up sharply from here, and the sold put has a big profit, which can cover the maximum loss of the call spread part, e.g. 121$ (see Fig.3), then cover the put. By doing so, the neutral condor becomes a free bear call spread + a nake put (with paper loss). From here, you can either close the put, or wait for a market fall to re-enter a put short position to restore the condor. If condor restored, the same profit taking process can be repeated whenever there is profit on the shorted call/puts.



2. If the market moves downward, and leave a big profits for the shorted call, which can compensate the maximum loss of the put spread part, e.g. 138$ (see Fig.4), then cover the call. The follow-up action would be the same as in scenario 1.

radical illusion

The follow through day definition.

* Market in downturn.
* First there is a up day which closes higher than previous day. That is when you start counting. (Attempted rally day 1)
* From that day 4th to 10th day a 1.7% plus up day on higher volume than previous day and higher than 50 day average volume is confirmed follow through day.
* And during the period between the 1st rally attempt and the follow through, the market should not trade below the first rally day attempt low.

Investor's Business Daily

All Major Bull Rallies Begin With A Follow-Through DayTuesday July 27, 7:00 pm ET
Jonah Keri

You hear it so much, it's almost become the naysayer's mantra: "You can't time the market."
Short and punchy? Sure. And also completely false.

The market's price-and-volume action gives clear signs of the market's direction. A follow-through day gives you the biggest of head starts -- timing the market's bottom.

A follow-through occurs at the earliest stages of a fledgling rally. After a significant market correction, the market will look to regain its footing. Any up day then counts as Day 1 of an attempted rally.

The next two sessions, Days 2 and 3, don't need to show much in the way of gains. As long as they don't undercut Day 1's low, the rally remains intact.

For a follow-through to occur, you want it to land between Day 4 and Day 7 of the attempted rally. On any one of those days, you're looking for one or more of the major indexes -- the Nasdaq, S&P 500 or Dow -- to rise 1.7% or more in higher volume than the previous day.

Though a follow-through in that span gives the strongest signal for a new rally, one that hits anywhere between Day 4 and Day 10 can work. Follow-throughs that occur after Day 10 yield lower success rates.

Though this method may seem esoteric at first, keep in mind it has decades of IBD research behind it.

To gear up for the next follow-through, study charts of past market bottoms. The Nasdaq flashed a follow-through in October 1998 which kicked off the final, furious stretch that carried stocks to huge gains.

Just remember: Not every follow-through triggers a huge, new bull market. But no raging bull has ever started without one.

After three years of harrowing losses, investors were starved for good news by the time March 2003 rolled around. On March 12 of that year, the Nasdaq fell to a low of 1253.21 before bouncing back for a 0.6% gain in swift volume (point 1). That was Day 1.

The Nasdaq roared ahead 4.8% in massive trade the next day (point 2). Exciting action? Sure. But you still wanted to wait for Day 4-7 to confirm the new rally.

On March 17, the follow-through hit on Day 4. The Nasdaq jumped 3.9% in sharply higher turnover (point 3). Volume was also above average. Though the index stumbled a bit on March 31 (point 4) and a few other times shortly after the follow-through, it never approached its prior lows. The Nasdaq would go on to gain 72% to its January 2004 peak.

http://i25.tinypic.com/warips.jpg

在怀疑中上涨
在等待中狂飙
...
在兴奋中触顶
在憧憬中跳水
在绝望中重生

http://www.joe-duarte.com

Bear Market Analysis. Darker Days Ahead?

by Dr Joe Duarte
February 11, 2008

Bear Market Analysis

Darker Days Ahead?
The odds of the current correction being the start of a bear market are higher than most expect. In fact, one Marketwatch analyst says that a bear market is "about due."

John Prestbo, editor and executive director of Dow Jones Indexes, ran a statistical analysis of bull and bear markets since the Dow Jones Industrial average was established in 1896, which led him to come to the above conclusion.

Here are some of the interesting things he found:

1. "The five-year bull market that was either interrupted or ran out of steam on Oct. 9 lasted eight months longer than the post-war average. The bull appears at first glance to be significantly below average in strength, gaining 94.4% versus an average post-war bull run of 136%."

2. Yet, "if we remove the three giant bull markets of 1949-61 (up 354.8%), 1982-87 (a 250.4% gain) and 1990-2000 (395.7% higher) from the average, we get 61.8%. That would make the most recent bull more than 32 percentage points larger."

3. "The average bear market over the past 111 years sent the Dow down by 34.63%. The declines ranged from 53.57% on the deep side (1932) to the shallowest drop of 21.16% (1990). They lasted, on average, nearly 11.5 months, ranging from 36.55 months (1946-49) to 1.81 months (1987)."

4. "Bears are smaller and appear less often since World War II, though they last a bit longer. In those 63 years there have been 11 bear markets, 10 fewer than in the preceding 49 years. They lost 29.71% on average, ranging from 45.08% (1973-74) to that same 21.16% (1990). Their average length was 14.17 months, with a high of 36.55 months (1946-49) and a low of 1.81 months (in 1987)."

So putting a little math together here, based on Prestbo's analysis, if this is a bear market, which presumably started in October 2007, it could last 11.5 to 14.17 months, depending on whether it acts as bears did on average before, or after World War II, respectively. And the drop, based on the Dow Jones Industrial Average could be anywhere from 29.71 to some 35%.

That would put it ending somewhere in the November to December 2008 time frame, and the bottom would be somewhere around Dow Jones Industrail Average 9956.25 and 9206.55, some 15 to 20% below last Friday's close.

We don't know about you. But when we did those calculations, it took our breath away. Think about it, if this thing is another bear, and it just runs along average lines, based on past performance, it's only one half to one third finished, which means that a whole lot more pain could be on the way.

Oh yeah. It could be worse. Check this out. According to Prestbo, who gets our award for being Mr. Dark Knight "Sometimes, however, there are two or more bears in a row, with only a bit of bullishness in between to separate them. For instance, the Great Depression was marked by 12 bear markets, starting with the Great Crash-initiated retreat of 47.9% in 1929. That one wasn't the deepest, either. The honor goes to the previously cited 53.57% rout over four miserable months in 1932."

Wouldn't that be an interesting scenario? You bet, 12 bears in a row, would make life interesting for anyone in the White House, not to mention your house and ours.

Fear not, though. As Prestbo noted, it wasn't all bad. "Overall, the Depression's bears averaged Dow declines of 37.7%, with an average span of five years and three months. Separating them was the same number of bull markets that rallied an average 53.5% and lasted an average of five and a half years. But an average bear followed by an average bull still left the Dow lower."

And here's one for us market timers. "One Depression-era bull market was worthy of the name -- a 127.3% rally in 1934-37 -- but the others amounted to inconsequential hills in a deep, wide valley. The Dow didn't climb back to 1929 levels for 25 years, in 1954."

Conclusion


So what's Prestbo's conclusion? "All these numbers make one conclusion irrefutable: Bear phobia isn't paranoia. Bear markets really do maul portfolios. Investors are wise to avoid them if possible, just like hikers do with the real animals."

You bet baby. And here's ours, which we put forth in these pages on January 16th, 2008.

"Anyway you look at it, it feels like a bear market, even if the Fed pulls a miracle, things straighten out, and it turns out that we really aren’t in one. And, as the old adage goes, on Wall Street, it’s all about perception. Right now the perception is growing worse and worse with each down tick in each individual market. And, why not? If you take a bit of time to look around, you’re seeing charts that are in the midst of patterns that are tracing lower lows and lower highs, and support levels that are failing left and right. At the same time, the fundamentals of the U.S. economy are starting to show significant erosion, and the rest of the world may be starting to slow as well. In other words, this is one of those markets where the return of your money is a whole lot more important than the return on your money. Tread very carefully."

And what if we're wrong? Great, we'd love to be wrong, and to be buying stocks left and right, which is what we'll be doing if things turn around.

Until then, though, we'll be holding on to lots of cash, and trading currencies, gold, commodities, and bonds whenever the trend is sustained in any of those other assets.

http://mysite.verizon.net/vodkajim/housingbubble/

The Vision of a Bear Market

spy and rate cut

After 0.5 rate cut, the market rallied and then fell.

It's often told that, the initial response to a rate cut is real as demonstrated by a rate cut last oct, which initially down and then up that afternoon, but in the following days, marked was sold hard and lead to the bear market.

This time, the response is just opposite to last time, and we will see if the market will be up in the next few days.

Lord, is it mine?

Supertramp

I know that theres a reason why I need to be alone
I need to find a silent place that I can call my own
Is it mine, lord is it mine?

You know I get so weary from the battles in this life
And as many times it seems that you're the only hope in sight
Is it mine, oh Lord, is it mine?

When everythings dark and nothing seems right,
Theres nothing to win and theres no need to fight

I never cease to wonder at the cruelty of this land
But it seems a time of sadness is a time to understand
Is it mine, lord is it mine?

When everythings dark and nothing seems right,
You dont have to win and theres no need to fight

If only I could find a way
To feel your sweetness through the day
The love that shines around me could be mine.
So give us an answer, wont you,
We know what we have to do,
There must be a thousand voices trying to get through.