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<DIV>>Come on Gitanshu, tell us your secret for finding fair value using
options. <BR>>You know, the one you call Implied Fair
Value. </DIV>
<DIV> </DIV>
<DIV>What can I say Bob - 40 OEX points in a day Implies Fair Value for a hard
day's work :) </DIV>
<DIV> </DIV>
<DIV><FONT style="BACKGROUND-COLOR: #ffffff">></FONT>and created this one
showing our trades today. <BR>>Sorry, code is locked in a bank
vault.<BR></DIV>
<DIV> </DIV>
<DIV>Ah well - another one of those black screen boxes. Hate those black
boxes.</DIV>
<DIV> </DIV>
<DIV>Old timers on the list would celebrate the Return Of Bob The Jedi to the
vocal e-world. I can assure you he isn't always like this, so milk his brain
while Bob the Groundhog sniffs spring air at RT. He gets excited by the process
of discovery of a new indicator he can put to use (called Indicatoritis), or by
the process of poetry in motion on a price chart as you have seen the
before-after cases yesterday and today from his cone charts (real trades, real
money).</DIV>
<DIV> </DIV>
<DIV>Maybe The Doctor can help us here. </DIV>
<DIV> </DIV>
<DIV>I use VIX to "understand" what the market is implying the ATM
volatilities are on a minute by minute basis. Since VIX is only reported at one
minute intervals, it presumably has some inherent weaknesses:</DIV>
<DIV> </DIV>
<DIV>- Say OEX moves through 2 strike sets within 1 minute, thereby causing a
sudden dis-continuous hump in VIX as old strikes rotate out in favor of new
ones. </DIV>
<DIV> </DIV>
<DIV>Is there any way this time lag gets rectified in the VIX computational
algorithm? For example, OEX 680 Calls and puts moved around much more in the
bid-ask spread than normal around the time Bob indicates purchase - and yet the
price move in the options was not as violent within that same timeframe. </DIV>
<DIV> </DIV>
<DIV>VIX gets computed basis last trade, not basis the varying bid/ask.
Correct?</DIV>
<DIV> </DIV>
<DIV>- Since bid-asks on days like today are half or more point apart, how does
VIX compensate?</DIV>
<DIV> </DIV>
<DIV>- What happens to VIX's calculation if 2 or 3 of the 8 options used to
index implied vols do not trade within that 1 minute between last reported vix
and newly reported vix?</DIV>
<DIV> </DIV>
<DIV>On OEX, homework done over the weekend showed that </DIV>
<DIV>- today was a multiplicity of signals going off as of Friday close:</DIV>
<DIV>- We had an Inside Day </DIV>
<DIV>- which was also the Narrowest Range Day of the past 4 AND 7 trading
sessions</DIV>
<DIV>- which did nothing to alter the downtrend begun on the slower MA used in
ANTI</DIV>
<DIV>- and brought out the breakout traders who entered long on a break of
Friday's high within the first 6 bars of trading</DIV>
<DIV>- helped along by Momentum Index Buyers on the strength of 2 bullish
Connors Vix Reversals</DIV>
<DIV>- conservative ones exited into strength at the 2 std deviation cone
reading - since from that point on the momentum - statistically - could only
carry the market sideways into the close tracking the cone, or reverse - either
way the money on the table would be idled and therefore exposed to risk of time
decay, and of uncontrollable variables</DIV>
<DIV>- aggressive traders therefore reversed long positions and/or patient
stalkers entered short, fading the morning pop (as Bob has illustrated using
OEYQPs) knowing that momentum had reached its statistical peak for the day</DIV>
<DIV>- trailed stops and booked profits at test of morning lows (too fast, did
not work) OR Friday lows (did work)</DIV>
<DIV>- market bounced but found resistance at Friday lows - and 1 sigma cone -
so they re-entered short positions</DIV>
<DIV>- booked partial profits this time at the -2 std deviation cone</DIV>
<DIV>- but never got stopped out since Friday highs were never tested </DIV>
<DIV>- and at the close, they had the choice of booking profits on the remaining
positions and starting Tuesday seasonality with a clean slate</DIV>
<DIV>- or carry their puts or put spreads home in the hope of some early morning
follow-through where they could squeeze out money for a few hamburgers/pizzas
from their positions</DIV>
<DIV>- or prepare a defense for their carry-home positions by pricing some call
spreads while the world was giving them away.</DIV>
<DIV>- Or leave everything alone and just concentrate on figuring out WHY crude
keeps rallying but the products (HU and HO) can't keep pace.</DIV>
<DIV> </DIV>
<DIV>At least that is what my trading diary wrote at 3:30 PM. Chart
attached.</DIV>
<DIV> </DIV>
<DIV>As to vaults and volatile implications for Tuesday, you never know, my
friend, you never know. The market is the sum total of some of the sharpest
minds and the richest wallets in the world. All we can do is prepare for the
next move, hoping it will be what we think it should be, but just in case it
isn't, it ain't "Game Over"...</DIV>
<DIV> </DIV>
<DIV>And so we get on with the homework for Terrible Tuesday - like figuring out
where the parabolic moves we see on the charts to follow on the next email lead
to conclusion... at the 50 day MAs or the 100 day MAs or at a 100%
retracement...</DIV>
<DIV> </DIV>
<DIV>Gitanshu</DIV>
<DIV> </DIV>
<DIV> </DIV></BODY></HTML>
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