r/options
Risk off?
Author warns of an overheated market and potential bear market, noting a shift toward Treasuries and planning bearish options.
- Indices are overheated and all scenarios are priced in, leaving no room for upside.
- A stronger dollar tightens financial conditions for the S&P 500.
- The AI cycle's ability to sustain economic growth remains questionable.
Gold is falling toward a major level where the market will play a decisive role. Bitcoin is also charging ahead, while EUR/USD is making a large swing that could signal a decline in the euro. If that happens, combined with the already overheated atmosphere in indices and the fact that all possible scenarios have already been priced in, there is nothing left except a strong correction or bear market.
A stronger dollar tightens conditions for the S&P, while an exit from gold and Bitcoin suggests that investors are shifting their focus toward Treasury bills, bonds, or bank savings.
The spike in the S&P has already priced in every possible outcome. There is literally nothing left, even if interest rates are cut. The question is how much additional value the AI cycle can create, and whether it can actually solve enough problems to keep the economy growing.
If, over the next two weeks, the situation continues to follow this setup and if TLT and short-term yields rise while implied volatility increases more strongly in VIX 3M, 6M, and 1Y then I will target an options structure for a bear market.
Indexes seeing 2%-4% daily moves is showing lack of confidence. Frothy. The run-up over past year is totally unfounded, makes no sense, and can't fathom continued upward movement. I figure markets flounder in this +/-10% range for a bit.
I'm still near 60% in t-bills, bonds, and dividend aristocrats. My option exposure is fairly light, I take exit opportunities and not interested in entrants to most overpriced equities. Though VIX/SKEW is putting my head on a swivel for opportunity.
Have set some alerts for a small set of equities, but these are so far below current prices as to be a pipe dream... they are what I would be willing to pay, and the market will have to come to me.
My greek ratio is currently 1:2.5 with a moderately low extrinsic value. I consider this neutral.
Though small, the positions have seen too much fluctuations and will have to be managed soon. Several expire next week, so have bit of work to do.
Positions that are getting the onions; LMT, UNH, BA.
Love to see SPX under 6000, probably pipe dream.
meh, ive been delta neutral for the past month and I will continue to just collect theta
trying to time this pullback is dumb af and you will lose your house
the part that trips up this kind of setup is your trigger. you're waiting for vol in the 3m/6m/1y vix tenors to lift before you put the structure on, but if those tenors are already rising the cheap convexity is mostly gone, you'd be buying protection after it repriced. either you nibble a little long vol while it's quiet and boring like right now, or you accept paying up once everybody wants it. designing the entry around rising IV kind of guarantees you show up late. what structure are you actually eyeing, put spreads or straight long vol on the index?
That 100 ema line has shown to be sturdy but my calc., anyway, says this time the bottom may be made below.
People had shifted towards meme stocks in this case it’s been semiconductors and space. I don’t think it will last much longer