Random Thoughts on a Wednesday

Good afternoon. 

The major markets started with a nice selloff but with two hours left in the trading day they have rallied to cut their losses in half. The SPX was off 7 points to 1350 while the VIX was near 17, up 0.29. The SPX 75 day MA is ~1315. Falling Oil prices were said to be one of the culprits, but weren’t rising oil prices last week a "drag" on the market? I get so confused….

Open interest in VIX Futures climbed over 10 million contracts yesterday, reaching levels not seen since late September 2008. 

I moderated an on-line panel discussion last Wednesday the 27th, two on that panel are contributors to the CBOE Blog – Larry McMillan and Price Headley. My favorite question was "are gold and silver overbought or could they go higher?" My flip answer was "yes". Silver has been overbought for almost four weeks. If you shorted it back then, you might be close to break-even after the 15% correction this week. Both panelists had a similar suggestion – if bearish buy a put, if bullish, wait for a pullback and buy calls. Price also mentioned (it’s been so long – almost a week) doing a covered write on a pullback if bullish (option volatility could spike higher). To be honest, I’ve been bearish on silver for over two weeks – and did nothing! I was looking at May put butterfly’s, but was unsure of where it would go (kind of critical with a butterfly). I tell participants in seminars the Options Institute conducts that if you don’t get a "warm and fuzzy" feeling about a trade, don’t do it. I only got one of the two.

I saw Dan Haugh from PTI Securities, another contributor to The CBOE Community on CNBC’s "Volatility Playbook" yesterday. Pretty articulate for a Notre Dame grad. Just kidding! The comments we’ve received about Dan’s articles here have been outstanding. he had some good insight on a few issues. Some of those segments are less than 90 seconds, kind of hard to go into great detail. Maybe Dan could recap what he said, and we’ll give him a little room to expand on his thoughts. 

The employment report Friday morning is the next economic event to watch. I saw some small snowflakes as I left The CBOE yesterday, I’d like someone to tell me when to expect Spring!