The big sell off started with the retail stocks, then spilled over into the financials and into everything else. Both of those sectors have a good long way to go. Retail feels like a dud, so at most it will move sideways without falling off a cliff. I still can’t help but think, why? Why the 7% correction in stock prices?
And to be honest, who cares. Stocks are running again on relatively low volume as a client of ours pointed out to me. That is not different from a lot of 2013. What this does do is bring the upside gamma back into play for some individual stocks. Just look at the leaders and create close to the money backspreads. When uncertainty fades, the pattern has been for stocks to fly, so look at the fliers.
We already liked short volatility and the bigger EM products, so it is time to look at some individual names. Look at a leader like GOOG and find OTM 1 x 2 ratio call vertical spreads (sell 1/buy 2) for even money or better. Give yourself a duration of 3 weeks at least and let the money flow back into stocks.