Wednesday, February 23, 2011

ISE Call Buying

The ISE Sentiment Index today was 119 (indicating more call buying than put buying). That's surprisingly high for a second big down day.

Anecdotally, bears are still scared/wary of a rally and bulls are confident.


Taylor Conant said...


Anecdotal e-mail from a momentum trader I met last weekend, responding to my question about whether Monday was a rough day for him:

Actually, it was a great day because all my options contracts had expired last Saturday so I was flush with money waiting for the stocks to fall. Did get in Apple and Google....Ipad 2 coming out March 2nd will drive momentum back up. I think people jumped the gun. Wall Street does this to fleece people every few moons. Part of the routine I guess. I was up this morning at 3:16 AM checking my gasoline (RBOC) plays that will double by May.

CP said...

Is that for-real, or are we having a writing contest to see who can pack more bullish tropes in one paragraph?

I count:
(1) If the options contracts "expired" that means they either expired worthless - at a loss - or they were automatically exercised, and he would have been long on Tuesday. [I guess he could have been selling puts?]
(2) If bulls are selling puts as a strategy now, google "Niederhoffer".
(3) Why AAPL and GOOG? Why not, at least, an AAPL supplier or a more subtle, interesting way of playing the theme?
(4) Why wouldn't the ipad 2 be priced in already?
(5) Does it make sense to ascribe a rare down day to a deliberate "fleece" program?
(6) Wholesale gas over $5 by May? With retail maybe close to $6? And still bullish? OK...

Taylor Conant said...


Yes, exactly, he is selling puts and then buying puts below his own puts to protect himself, "locking in" a profit on the spread. This is his strategy. He said he could do the same with calls in a bear market.

He showed me his portfolio, mostly AAPL, NFLX, GLD, SLV, GOOG, etc.

You raise some good concerns. I don't know if he is or was thinking of any of those things. It's a strange mental disconnect I witness often-- he's a really nice guy who was very critical of Bernanke and knew what he was doing was dangerous and economically disruptive, yet he believes he can run on the edge of a knife without risk of slipping and hurting himself. He kept telling me about how stupid it is to lever yourself up personally, take dumb risks and live the way everyone else does, but when it comes to investing he kept clapping his hands together and wiping them apart in that "It was simple, I did it and washed my hands of it" type motion, as if this strategy of his was a no-brainer. Kept saying something about how he "has to" succeed in his investing or he doesn't eat, so somehow that's supposed to give him an edge or something. Not sure.

CP said...

It's all been done before.

getyourselfconnected said...

That is a bucnh of contortions to go through for gains in a no lose market it seems.

CP said...

Ha! Everyone knows you just buy AAPL calls as far out as possible.

Eric said...

[I guess he could have been selling puts?]

Selling volatility on the downticks has been a great strategy -- i.e. one that has yielded high returns with relatively good safety -- for two years now.

As I previously mentioned.


whydibuy said...

I hope all you idiots of the apocalypse took advantage of the market crash, lol.
Bad news, bears, its over and up we go.

Bulls gave the bears just a taste to get some nice discounts on good stocks. We thank you for your generosity, lol.