Seeking Alpha
  • Erick McKitterick
    Next week could be very nasty. Watch out.
    12/3/11
    Reply (108)
    • 1980XLS-2.0: Do you have any Data you would like to share with Us?
      12/3/11
    • PVizzle: I take it you consulted your crystal ball
      12/3/11
    • Erick McKitterick: We have a ton of Eurozone exposure, almost every technical indicator has us in an overbought state, and some very large VIX put selling
      12/3/11
    • 1980XLS-2.0: VIX selling would be bullish by some measures.
      12/3/11
    • talbano: 1980- i was thinking the same thing -thought I was crazy.
      12/3/11
    • Irishmedic: Is the VIX just an indicator per say like a wilder's DMI of "strenght" of move? Or am I getting this wrong?
      12/3/11
    • PVizzle: I have no eurozone exposure--maybe you do. Technical analysis is nonsense. How is put selling bearish?
      12/3/11
    • PVizzle: VIX put selling
      12/3/11
    • Irishmedic: Can I ask why you think TA is nonsense?
      12/3/11
    • Brandon Gibbs: I would say VIX put selling is long term bearish, short term bullish. Lots of VIX holders needing to cover their position for a bit?
      12/3/11
    • Erick McKitterick: VIX put selling is bearish. The Dec 25 puts were bid at 1.30 at the start of trading and large block sellers drove the bid down to .80.
      12/3/11
    • PVizzle: TA is a pseudoscience. So what is a pseudoscience? Taken from wikipedia:
      12/3/11
    • PVizzle: "Pseudoscience is a claim, belief, or practice which is presented as scientific, but which does not adhere to a valid scientific method"
      12/3/11
    • Erick McKitterick: Additional some very large 35 / 55 call spreads were bought implying another spike in the VIX which would come from a selloff in equities.
      12/3/11
    • Irishmedic: On October 1st the VIX was +$45,by Oct 14th it was about $28. Yet the RUT had risen about 100 points! Selling puts in that bullish run would
      12/3/11
    • Irishmedic: have been a terrible move!
      12/3/11
    • Irishmedic: I could show periods of the exact opposite where VIX was down during a 100 drop in the RUT, either way, I think it just shows volitility
      12/3/11
    • Irishmedic: Or strength of move. But I am not fully read in the VIX, so I stand to be corrected!
      12/3/11
    • Erick McKitterick: Exactly - the VIX is traditionally inversely correlated to the equity market. VIX up = markets down, VIX down = markets up.
      12/3/11
    • Irishmedic: On Sept 19th both the VIX and the RUT dropped? I am not being an ass here, but it does not appear directly related!
      12/3/11
    • Irishmedic: But I see you use the phrase "traditionally inversely correlated"! And on that I would agreee
      12/3/11
    • Irishmedic: It also seems upon quick inspection to "overreact" to downside momentum, is there a reason to that?
      12/3/11
    • Erick McKitterick: Sept 19th is a Monday where option prices are re-priced from the weekend. Additionally the VIX still closed higher than previous close.
      12/3/11
    • Irishmedic: Can the VIX spike up with "fenzied" buying?
      12/3/11
    • TruffelPig: Next week could also be VERY good.
      12/3/11
    • Erick McKitterick: VIX can spike with crazy buying, but it is a measure of the "Cost" of options and is a measure of price of insurance both long and short.
      12/3/11
    • Irishmedic: But it would look like it is primarily as you said inversely correlated! Again sorry just want to fully understand.
      12/3/11
    • Irishmedic: It would definitely appear to be more of a contrarian indicator though as I overlay it on the index's Another tool in the tool box,thank you
      12/3/11
    • Hypnos7: VIX measures the relative value of an SPY put option compared to an SPY short. If the price of the put rises faster than SPY falls VIX rises
      12/3/11
    • Hypnos7: http://bit.ly/t2Tib6
      12/3/11
    • Irishmedic: Last question I promise, is there certain prices that are used as gauges for turns in the market, like is $45 a top end indicator, etc?
      12/3/11
    • Hypnos7: Technical analysis only works in trending markets. If this market were trending, VIX ETFs would be useless.
      12/3/11
    • Hypnos7: So, I wouldn't try to apply any kind of tech analysis to VIX. You need to successfully predict how macro will turn the market
      12/3/11
    • Irishmedic: OK, so only in volitile markets! Thank you both for humoring me here! never did get the VIX, but I think a bit more reading and I will fully
      12/3/11
    • Irishmedic: understand how it is calculated, thanks for the link, I like the calculations, thats a real help.
      12/3/11
    • Erick McKitterick: Remember the VIX cannot be bought or sold directly only through futures of the options market. Tech analysis of the VIX is worthless!
      12/3/11
    • Erick McKitterick: http://bit.ly/nq8S4P
      12/3/11
    • Irishmedic: But big moves,as you said can be It would suggest a big bet in one direction!TA for me is not a line,it is all about overlays of information
      12/3/11
    • Irishmedic: Again thanks for taking the time to explain this, I really appreciate it! By the way Erick, I have been short the market via IWM puts
      12/3/11
    • Irishmedic: for a while now! So was not argueing your direction just needed to understand your reasoning!
      12/3/11
    • Erick McKitterick: Irish: no worries. I just follow large trades in the options market and many traders are positioning for a move down through options.
      12/3/11
    • Erick McKitterick: XLB, XLI, and XME all saw some very large put volume last friday. Combine that with the VIX climbing into the close we could take a leg down
      12/3/11
    • Hypnos7: Erick: in those sectors. Tech, financials on the up, no?
      12/3/11
    • AlphaVolume: why are we going down next week? Europe is all honky dory thanks to the central banks... sure the fundamentals are terrible but....
      12/3/11
    • SwingTraders: Some easing of credit does not solve the problem. It merely prevents a freeze up.
      12/4/11
    • 1980XLS-2.0: Easing of credit to uncreditworthy, just blows bigger bubbles. Escalator up, elevator down. That's the way to make $$$$
      12/4/11
    • cheme: Read Fred ruffys options Summary for Friday. Crazy volume and strikes bearish. VIX is a measure of gamma.
      12/4/11
    • Hypnos7: cheme: you're saying VIX will go up if SPX calls outperform SPX?
      12/4/11
    • Hypnos7: That's the behavior of gamma, which is positive for both puts and calls.
      12/4/11
    • Hypnos7: Implied volatility is directional -- positive for puts, negative for calls.
      12/4/11
    • Hypnos7: Of course, VIX is not really implied volatility using a theoretical pricing model -- they employ some empirical averaging scheme.
      12/4/11
    • cheme: I meant gamma on puts. Though I think it "should" work both ways and not just measure downside impl vola.
      12/4/11
    • cheme: As volatility should be a measure of peak to trough or vice versa. My two cents.
      12/4/11
    • Hypnos7: cheme: I agree with you -- it's a "fear" gauge rather than a volatility gauge
      12/4/11
    • Hypnos7: People use it as a short then wonder why it's "broken"
      12/4/11
    • Regarded Solutions: green all the way folks....until the whites of christmas!
      12/4/11
    • Erick McKitterick: I'm just pointing out the options market into the end of the week showed a possible decline next week in stocks.
      12/4/11
    • Erick McKitterick: If everyone believed the Europe and the market was "Fixed" then funds would have dumped their hedges and VIX would be below 25. IMO
      12/4/11
    • TruffelPig: Funds are not long enough and that is why I don't invest in funds. The low volume stuff KILLS funds. They have to buy expensive now.
      12/4/11
    • PVizzle: the sky is falllllllllllllllllllling
      12/5/11
    • Erick McKitterick: Sir I never said the sky was falling. I said the VIX had not and still has not compressed as much as it should have into such a big rally!
      12/5/11
    • TruffelPig: VIX doesn't always behave well.
      12/5/11
    • PVizzle: You should just say nothing from now on.
      12/5/11
    • Erick McKitterick: My apologies. I didn't realize stating opinions was bad. We'll see how we end the week shall we. I went synthetic long SDS, TZA, and FAZ.
      12/5/11
    • cheme: Yea Erick, you think you have freedom and speech here?! (BTW, I concur w/your moves)
      12/5/11
    • 1980XLS-2.0: All comments on SA, are subject to attack and bullying, It's the American way, nothing personal, LOL
      12/5/11
    • talbano: pvizz- what u have to remember most people especially ones that post repeats or once & a while again come out and state extremes are trying
      12/5/11
    • talbano: 2 get others to follow.
      12/5/11
    • talbano: Pvizz- the tell for me is this is the only Stocktalk this person has posted, it was extreme and without backing - so he must be very short.
      12/5/11
    • TruffelPig: @Erick: Good luck with your shorts! Worked great thus far, didn't it?
      12/5/11
    • talbano: TP- I think we will have a least on big down day (wed) I am leaning towards. We may sell on the news at the end of week quad witch
      12/5/11
    • Erick McKitterick: I'm new to the SA community and thus my first opinion. I just gave you my trades and yes I'm short. Like I said we'll see at weeks end.
      12/5/11
    • talbano: that is my silly opinion:)
      12/5/11
    • Erick McKitterick: And I fully respect and can appreciate your opinion. What are you long? I am long NLY, AGNC, ZSL, WLT, POT, & T.
      12/5/11
    • Erick McKitterick: However I am still net short a this time through synthetic long's using options on TLT, TZA, FAZ, and SDS
      12/5/11
    • talbano: I am long many positions. WLT is one, RL NBR MDR, MAKO, DELL, ETN too many to list. -- Your new but a contributor and come out w/drama hline
      12/5/11
    • PVizzle: I was thinking I was too harsh but then I saw you were long leveraged etfs. Then I killed a kitten.
      12/5/11
    • talbano: I personally feel bad when people follow that- or try to talk positions. That is why I generally do not list what I have. Ur objective
      12/5/11
    • Erick McKitterick: @talbano what do you use to hedge?
      12/5/11
    • talbano: IMO was too unverve people and get them thinking that we were going to crash. You trade the market you have not one u think we should.
      12/5/11
    • talbano: Yes many have opinions, but to speak to extremes either way without some indication is without merit and IMO should be ignored. Good luck
      12/5/11
    • Erick McKitterick: I'm not speaking to extremes I just follow options and was just trying to state much of the option paper was moving in a negative trend.
      12/5/11
    • 1980XLS-2.0: Doesn't matter. Any opinions on SA can be attacked for any reason, any time, without warning. Welcome to the Jungle Pal!
      12/5/11
    • Erick McKitterick: Good point 1980
      12/5/11
    • TruffelPig: I am long: AAPL NLY WIN NOG KOG SSN LEI TNK TGP ERF BAS IPGP MU EXEL ECYT GERN (blach) DRL (recent) TTMI CF
      12/5/11
    • TruffelPig: Double or nothing picks: LEI (+50% by now) BAS SSN KOG EXEL ECYT
      12/5/11
    • TruffelPig: Other positions: core and trade around
      12/5/11
    • talbano: EM- Then my bad but your head line was "Next week could be nasty watch out" Not pull selling may indicate pullback. whatever
      12/5/11
    • TruffelPig: AAPL, NLY, TNK, TGP: don't touch, just add on weakness
      12/5/11
    • talbano: The VIX tends to sell on Friday and I tend to think put seling Vix is more bullish that is what makes a market
      12/5/11
    • TruffelPig: add DRL to double or nothing - lol, probably nothing
      12/5/11
    • talbano: TP- not adding anything right now - I have a gut feel we fall down a bit - I am more ready to take profits and hold a bit. CF might be add
      12/5/11
    • Erick McKitterick: I really wish I would have went in on the SFSF last friday when I saw the calls go off. Dec 31 calls traded 1K times for .15 each.
      12/5/11
    • TruffelPig: @Talbano: I only added to ECYT and DRL today; DRL will double eventually (in < 6 months; $3 book value!) and ECYT I know personally the CSO
      12/5/11
    • Erick McKitterick: 15K bet now worth almost 850,000 in one day of trading.
      12/5/11
    • TruffelPig: ECYT is a mega good company; may get their drug fast track approved in Europe; stock fell down on supply problems of J&J drug for trials.
      12/5/11
    • Erick McKitterick: @talbano: fair enough in the future I will adjust my headline I appreciate the feedback.
      12/5/11
    • TruffelPig: That supply problem should be fixed eventually and not delay trials. Mega good data in phase II! My top biotech pick.
      12/5/11
    • TruffelPig: I net sold today and went significantly lower on margin.
      12/5/11
    • TruffelPig: I sold before things went ugly ;P.
      12/5/11
    • Erick McKitterick: I like risk reversals on Biotech's gives huge leverage without the margin costs. I like SQNM
      12/5/11
    • talbano: EM - we allhave those kick could've trades. not looking to beat up just some people really buy the headlines
      12/5/11
    • talbano: EM- I usually qualify w/ I see, think...etc i would hate to see someone new make a bad trade because of me . WTF do i know?
      12/5/11
    • talbano: TP- wanted to - was too busy at work..... dam job@!
      12/5/11
    • TruffelPig: @Erick: wow, 15k to 850k in one day
      12/5/11
    • talbano: Have a good night guys - :)
      12/5/11
    • Erick McKitterick: tp- Yes.. shoulda, woulda, coulda.. Hindsight is always 20/20. Did make me sick hearing about the buyout less than 24 hrs after the trade.
      12/5/11
    • Erick McKitterick: had an order in for a small block of 10 contracts for .10 each never got filled. If I would have paid the extra 50 bucks it would be 8.5K
      12/5/11