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De-Risking

According to the "talking heads" the continued downward pressure on the markets is due to "de-risking" as investors, fund managers go to cash.  On the same note, Options activity has increased as has implied volatility, suggesting the while share values may be moving lower due to selling, the investment community is using options to optimize expectation.

Option values are maintaining high levels of extrinsic value as activity has increased as well as expectation that market values can move.  Most of the activity has been around Put buying, although Call buying is taking place, in many instances at the same strike as the Puts, suggesting neutral or non-directional positioning.

Inflationary pressure is non-existent as per CPI data but consider that cost of good are on the rise as is state and local government fees and taxes.  The Feds are hesitant to begin selling mortgage back securities they purchased as they consider the economic recovery while improving will be slow.  Mortgage delinquencies are on the rise and 10% of mortgage holders have missed at least 1 payment during the first quarter of the year, troubling at best and recovery inhibiting at worst.

Summary: SPY and NASDAQ support benchmarks remain at 110 and 46 respectively and could signal accelerating selling if broken.  Neutral positions for June makes sense, and remaining protective on open positions remains extremely prudent.  The aforementioned support levels are being tested and if they hold a range may very well be the trend through June.

CTM trades:  Will be making adjustments in the next few days on ITM bull puts.

AMZN - ripe for a straddle/strangle using June options, and will consider a wide range Iron Condor using the 105/100 bull put and 140/145 bear call.

BIDU - no new trades on BIDU, I was considering a bear call but have decided to hold off this expiration month.




Disclosure: Neutral on AMZN, long on BIDU