Okay, you can’t really call it a lull when you get a 192-point drop two days after Christmas. But anyway, we’re taking it easy on the blogging through the holidays, though we did publish a new trade today for our members.

Some items of note:

• Be a little careful on Monday, it’s the end of the year and you never know what those crazy pension and mutual fund managers are likely to do.
• Listening to Tom Sosnoff of thinkorswim the other day - his tentative volatility forecast for 2008 is that the VIX stays in a range of about 17.5 - 27.  Seems pretty reasonable.  We’re definitely seeing a change in the VIX trend, and fundamental factors suggest plenty of continued worry to go around.
• Speaking of the VIX, you should already know by now that trading VIX options requires a bit more care than usual.  And you should know that trading VIX calendars is never, never a good idea.  Adam posts an analogy that makes the reason why crystal clear.
• In other news, that whole thing about how the tryptophan in turkey makes you sleepy is a myth.

We’ll be posting our annual review hopefully this weekend. The numbers (as you can see) were quite good.  Here’s to a volatile 2008!

• The Sad State of Western Civilization
  no comment necessary
• Where to Put Your Cash in 2008
• Zero Beta: More On Counterparty Risk
• VIX and More: The Incredible Shrinking VIX

• Bloomberg.com: Special Report
  “Interesting presentation,” Bass says the firm’s chief risk officer said into his ear, his arm draped across Bass’s shoulders. “God, I hope you’re wrong.”
• ‘Deal With Devil’ Funded Carrera Crash Before Bust - Bloomberg
  One week in 2002, Daniel Sadek was $6,000 short of covering the payroll for his new subprime mortgage company, Quick Loan Funding Corp. So he flew to Las Vegas and put a $5,000 chip on the blackjack table.
  (tags: mortgage subprime)
• FT Alphaville » Blog Archive » Short View: Equity volatility, back at a cinema near you
  But in the longer term, there are signs that volatility is “entering a new regime”, as Deutsche Bank says.
  (tags: volatility hedge)
• Commercial Real Estate Crisis - Portfolio.com
  Now that the subprime shakeout is nearly over, another real estate mess looms, this time in commercial property.

Tom Preston makes an interesting observation:

After a month of so-so rate cuts, subprime losses, and various and sundry news items that gave the market some mighty big moves up and down, the SPX is right where it was when we put on the experimental Dec 1335/1340/1560/1565 iron condor. As I write this, it’s not just close. It’s 1450, which is what it was on the Monday morning after last expiration. Is that market neutral enough for you? [link]

This is the whole point, you know? I mean, it’s an extreme example, but there are so many months that are like this, where after everyone is done reporting earnings and cutting rates and marking down their books, the dust settles and things are basically back where they were a month ago.  If you’re trying to game every directional move, you can easily get killed.  And if you sit on your hands and collect some theta premium, you end up looking like a genius.

Maybe we should call the site Genius Options.  Kidding.

(Hey, in other news, did you hear that the Lakota seceded from the United States?  About time.  Can’t find any mainstream news outlets picking up this story yet (except for FOX News, which never counts for anything), so maybe this is a PR event rather than a real event.)

This is a historical occasion: namely, it is the first time we’ve posted a separate followup to one of our bonus trades. Back on November 11, 2007, we posted the following position, which we dubbed the “Fearful Santa Iron Condor“:

+1 Dec SPY 133 put

-1 Dec SPY 135 put

-1 Dec SPY 150 call

+1 Dec SPY 152 call

for an $0.86 credit.

If you got in on that trade and if you were tough enough to ride out the ensuing bounciness in the markets, you’re now sitting on a winning position that will expire worthless tomorrow. Or you could exit it right now for about $0.04.

Either way, you’re looking at a gain of about 70% on capital risked.

If you want to say thanks to us for the trade, or are just feeling thankful in general, Doctors Without Borders / Médecins Sans Frontières can always use the help.