Some traders are initially attracted to options because of the leverage they provide. But leverage, as anyone who’s followed the fate of the investment banks knows, is just a means for magnifying outcomes. A leveraged risk-taker will experience more glorious wins and more disastrous losses, like a deranged person who shouts both poetry and obscenities (instead of whispering them quietly to himself, like the rest of us).
We use options not for the leverage, but to articulate views that are otherwise…
First of all, we would be amiss if we didn’t congratulate our readers, and especially our subscribers, on staying cool and collected yesterday. It’s very easy to get swept up in the panic and the buzz and forget that the S&P 500 is only 20% off its all time high from back in October. A 20% decline is standard bear market fare; a few large companies failing is standard bear market fare; and despite what all the financial media are…
The theme for July was most certainly risk management. The broad-based decline this summer has been quite breathtaking to watch, especially as all of the technical and sentiment-based indicators that we follow moved from oversold status to extremely oversold status to something like doubleplusungood. Our attitude throughout late June and early July was that the unending litany of bad news deserved to be taken seriously, and that waiting around for the “inevitable bounce” and “inevitable VIX spike” would be a…
Monday, March 16, 2009
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