Can’t Hardly Wait

by CC July 6, 2011 12:30 pm • Commentary

Dan hinted a little about this in his earlier post on the Nasdaq Composite‘s tendency to overshoot, and I wanted to follow up on it a little bit. One of the reasons you won’t see a ton of new trade ideas on Risk Reversal on a week like this is the issue of timing in the market. One of the difficulties with running a website like this, or in Dan’s case, doing a weekly show, is that sometimes you feel the market is just, blah. Traders like to see markets overshoot in one direction or another. Those overshot moments tend to be the best times to initiate new positions. When the market was at these levels previously, we piled on a bunch of bearish trade ideas on the site. They came one right after another. The reason was that the markets were making multi-year highs, despite a daily deluge of negative news that was seemingly being ignored by Wall Street.

Right now, the perception is that some of that bad news is out of the way. But all one has to do is look at the headlines from this morning to realize that, no, it really isn’t. If China is raising rates, Europe’s debt worries are spreading to other PIGS, and US growth remains sluggish, (as it always does following a banking crisis) it’s not hard to see a scenario where a short entry point into this market, using bearish option strategies, will present itself again. On the flip side, there will also be times when the opposite is true, being bullish when everyone else thinks the sky is falling. When those moments happen (and they seem to happen with more and more frequency in our new internationally connected bubble economy) you’ll see a ton of trade ideas come flying at you on the site.

That moment may actually be pretty soon. If we start to see negative news like this morning start to pile up again, and the market continues to go up, believe me, you’ll know it by reading this site. Until then, there will be some single name strategies, particularly surrounding events. (Dan will post some thoughts and trade ideas on IBM shortly) But on a week like this, you may see only a few trade ideas, as opposed to moments when Dan and I are really geeked up, where the ideas will come flying. But sometimes, sitting on your hands a little and waiting for the right moment in the market is the best strategy.