Enis’s Macro Wrap – August Expiry

by Enis August 17, 2012 7:48 am • Commentary

The SPX closed a few points from a new closing high, and has a new high well in its sights at this point.  Though I have not posted any of my many risk-on / risk-off indicators in the past couple weeks, none of them have confirmed the index price action (whether high beta vs. low beta, cyclicals vs. defensives, new highs, equally-weighted breadth, emerging market currencies or cyclical commodities, etc, etc).  But only price pays.  And as a result, no matter what I thought would happen, this market has proved me wrong.  

I own too many positions that will expire worthless today on August expiry.  If there is one major mistake I have made in the past 4 months, it is concentrating too many of my positions in one expiry and waiting too long to roll them or restructure them.

Part of the reason why I’ve been quiet trading lately is because I think it’s best to take a step back when you have a big drawdown.  I’ve been trying to get back in the winner’s column by looking at more directionless bets (delta neutral) and potential pairs trades based on discrepancies in implied volatility.

As for overnight trading, Asia and Europe broadly followed the U.S. rally higher, with most markets up 0.25-1%.  Treasuries are actually higher a bit this morning, after ending lower each day this week.  The dollar is close to unchanged, along with most commodities.  As for open interest on expiry today, the market has rallied so much that there are no large SPX or SPY levels of open interest nearby.