Comments on: Three Day Rallies? http://www.ritholtz.com/blog/2008/11/three-day-rallies/ Macro Perspective on the Capital Markets, Economy, Geopolitics, Technology, and Digital Media Sat, 21 Nov 2009 11:00:47 -0500 http://wordpress.org/?v=2.8.5 hourly 1 By: John Borchers http://www.ritholtz.com/blog/2008/11/three-day-rallies/comment-page-1/#comment-128719 John Borchers Tue, 25 Nov 2008 12:14:39 +0000 http://www.ritholtz.com/blog/?p=10868#comment-128719 I see a green future ahead. Citi options sold yesterday. GLW sold yesterday. Moved those to GRMN. Call options for Dec for most stocks have a bid only about 5% above the current level. Options market does not think another 10% -20% up is possible by Xmas. I think that's a fatal flaw. I also noticed that I could get close to predicting a bottom in the market when call options for a 20% increase in stock price over the next months expiration were selling for pennies 5-10 cents. There is a high probablity of this occuring in a bear market, especially when share prices just came down over the last two weeks by 30-40%. I'm all in and at another 10% rise in the market I'll be selling call options against GRMN and will continue that trend into next year as we start to see recovery ahead. I see a green future ahead. Citi options sold yesterday. GLW sold yesterday. Moved those to GRMN.

Call options for Dec for most stocks have a bid only about 5% above the current level. Options market does not think another 10% -20% up is possible by Xmas. I think that’s a fatal flaw.

I also noticed that I could get close to predicting a bottom in the market when call options for a 20% increase in stock price over the next months expiration were selling for pennies 5-10 cents. There is a high probablity of this occuring in a bear market, especially when share prices just came down over the last two weeks by 30-40%.

I’m all in and at another 10% rise in the market I’ll be selling call options against GRMN and will continue that trend into next year as we start to see recovery ahead.

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