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Created on: 1/17/2021 5:01:31 PM Last Update: 1/17/2021 5:29:10 PM Posted by: RTT
1 POST
Why did selling SP500 volatility trades blow up?
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 Many have made their fortunes selling volatility premium and then losing it, that is because they are running down the lit fuse and not understanding that eventually the strategy blows up.
In the chart below periods marked with A, B, C, D are periods of chasing yield which was so great the selling of option premium became vogue. Yes, this strategy worked for a while and 'this time was different' worked, until it didn't.
Selling volatility work great during period gray A until the cycle ended at red A.
Selling volatility work great during period gray B until the cycle ended at red B.
Selling volatility work great during period gray C until the cycle ended at blue C.
Selling volatility work great during period gray D until the cycle ended at blue D.
The point is if you play the selling volatility game, know thy cycle. Cycles matter!. The dominate cycles below gave you plenty of time to go to side lines when risk became apparent.
NOW >>What is interesting is gray E, VIX is above 20, and the red cycle is rising with the blue cycle is pending a swing up which suggest we are in a pending crisis moment (deflation shock).
IDEA: Have cycles studies in you investing plans, mix them with sentiment and market fundamentals.
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Changes in the world is the source of all market moves, to catch and ride the change we believe a combination
of Gann Angles,
Cycles,
Wyckoff and
Ney logic
is the best way to ride the change, after all these methods have been used successfully for 70+ years.
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NOTE: readtheticker.com does allow users to load objects and text on charts, however some annotations are by a free third party image tool named Paint.net
Investing Quote...
.."Being in the market at all times is not the key to profits. Being in the market when there is a clear, unconfused technical signal, and the trader's judgment is not swayed by emotion, is the method for trading success"..
Richard D Wyckoff
.."Until an hour before the Devil fell, God thought him beautiful in Heaven"..
Arthur Miller, “The Crucible”
[Contrarian Investing]
.."The financial markets generally are unpredictable. So that one has to have different scenarios... The idea that you can actually predict what's going to happen contradicts my way of looking at the market."..
George Soros
..“Don’t try to buy at the bottom and sell at the top. It can’t be done except by liars.”..
Bernard Baruch
..“Investing should be like watching paint dry or watching grass grow. If you want excitement…go to Las Vegas.”...
Paul Samuelson
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