Will the market get the lead out?
Usually on Fridays when the closing sentiment feels awful (or great) I like to take a simple snapshot of the week’s activity to get a good sense of how the market did. By the close I felt things were starting to get unhinged for no real reason. Granted, the US election and the Greek election (austerity budget or not) is setting us up for another binomial event in what has become the monthly roll of the dice on big political votes. Those events have set up some nice opportunities as the volatility subsides after the news.
I set up the AlphaVision™ for Bloomberg landscape below and I am looking at 1 Week Return for all optionable stocks listed on the CBOE. Note a good chunk of the market did ok last week. Things felt so bad because the $700 Ipad Mini rally did not materialize as fast as everyone wanted. Overall the US economic news was very positive but the specter of the unknown seeped into the cracks. Look at two of better percentage gainers, GM and F last week.
Normally I would look at the car companies and say no way, but things are getting better there. Actually as I picked through the landscape most of the stocks that have been decimated by the 2008 Financial Crisis did pretty well last week. The type of trade I like for a low volatility stock like a GM or F is the risk reversal (long out of the money call and short out of the money put) for a credit. The difference is start on the short put side first, since I feel the volatility will come in and leg into the long call side if the market catches a bid. No sense rushing into things until the election, and if the rally ensues, the short put should work fine. Ohio might end up making the big difference in the election but these two companies should keep their trajectories moving forward no matter who wins.
AlphaVision™ – data from Bloomberg
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