Deep Thoughts

Paul Giamatti was in every movie made over the past 15 years. 6 Degrees of Kevin Bacon? Try 6 degrees of Giamatti.

OK, I will.

Paul was in Private Parts with Howard Stern. Paul's dad Bart was MLB commisioner once, and famously banned Pete Rose for life. Pete was once a teamate of Pedro Borbon. Manny Mota "pinch hit" for Pedro Borbon in Airplane.

Or how about a football version, 6 Degrees of Giants punter Jeff Feagles. He was on the '88 Pats with Steve Grogan. Tim Hasselback (who's dad Don played with Grogan way back when) was on the '05 Giants with Feagles. Tim's wife Elizabeth was on Survivor once, and now is on The View. So you can get from a 1977 New England Patriot, let's say Mosi Tatupu or Sam (Bam) Cunningham, to Colby on Survivor, or Rosie O'Donell, in 5 Degrees, lol.

Anyway, just wanted to express my State of the Options thoughts. So please allow myself to converse with.......myself.


Volatility? High? Low? Just Right?

I'm going to go with "just right". To me, volatility is subjective. A VIX of 20 is historically about average. But in a given snapshot of time, maybe not so much. In 2006 for example, the S&P itself had a single digit volatility. And no real sign of ever busting out of that. There was nary a 2% move market forever. The VIX hovered in the low teens, and even nudged below 10. And options were really not a buy. Time is money, and even at those low levels, options were overpriced relative to underlying market volatility. Unless you timed it well, you sat with bad positions for a while before you got a *windfall* pop in February 2007.

Fast forward to now, and 20 VIX is kind of low relative to the daily news flow and actual market fluctuations. We are far from stable. So to me, low to mid-20's feels about right.


You've written 400 times about how you think that 37 tick in the VIX was overanalyzed. Care to elaborate again?

Not really. But I would note that not only was the 37 tick incredibly brief (one minute), the whole VIX *pop* did not last very long. It only exceeded 30 on two days (January 22nd and 23rd) and only went north of 26 on four other days. It's fair to note though that the August pop was similar in days, although the extreme readings were a bit longer lasting.

So why has 2008 been such a grind for options?

Not entirely sure, we have certainly had some volatility. That's usually best case for whatever you are doing. My anecdotal experience is that both long and short gamma plays have been problematic. I have had both on, and both feel like an uphill climb. Not entirely sure why, I am not of the opinion someone is looking at my plots and picking which strike it will hover near.

How about the put/call

I am generally not a fan of put/call numbers (too much noise). But it is worth noting that the ISEE, the "customer opening purchase only measure did hit extreme levels of put buying near the bottom.

Any market opinion? I know you're not big on that sort of thing.

I am more of a volatility opinion-ator, but my *guess* is this is a short-ripping lift within a longer bear move. We're getting back close to the 50 day MA in the SPX. But what difference does that guess really make? Not alot. We're strong right here, right now. In the back of my mind, I don't feel that drop a couple weeks ago was *it*. But time will tell.

What's with all the Cramer c*** you write up?

Well, in one sense I realize it's a total waste of time and energy. On the other hand, he's all over the place, his utterings do matter, he can actually move things.

Plus it's just so insidious when you read it a bit. It's a poupouri of straw men, "bold" calls with qualifiers that make them meaningless (like XYZ will rally off earnings, unless they are bad) lists of names that have already rallied that he hopes you won't notice he's just mentioning now, no mention of those same names after they stop going up (Google anyone?), exhortations to "take some off" that set up a heads you win (sell some more mythical tranches) and tails you win (I told you to take some off) and on and on.

So what value is there? I really think he's a good proxy for that mythical "Joe Public", the guy that gets most enthusiastic late in the rally and most morose late in the selloff. And with Voldemort a veritable short-taunter now, ("And the pushing-on-a-string crowd is now using the string to hang themselves"). it's flashing a big warning.

If there was only some way to measure that excitement and use it as a contrary tell. Hmmmmm.

Super Bowl pick?

Giants 31-28. As Dave Putty once said, gotta support your team. Not sure I'll face paint tomorrow though.

I'll add even if tomorrow goes badly, it's alreadybeen such a fun stretch of fandom, completely out of the blue. And we won't have the '72 Dolphins to kick around any more.