OK, we have an answer to the Mystery of The Exploding ISEE for yesterday. The XLE July 85-86 call spread traded 400,000 times (Goldman apparently sold it, if you're scoring at home). The ISEE only adds up "public opening buy" transactions, so some number under 400,000 went into the calculation off that single trade. Which is an awful lot.
Again, I did not have access to my trading screens, and Yahoo unimpressively did not pick up either series in their Most Actives list. Or at least hadn't picked it up when I looked.
A couple things worth noting here.
This is exactly why Moving Average analysis of put/call readings makes more sense than snapshot numbers. Talk about your noise there. This is a trade that had extremely little in the way of import as far as directional bets go, and yet it dominated an entire day's worth of readings.
I am not a big fan of put/call readings anyway, although I do prefer the ISEE methodology to the standard put/call.
As to RIMM, guess that old Jimmy Ray 1 to 4 special did not exactly see the best case. Although I imagine we will get regaled of tales of all the stock someone hypothetically sold vs. the call purchase. But we're not here to talk about the past....
OK seriously, even if you sold stock delta neutral vs. the Sep. 130 calls he recommended, this is a disastrous play. Volatility is going to get slammed, and the stock is now near the strike we "own". Worst possible outcome.
We can of course learn lessons from this. Tread VERY carefully with directional earnings bets. If you net-buy options, you completely have the wind in our face as you know your option volatility will get crushed.
11 comments:
Going long in the face of declining vols is like being the visiting team in Wrigley Field -- you ARE quite likely going to lose, and there's not much you can do about it.
unless you're the mighty Orioles!
I caught the end of Jimmy's little program last night...he had quoted himself from last week, where he said apparently "the game plan is, if RIMM comes out of their quarter down, you use that as a big buying opportunity." So he didn't allude to previously recommending a buy. That's another thing with him...he gives you different opinions through different outlets...like with the RM-awesomely-ambiguous-Sep calls+short stock combo thing. If one works, he'll point to that particular recommendation. But yeah, those Sep 130's probably won't be sitting pretty...unless Cramerica comes in a buys like crazy!
it really is insidious. What a joke.
This just in..
The economy in Cramerica is suffering. People are losing money. There are no jobs. Inflation is ramping. And we have pundits running loose with no medication.
Say, this place sounds like a land i know of.
We're all going to buy iPhones on July 11th, 2008. I think that's RIMM's real problem going forward.
I'm still wondering where the inflation is outside of energy, though.
um, education? Health insurance? Corn? Iced Venti Skim Latte's?
Actually, scratch that last one, they were not much cheaper when gas was a $1.50/gallon. Guess those raw materials in it went up all the way from 5 cents to 6 cents, lol.
Jason: I'm picturing Depression-era soup lines in Cramerica, lol.
lol ya know its funny..i just heard sue herrera say...
"As we close out the lunch hour things are looking a little better, we are "off" the lows and ONLY down 242".
um what lol, this gibberish is so ridiculous
Aren't all of those in the CPI market basket of goods?
Although, I think the Latte was left out of the market basket of goods in favor of the Caramel Macchiato. Maybe that's where the CPI went wrong.
true, the raw material in the macchiato's went up from 5 cents to 7 cents, lol.
I do so love when CNBC reassures me "it could have been worse".
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