Investors are bracing for a massive stock-market selloff

[bostonangler]

If options traders are correct, stocks are in for a wild ride in February.

Demand for one-month call options tied to the CBOE Volatility Index, a popular gauge of stock-market volatility, has spiked in the past week, a sign that some are bracing for a sharp downturn following the inauguration of President-elect Donald Trump.

In that time, investors have purchased 250,000 VIX call options with a strike price at 21, and another 100,000 with the strike at 22, according to Brian Bier, head of sales and trading at Macro Risk Advisors, an options brokerage. The options cost roughly 49 cents per contract, Bier said.

By comparison, the CBOE Volatility Index VIX, -2.69%  was at 11.16 in midday trading on Friday as the Dow Jones Industrial Average DJIA, -0.03%  and the S&P 500 SPX, +0.18% were on track to record modest daily gains.

It would take a massive selloff to make these options profitable, Bier said.

Call options represent bets that the level or price of a given asset or index will rise during a given time—in this case, the period between Friday and Feb. 15, when these options expire.

Investors frequently use VIX futures and options as a hedge against volatility. That way, if stocks tank, they can offset some of those losses with the profits from their options trades.

“Even in the current low volatility environment, we’ve seen a lot of people still looking at the VIX as a hedge,” Bier said.

Since the beginning of the year, stock-market volatility has been relatively subdued despite increasing uncertainty surrounding the future direction of fiscal and monetary policy in the U.S. The Daily Shot, a popular market newsletter, illustrates this divergence in the chart below.

The Daily Shot

 

Aside from the beginning of Trump’s first 100 days in office, a period where investors expect Trump to begin implementing his plans for infrastructure spending, trade and deregulation, there are no clear market-moving catalysts, Bier said.

Another reason for the increase in demand for one-month VIX options could be that they’re cheap relative to three-month, six-month and nine-month options, Bier said.

 

“Investors are getting advantageous prices on hedging in the short end of the curve,” Bier said.

Since touching a five-month high on Nov. 4, volatility has trended lower as U.S. stocks embarked on a torrid rally that took the Dow to within a hair’s breadth of the 20,000 milestone last week. But stocks have struggled to build on their gains this week, and some Wall Street analysts are saying that the inauguration could mark a near-term top.

Trump will take the oath of office on Jan. 20.

 

 

http://dinarvets.com/forums/index.php?/forum/18-wall-street/&do=add

[MyLadiesDaddy]

I will make you a bet that by the end of Feb 2017 you will see the market soar over 20,000 

The bet 100,000 dinar. 

So put your wealth were you mouth is, or are you just trying to create fear? 

Edited January 16, 2017 by ladyGrace'sDaddy

[bostonangler]

15 hours ago, ladyGrace'sDaddy said:

I will make you a bet that by the end of Feb 2017 you will see the market soar over 20,000 

The bet 100,000 dinar. 

So put your wealth were you mouth is, or are you just trying to create fear? 

First, I love your optimism. Second, I do not ever gamble. Third, this is an investment article. No fear mongering. I have stated in other investment threads, that I have booked my profits of 20 and 30% from the last 4 years including the big bump since November. But in the past I have been greedy with these types of gains, hoping for 40%, 50% or more and ended up late on selling and losing much of my profits. I have learned not to be greedy.

So take it as you see fit. But if you have made large gains in your 401K, IRA or whatever, take some profits and look for the next buying opportunity. JMHO

 

B/A

[MyLadiesDaddy]

If you're in the Stock Market, YOU GAMBLE! 

Face Reality

 

[bostonangler]

19 minutes ago, ladyGrace'sDaddy said:

If you're in the Stock Market, YOU GAMBLE! 

Face Reality

 

Gambling is purely luck... Investing is an educated guess. Even buying precious metals is no guarantee. That's why you do DD.

B/A

Edited January 17, 2017 by bostonangler

[MyLadiesDaddy]

And herein lies the Crux of the policy called liberalism. Just because you know how to use that language to change the meaning of words to suit what you think it should be doesn't actually change the meanings of words. Gambling is gambling whether it's an educated guess on how many cards are left in the deck for you to get 21 or whether it's an educated guess on which companies to invest into in the stock market, a guess is a guess at that is gambling.

[md11fr8dawg]

Excellent point LGD, most people lose money in the market due to their educated guesses being wrong or as BA says, get greedy thinking they can squeeze a few more bucks out of a stock they already rewarded them with better than average gains. Better odds to find a single deck Blackjack game and count cards and follow the strategy , than to invest in stocks.

[bostonangler]

41 minutes ago, ladyGrace'sDaddy said:

And herein lies the Crux of the policy called liberalism. Just because you know how to use that language to change the meaning of words to suit what you think it should be doesn't actually change the meanings of words. Gambling is gambling whether it's an educated guess on how many cards are left in the deck for you to get 21 or whether it's an educated guess on which companies to invest into in the stock market, a guess is a guess at that is gambling.

Due Diligence or DD is the difference. Reviewing the books, sales, production costs, etc. is information/education. Studying companies, consumer trends, technology, can all help in making wise investments. Going to Vegas, of betting on sports is always subjected to luck. Think about your industry. You have an inside track on trucking. Are fuel costs going up or down? Are manufacturers producing and thus shipping more? Is our government going to privatize our interstates and if so, will there be tolls to effect profits? You would know if investing in the trucking industry right would be wise or unwise. It is information like that which can turn a profit.  

If you think investing is liberal, you need to think again.

 

B/A

[Jim1cor13]

Apparently investing in markets is gambling, but investing in foreign currency is not?

It is, it is part of doing business...building a business is a gamble, it either produces profit

or it does not. Many folks have gambled their life savings in order to create a better life,

some went on to create huge businesses that help others create a decent life.

This is reality...and a daily choice for those of us who run businesses who learn to take

what is called calculated risks. Nothing wrong or "liberal" with taking risks. It is still a form

of gambling, no matter how it is spun.

[Jim1cor13]

On Tuesday, January 17, 2017 at 9:31 AM, ladyGrace'sDaddy said:

If you're in the Stock Market, YOU GAMBLE! 

Face Reality

 

If you invested in foreign currency, you GAMBLED. Face reality.

[MyLadiesDaddy]

35 minutes ago, Jim1cor13 said:

If you invested in foreign currency, you GAMBLED. Face reality.

What's wrong with you?  I never said dinar wasn't gambling. So why is it a man who seems so divested in love as you are find it rather difficult to speak to me with that emotion?

[Jim1cor13]

23 minutes ago, ladyGrace'sDaddy said:

What's wrong with you?  I never said dinar wasn't gambling. So why is it a man who seems so divested in love as you are find it rather difficult to speak to me with that emotion?

My apologies Scott if I offended you. I was simply trying to make the point that we all gamble, speculate, etc., in our

daily lives, whether it is running a business or if it is buying a lottery ticket or investing in stocks or commodities or foreign currency. Those actions

are conducted in order to realize a return on our invested money. It has nothing at all to do with one being "liberal or conservative".

Not everything can be twisted into that mindset and trying to accuse someone of being a "liberal" because they invest in the stock

market made no sense. Some of my most "conservative" friends are heavily invested in many things, and some are also heavily

in debt speculating they will make a profit from those investments, whatever they may be. Call it what you will, gambling or speculation,

I like to call it risk management when it comes to investing or business building, etc. Some win, some lose, but we try and make good decisions

the best we can so we can profit from our speculations.

 

 

[MyLadiesDaddy]

25 minutes ago, Jim1cor13 said:

My apologies Scott if I offended you. I was simply trying to make the point that we all gamble, speculate, etc., in our

daily lives, whether it is running a business or if it is buying a lottery ticket or investing in stocks or commodities or foreign currency. Those actions

are conducted in order to realize a return on our invested money. It has nothing at all to do with one being "liberal or conservative".

Not everything can be twisted into that mindset and trying to accuse someone of being a "liberal" because they invest in the stock

market made no sense. Some of my most "conservative" friends are heavily invested in many things, and some are also heavily

in debt speculating they will make a profit from those investments, whatever they may be. Call it what you will, gambling or speculation,

I like to call it risk management when it comes to investing or business building, etc. Some win, some lose, but we try and make good decisions

the best we can so we can profit from our speculations.

 

 

I  had to go back and reread the entire stretch to find out what was wrong here. I clearly see that we both have a misunderstanding of meanings. I wasn't equating gambling or stock market or Investments of any kind with liberalism, I was using B/As  twisting of words to justify his investment in the stock market as something other than gambling as similar to how liberals twist words to justify their worldview. Please forgive me for not understanding where you were coming from as I had not read the post above where you stated that gambling and Investments doesn't mean your liberal. Sorry but I missed that post. But to be more exact the post that I have just quoted by you I concur with 100%.

[bostonangler]

You want to bet on it? LOL I'm joking!!!

 

B/A