With the right strategies in place, now is a great time to take advantage of the option trading market. In the following article Morningstar’s Philip Guziec explains exactly how you can do just that.
With the market hypersensitivity, both hard and soft data are indicating that it’s time for long-term investors to get bullish.U.S. and Europe, Economics and Debt
U.S. equity markets have become hypersensitive to every nuance of the ongoing train wreck in Europe. In fact, they are so sensitive that I can no longer keep track of which little nuanced comment from which player caused which market rally or convulsion.
Meanwhile in the U.S., the soft economic data, like psychological measures of sentiment, continue to weaken while the hard economic data, like job creation, remain stable, leading to a growing dichotomy between economists who are convinced that recession is imminent and those who believe it is extremely unlikely.
As a final bit of uncertainty, by the way, Saudi police opened fire into a crowd of civilians, bringing greater uncertainty to the stability of the Middle East and oil prices, as seen in this article.
I’ve spent recent volatility reports discussing the dynamics of markets and economics, but this week I’ll simply say that there is uncertainty in the air.
I’ll also repeat my statement from two weeks ago: It’s times like this when the real money is made. When the market panics, find companies that will be around in a few years regardless of the outcome of this uncertainty that are trading for low multiples of what they are likely to earn at that time, and get bullish, either by selling expensive downside premium or buying upside tails that are underpriced.
The S&P 500 index cycled through an 7.4% drawdown at its low, rebounding to a 40-basis-point gain for the week, and the VIX ran from 38.84 through a high in the mid-40s and back to close lower at 36.27.
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