Where is the bottom?
We are now officially getting silly, with Germany falling another 3% this morning, now down close to 30% in less than a month (see David Fry’s chart) with the banking sector off 50% and more. To keep that in perspective, the S&P is down less than 20% and even our super-lame Transports (which go down with oil for some reason) are down “just” 24%. So – do we have another 10% (at least) left to fall or is it kind of ridiculous that AAA-rated Germany, with arguably the World’s strongest economy, should drop 30% in 30 days?
It looks like EWG is going to open around $19.50 this morning and you should be able to sell the Sept $19 puts for $1+ or the Jan $17 puts for $1.25+, giving Germany another 16% buffer before you have to give that $1.25 back at net $15.75, which is back at the non-spike lows of the crash.
The VIX spiked up to $42.50 yesterday, that’s higher than it was in April’s sell off and that made an excellent short at the time. You can sell VXX Sept $45 calls for $3.25 and buy the $45/40 bear put spread for $3.40 for net .15 on the $5 spread. If the VIX and VXX do move higher, a 2x roll to the Sept $55s (now $1.60) is about even or the Dec $62 calls are currently $3.10 so it would take a pretty major, sustained move up in volatility for the short puts to really hurt.
Here we are, back at our March lows for the Nikkei and 15% BELOW the March lows for the DAX and 10% below the March lows for the S&P. REALLY? Were we too optimistic in March by 15%? We just had earnings reports and the numbers were generally fine – it’s the outlook that got gloomy, due to all the economic uncertainty. That’s what happens when your Congress is a bunch of buffoons who are willing to sacrifice the Nation and it’s Citizens in order to improve their political posture…
Other than the imaginary problems of debt (it’s been worse) and austerity (a poor solution to address the debt non-issue) and the real problem of the deficit (easily fixable by collecting taxes and cutting military spending) and a slightly slowing economy (caused by the idiotic austerity measures),…
