2009 Outlook

I have no predictions for the new year.  That's not because I lack the courage to publicly predict stock market events, but because I have a below average track record.  And if I'm unwilling to follow my predictions, why should anyone else?

I anticipate that the market cannot rally under the weight of so much pending bad news, but the markets rarely perform as expected.  It's also possible that all the bad news has already been factored into the prices of most stocks.

What I do know for certain is that I plan to continue to buy iron condors – at least for awhile.  It's a market neutral option strategy that provides outstanding returns when the markets are non-volatile, but which can incur huge losses when the market is volatile as it was last year.  Stock market volatility (as measured by the CBOE volatility Index, or VIX) has been steadily decreasing during recent weeks.  Than may be an omen of a further reduction in volatility  (good for me, as an iron condor buyer; not so good for day traders who love big market moves).

Being willing to accept profits that are a bit less than 'outstanding' and feeling it's mandatory for any losses to be less than 'huge,' I continue to stress the importance of careful risk management when trading options, and encourage you to 'be careful out there.'  

Esterhaus


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