Where’s the Panic?

Today the market declined (SPX 789; INDU 7552) and implied volatility rose (VIX 49). 

But no panic.  I'm pleased there was no panic – but does that mean complacency still reigns?  I note that futures are a bit higher as I type this (8PM Central Time).

At the opening today, I bought in all my short RUT March call spreads, paying $0.25.  Even bought (to close) some Aprils @ $0.32.

It feels strange to have only put spreads remaining for March expiration when it's more than four weeks in the future.

I'm anxious to see what tomorrow brings.

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2 Responses to Where’s the Panic?

  1. duane slyder 02/18/2009 at 5:24 AM #

    My partners and I discussed the nonpanic yesterday as well. The ES futures went down before the market opened and the SPX followed after 9:30PM EST. Then we just traded in a tight range. I don’t think it means much though and feel a new downward trend is likely at least to test November’s lows.
    Now is when insurance on the ICs is critical, but it is too late to initiate said insurance. It is best to set it up when one is setting up the ICs. I hope we all did. Thanks for posting your insurance ideas on Twitter. It made me plan more than I would have in the past.

  2. Mark Wolfinger 02/18/2009 at 7:59 AM #

    Hi Duane,
    Thanks.
    One point to consider:
    If you buy insurance when you initiate the position, it’s obviously less costly.
    But, if you buy it only when needed, you will buy it far less often.
    It’s difficult to say which is more efficient over the longer-term, but buying it early (before it’s needed) protects you from a calamitous market opening. And that may be best reason of all to own insurance.