Friday, October 10, 2008

Sometimes a Trading Mentality Can Trip Me UP

I had been trading the inverse ETFs for a couple of years now.  I made good money buying the double short for the S & P 500 (SDS) and the double short for the Russell 2000 (TWM).  As readers of my emails prior to starting this blog already know, these ETFs will go up twice what ever the pertinent index goes down.  I am not a day trader, far from it, but I do use a few trading tools and one of them is the VIX.  I believe that it was over 35 a few months ago when I sold my double short ETFs.  After selling all of them, I was waiting for a signal to buy and it came within 1 point of my target and I have different targets for the inverse ETFs for the S & P 500, Russell 2000 and the Nasdaq 100 using respectively the VIX, RVX and VXN.  Being a little steadfast in my ways, I refused to buy until I got that 1 point.  Well, maybe I need to be a tad more liberal.  The VIX is now over 50 points higher to the unprecedented level of 74 as I write this.  Some say that is a fear index.  I thought it was fear at 35.  It is something else now, more like extreme panic and unable to breathe anymore.

In any event, whatever, I will be buying in a few minutes and will certainly target some securities that may be subject to forced liquidation near the close, such as a TC or two where individual ownership is dominant.  I am not sure that I have seen in my life the kind of spreads that I see now between investment grade corporate debt and U.S. treasuries. 

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