Shorting the S&P from 1460

Over the first half of the year I definitely think we will see a big decline. So much shit going on in the US, UK and Europe right now and it's basically being ignored. Can you stay solvent long enough for markets to wake up is the real question! Shorting the S&P from high 1400s should be a good call (or put - cwutididthar?) though.

i like buying ten year calls....s and p is due for a correction, but it may not come. 10 yr is the play in my mind because rates have gone to close to 2%, and even if the stock market doesnt decline, people may lock to the treasury in anticipation

I have call options on the VXX(volatility etn). if you look at the vxx, its at a 52 week low, at a time period that I would personally consider unstable especially with Congress' inability to tackle the fiscal cliff problem until the very last minute. I feel like it is a pretty safe trade and has a very good risk/reward

Its such a binary call, is there going to be some sort of 3 sigma event or not. The problem is that the theme of 2012 was vol getting marked in your face holding it expecting there is going to be some sort of event. But really despite there being newsflow, vol didnt really perform on the way down. I mean a year ago unicredit implied vol was at like 100%, so that gives you an idea of the frame of mind across Europe. The thing is now vol is getting to levels that historically compared to the past year screens extremely low, but do you compare the implieds right now vs 2006 realized levels? Because that is potentially your downside. I personally think that with vols so much lower than last year, news has much more potentail to move stocks vs 6 months ago.

It's dumb to buy a call on VXX. That thing has negative carry of what, 10% a month?? Buy it for a week if you need to, not more.

I expect an all time high on the S&P 500 this year.

Shorting the s&p at that level might be a good short term tactical trade, but for H1 '13 a trade that I'm looking to initiate is long es, short nikkei.

The combination of the debt ceiling, sequester, continuing resolution (lack of 2013 budget) debates hitting in February make me cautious. The fight will likely end up being bloody, as the various participants have already staked out their positions, including Speaker Boehner telling his caucus that he is done negotiating 1:1 with the White House and Obama saying that he would demand that any new spending cuts be coupled with additional tax hikes. There is a good reason why this can was ultimately kicked a little bit more down the road, it will be a nightmare to figure out.

However, risk has been trading bullishly, and there is clearly a lot of money that wants to be put to work. Very high beta / cyclical stocks in particular have been trading vigorously. I'll also note that Europe and Asia will both likely be tailwinds to risk in H1'13. In the very short term I think the SPX will continue to move higher and that may create a good setup to put on a more defensive positioning towards the US markets in the coming weeks.

I don't usually comment on these types of threads as I have positions in a lot of these or related instruments, but I'll make a few general observations from my perspective (FX but I'm fairly certain from my cursory view of other markets they exhibit similar features).

First off, Implied Vol is low relative to where it has been post Financial Crisis, very true. On a longer time horizon, however, it's really nothing to write home about.

The first logical question is: Why is it so low? This can largely be explained by two interrelated facts. 1. Nearly every CB in the world is easing, and basically has emphasised that they will do whatever it takes to keep stability in the financial markets. This is not to say that an event like the FC couldn't happen again, or that there won't be long term implications when the market has to been weened off of the abundance of funding liquidity. But in the short term, CBs have made it clear they will be there, which has calmed the markets.

2. Shit just ain't moving. Realised vol is low. Influenced by CB interventions on all sides, participation (volumes) are near all-time lows in most assets, and things just don't whip around like they used to do.

If realised vol decreases (which it has done over the past year rather significantly), surely the gamma part of the vol curve most sell off in sympathy. Who in their right mind would want to pay an even bigger premium over realised vol? So what do most people do? Generally they have gone further out the curve with the logic "Well maybe not much will happen in 1m, but maybe 6m or 1y things will move again." Precisely what has happened, which is why most curves are steep as hell. What does this mean exactly? I'll make some fictitious numbers for risk-correlated asset X. Realised Vol: 6 1m Implied: 7 6m Implied: 8.5 1y Implied: 9.25

So basically, you can go further out the curve and "buy some time" for a game changing event, but you're paying a serious vol premium. If nothing changes (which is not out of the question), you might actually be long gamma at 9.25 and its realising 6. Sounds like you're fked. Yeah, you're not paying much theta initially, but how long are you, and perhaps more importantly how long is the market willing to wait around hoping for something to happen before the back end (which still has a good amount of risk premium in it) sells off because its rotting like a 6 month old egg.

Now I don't know if that will happen, but just looking at the evolution of the curves over the past few years, I think its a very real possibility that most people dismiss.

Furthermore, the market has become less and less reactive to news. Market participants have been fatigued from buying vol thinking this is the low, only to see it offered in their faces. So if you are hoping to buy vol for the MTM, it's also tough because the vol of vol is much lower. A lot of complacency out there, that's for sure. But for the time being, being patient and waiting for an opportunity seems much more intelligent than buying all vol because optically it looks low, and resultantly bleeding out of relevancy due to a thousand small cuts.

why try and short against the trend...S&P and DOW might look toppy, but why try to call the reversal. Expensive habit.

Its starting to look like there could be a mass capital flight from bonds to equities. Fund managers are hunting yield US/UK/Ger sovereigns yielding negative real rates, and corporate munis have gone below 6%...there is a lot of money on the sidelines and it is creeping into the markets with every not so bad data release, debt ceiling deal etc., the drip could soon become a flood. No one wants to be caught on the wrong side of a mass capital reallocation, and that is why I wouldn't be net short in this market.

People keep putting forward the argument that US/ Eu/ UK are screwed. But look at it this way...the US is putting out semi-decent data, QE4ever rumbles on...forever, and the EU have come to the realisation that they need to take a US-centric approach and agree to bailouts whether they like it or not. Its not a healthy economic scenario, but its driving the rally. Add to the fact from a historic perspective S&P looks cheap. Capital needs to be put to work, not many people want to die the slow death that bonds provide.