right shoulder still in play on IWM. VIX appears to be forming a higher low too at the mid point of the bolinger bands that seems to be acting as support. VIX had broken out of an inverse H & S on 1-28 but back below the breakout now on the backtest.
This is another reminder not to buy options that expire a long time from purchase date.
A co-worker bought SPY put options in April 2009 that expired in May 2010. He thought the market would have a double bottom. He unfortunately lost $50K +.
In 1995, I found that options would decay in value faster than the stock or index would increase in value.
On December 27th (four weeks ago), I bought January 2012 IWM $80 put options.
IWM was trading at $79 when I bought the options, and IWM closed today at $79.35.
I paid $10.25 for the options, and the current bid for them is $8.80 (13% less than I paid for them).
Are these options a rip-off, or what?
I agree. I shorted 20k IWM's at $79.44 on Thursday. What a call! nearly everything in this index is over-valued by 20%. P/E is a 27. Its going to a 20 by the time this correction is done. Tom Demark says the S&P will drop by 11%...that will take this high beta over priced piece of crap index down at least 20%. could be a flash crash on Monday. I cant wait until reports on USA and European bank exposure to Egypt, Tunisia, etc start to come out. can you say losses
technically, it just came out of a massive reversed multi year h@s pattern. should explode to upside. plus 80%(market almanac) time upside of 40+ percent year after an index reaches its former high(83). so you might be right over the next two weeks, but your really running counter to both intermediate technical analysis and also historical data. ps. the following year(year 2) is also positive for indexes. again this is predicated on reaching former highs. good luck.
still 1.5% off its 52 week high and carving out a RS. I'm thinking when the S&P 500 has a 10% correction, IWM will see 20-25% or 59-64 range. Then I'll re-evaluate whether to be long or short. The IBD rating on IWM is D - with a RS of just 64, so it is actually being dumped even though near its 52 week highs.