Securities Research Services

Monday, August 20, 2007

A Bumpy Ride Ahead

We should probably rant about how institutional money and the Fed are in bed together and how the Fed, lender of last resort, is actually babysitter to options sellers, willing to bail them out the first sign they are ready to lose a load of money based on foolish hubris. But what good would that do?

The game is what it is. It is not played fair, nor are all players on an even playing field. Sometimes retail traders get the short end of the stick.

We believe that retail traders have an opportunity to get back at the institutional players here though as this volatility lends to those of us who can switch positions quickly. We can quickly jump back on the long side now that the Fed has shown itself more willing to bail out their friends out of a bad situation. Then, when the market starts to fall under its own weight again, and it will (probably sooner than later) we can jump back on the short side and ride the next wave back down.

Considering the distribution taking place, we are looking for the market to stay bumpy, just like it did in 2000. This gives those of us with flexibility to get in and get out quickly a chance to make some nice profits in coming months.

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