≈ No stop signs. No speed limit. ≈
The market, this somehow concrete and, at the same time, abstract entity, wants to reach the all-time highs. Season ticket on a one-way ride.
As the candles steadily approach the ultimate level, I can’t help but notice how deep the VIX futures go, concomitantly with the decreasing volume heading into a long weekend, when we are going to stuff our bellies with chocolate, just to feel guilty on Monday, first thing in the morning. Sugar and cocoa hangover.
Market approaching the gates of Hell with a shallow volume and the VIX lying into the abyss reminds me of one thing and one thing only: risk.
Volatility is not a synonym for risk and vice-versa.
The problem with low volatility is that it hides the risk under the false impression that everything is OK. The risk is still there, it’s just not perceived and that makes fear and uncertainty hit low levels. Just think of those horror movies. It’s exactly when everything is calm and silent that the psycho jumps into the scene making us choke with the popcorn. The psycho was already there, hidden somewhere, we just couldn’t see him.
Absence of evidence is not evidence of absence. Compare and contrast 2017 with 2018 and you will see how bad things can go.
Our suggestion is pretty simple: think about buying insurance. They are cheap now. If you are a cash flow trader, use some of the funds raised to buy OTM puts. If you are a directional swing trader, give up some of your profits to invest in airbags in case the candles crash.
Going down, party time
Our friends are gonna be there too
We’re on the highway to hell
Chart of the Day
The Promise Land
Hey mama, look at me
I’m on my way to the promised land.
Video of the day
AC/DC – Highway to Hell (from Live at River Plate)
Going down, party time
My friends are gonna be there too
Today’s line up
Tales of a Technician
About Portfolio Protection
I received an insightful question regarding portfolio protection. I’m posting it here in its entirety along with my response to see if we can all learn about the perks of buying puts to safeguard your account.
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