The Risk Averse Alert

Short squeezes founded on a single technology company whose earnings are reported — using a classic, Goebbels-like, phraseology — "better than expected," but whose revenues are down 15%, year-over-year, simply should not impress any risk averse investor in a time when profound structural imbalances continue threatening the core of the financial system.

I get the gig now, though. You write covered calls against your bloated inventory of overpriced equity, bid futures up, and hope that, in the short squeeze you precipitate buyers of your calls will exercise their right and take some of that dead equity off your hands.

It's not difficult to gauge just how effective this strategy is...




There simply are fewer and fewer takers. The risk to those holding the bag right now, attempting to offload "assets" whose depreciation over the next five years is as close to a sure thing as ever comes in this game, is that some shock event will leave them trapped in positions they might wish they had more aggressively unloaded.

One thing is certain. Many a long equity position is not being hedged. The thinking probably is, "who can afford it?" Yet it might better be, "can my firm really afford not to?"

To many the attitude probably rhymes with, "why bother, bottom is in!" Good luck, Arnold.




Well, well, no widening of participation in price recovery on the Pump and Dump. We'll see what develops over the next couple days. With a ton of overhead resistance at last autumn's gap in COMP there presently is little to fear about any runaway move to the upside.




© The Risk Averse Alert — Advocating a patient, disciplined approach to stock market investing. Overriding objective is limiting financial risk. Minimizing investment capital loss is a priority.

Analysis centers on the stock market's path of least resistance. Long-term, this drives a simple strategy for safely investing a 401(k) for maximum profit. Intermediate-term, investing with stock index tracking-ETFs (both their long and short varieties) is advanced. Short-term, stock index options occasionally offer extraordinary profit opportunities when the stock market is moving along its projected path.

Nothing is set in stone. Nor is the stock market's path of least resistance always known. More often than not, there are no stock index option positions recommended.

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