Sheep in Line for Fleecing ~ The Risk Averse Alert

Monday, April 12, 2010

Sheep in Line for Fleecing

Among Fast Money traders there is agreement that, cheap risk premiums better afford opportunity to hedge long equity positions. Insurance is at its cheapest in many months...


So, then, why should a market +70% off March '09 bottom perpetually command fewer insurance takers?...


Consider the trend of the 200-day moving average of the CBOE's Put/Call Ratio...

You might say the long trade largely consists of players who can ill-afford to buy even cheap insurance. Or you might say the consensus sees less need.

Either way, objective measure of the mindset and means of those long equity quite adequately reveals sheep in line for a fleecing (should history be a reasonable guide, rather than some technical illusion as most players these days by fate claim to value).

One other thing to think about...

With wealth concentrated in fewer hands that, now are less well-hedged, how much more rapidly might a relentless, self-feeding death spiral ensue?

Fast Money
* * * * *

© 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.

There's an easy way to boost your investment discipline...

Get Real-Time Trade Notification!