Positioning

Looking at blogs posted recently, one might get the impression I am all doom and gloom. Well, it is undoubtedly a very serious situation, but it is also a very volatile environment, creating more drastic opportunities and risks than usual.
On the positive side (for a change), I suggest the ones who loves the options product (I do), to use it selectively in this environment to be able to take advantage of these swift, and often unexpected moves. For anyone having read Talebs "Black Swan", the last three months has been a very vivid illustration. Now, my point, as assets gets very depressed in the equity market and elsewhere is the following; As we have seen, big rallies develop in this environment as cash rich market participants are lured in and shortpositions are squeezed. I am now looking for low delta calls at the front end of the curve, (expiring in December and January) in equities, commodities and currencies to be able to take advantage of these low delta, low premium options in order to capitalise on these kind of events. We are reaching the very thin liqudity part of the season and this year it will be worse than usual. My fundamental outlook is bearish though, there is still some way to go before this is over. Therefore, use rallies to get bearish positions on. And, I cant reiterate this enough, use options whenever possible unless volatilities/premiums are prohibitive. This environment spells capital preservation, high cost of capital and making sure you have the freedom to maneuvre and act in an illiquid and highly volatile environment. Cash is king=use options.