That Was Fast!

Didn't have to wait long to see some direction in this market. I used Monday to set up some short term option plays before expiration. Decided to go VXX calls/SPY puts/SLV puts up against TLT puts. My rationale here was if the market decided to pump higher on higher inflation expectations off Japan that the long bond would take a hit. On top of that, Japan is going to have to liquidate some of its UST holdings to start rebuilding once things cool off. Figured it was worth taking a shot at yields rising. They were cheap and they are looking to be basically worthless on the open today.

Here's the big problem, as I see it. Japan is imploding. First inclination is, "Yeah, but it won't affect us here. If anything. it'll see increased buying of US goods.". That seems fair enough on the surface. However, what if derivatives get triggered from this event? They would be massive. The yen carry trade has been a huge favorite for years. This would be Lehman on steroids!

This happened last week and it took until basically Tuesday for the market to react. Obviously, the "market" still doesn't understand the liability that is out there right now. Herd mentality may(or may not!) start to take over and everyone will be FINALLY looking for an exit from this two year bull market. I read non-stop BTFD articles all day Monday.

So, for this week, I have TLT 91 puts, VXX 32 calls, SPY 130 puts(ex-dividend will be Friday), and SLV 34 puts. If the market opens like it is looking right now, there are going to be a lot of busy margin departments and a lot of busy investors trying to raise cash by selling their winners fast. Unfortunately, this means selling pressure on gold/silver. I avoided GLD puts since gold is a tried-and-true safety play. SLV is not a definitive safety play and should see some short-term pressure. Maybe not, though? The VXX/SPY options should more than make up for any losses against the other two.

Never count the PPT out, though. Tuesday trading could be one of the most memorable trading days in a long time(at least since May's flash crash). It is truly tragic what is happening over there.