The root cause for market crazy

I am starting to think the market froth is due to millennial entering into the markets.  I have heard stories that Robin-hood app is disrupting the market, but then I ran across an article that really brought the market distortion into focus.

For the first time - ever - there is more option trading than the underlying stock trading.  That means high risk, high leverage is driving the market direction rather than actual stock purchasing as a primary driver.

That to me means that if at anytime there is market exhaustion, the shift maybe dramatic.  Further these market traders don't have the experience to know that the market makers will on an options expiration on a Friday let the market close, and co-incidentally explosive news hits with markets opening materially lower on Monday.  This enables the option expiration to settle in the market maker's favor.  I have seem dramatic gaps like this back in January 2008, and in the recent market descent in 2020.

My concern is with a market gap down, the many small traders will trigger a panic trade.

To read more on this odd event of option trading exceeding stocks, click here.

GDX call option activity

I had a bid in to buy 20 (2000 shares) of GDX call options for strike of 35 in 2015.
Basically, for $1k, at anytime GDX is worth more than 35.50 in jan 2015, get all profits.
Alternately sell if the option is worth more in the year ahead.


Today, I saw some insane volume with this option.  interpret as you wish.
Over $500K in options in this one level alone exchanged hands.
See below.  Good luck

Best Trade of 2010 so far

For those of you that know me, I have had two anchors in my trading, double and triple short funds, pretty much for losers, and the other short DECKERS (DECK).

On Feb 25th, I bought some Deck calls as a hedge against losses, 10 of them for March 125 strike. As of March 8th, I was up over 1,700% on the remaining 3 I hadn't yet sold.

1,700% in 8 stock trading days, not too shabby.
Here is why I am sharing, I have lost more than I care to write on this blog shorting deck. So this trade is extra painful, that my most profitable trade was AGAINST a primary position. Ohh the irony is too funny not to share.

The trade below will remind me when things are going well in the future, to not get too full of myself. A painful reminder of need to be more open to exact opposite trade is just as valid a play. A luck-shot trade as protection AGAINST my primary position. Laugh at me the next time you see me.

From WebSufinMurfs FinancialBlog2