Rope a dope or head fake?

Well, so much for the downside follow though I predicted. Mr. Market pulled off the old "rope a dope" trick originally invented by Muhammed Ali. Or was this simply a head fake to rinse out the bears that piled in on yesterday's reversal? We'll know soon but what I do know is that the VIX collapsed once again and is close to the 20 level again which signals complacency. It's not so much the absolute level of the VIX that matters (although it does somewhat) it the way the VIX moves. When you see the VIX spike or collapse in a short period of time it usually signals too much fear or complacency respectivitily. But again, let's keep in mind where we are comming from. Last year at this time we saw the VIX explode to off the chart levels and so I'm mindful that it can very well implode the same way to a large extreme before turning around.

There's a saying that goes "better to be lucky than good" and I did get lucky today. This morning I was contemplating bear etfs for a trade as I mentioned last night but I changed my mind and decided to go with an "all or nothing" OTM put play because I figured if I went with bear etfs there's a chance I could get whipsawed if I was wrong about the downside follow through (which obviously happened)today. With and "all or nothing" OTM put play, I'm willing to buy and hold it and lose 100% if my entry sucked but conditions were such that a move in my favor would be immanent. I chose puts on Barrick gold because I noticed gold stocks have been showing relative weakness and I consider Barrick to be one of the weakest of the bunch that has good liquidity in the options market. Very fortunately for me, my put position is in the red only very slightly. But my luck might change tommorow however because Amazon reported blowout numbers sent the market up after hours and gold is up a few bucks as well.

We'll see how this goes. Although I'm willing to lose 100% of my captial on such a trade (because the capital at risk is very small) I will still cut and run if I think I'm beat and I might end up doing that if things seem that way. If it happens, ce la vie. I was overdue for one and the loss should end up being very modest.