Remember "The Big Short" where Michael Burry is frustrated over the manipulation of his mortgage shorts?

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He calls Goldman and can't get a price to reflect an accurate pricing of items which SHOULD be priced 200-300 % higher. FINALLY, Michael Burry walks in to Goldman, and the clerk tells him more or less "we are now prepared to pay you market value on your huge short instruments?" Burry responded, "you mean you have now balanced your portflolio so that you are no longer long, and can afford to let them sell at market?" (loose translation). The guy returns : "I am not sure how to respond to that." That scene, plus the insight into daytrading “supply and demand” zones (google Sam Seiden) provides a great insight into the way the money flows in the huge banks, and a good insight into market behavior, and the way things are going right now. More than that, it gives some hints to understanding how to strategically approach this present situation.

Big commercial institutions don’t just “buy” or just “sell.” They can’t. They are so big, and control such vast amounts of money, that dumping huge orders into the market skew, distort and “bully” the markets, plus they get poorer fills. It is their job and strategy to subtly push the market around to “position it” to fill these large orders. Seiden introduced me to this. He observed, as a clerk for a large clearing firm, that before market open he had HUGE piles of order slips, which he separated into “buy” and sell” on right and left, and then organized them into ascending prices. His insight was that these orders sit there if price imbalances cause the market to “move away,” AND THAT IT IS IN THE INTEREST OF THE PLAYERS TO MOVE THE MARKETS BACK TO WHERE THESE ORDERS CAN BE FILLED. There is a whole school of retail trading that has grown up around this, with chart reading records of buy and sells, along with “level 2” orders (a more advanced buy/sell display), seeking to find the “levels” of unfilled supply or demand orders. This helps the retail trader to discern where the “big money” is and trade these levels.

The interesting point is that when you marry this with Burry’s scene, you realize that banks are “invested” in large positions, and they can’t just “get out” of them. They have to trade, then wait for the dust to clear, even entering orders against their own trading goals, to prop up/depress the market, for them to get in or out at better prices.
I believe we are in the “mother of all panics” and that all the commercial banks would desperately like to get out of equities, but can’t. It is in their best interest to talk up the nonsense that the interest rate rises have killed inflation (!!!!!!), the correction is over, the time to buy is now, and we are entering a new bull market. This is strictly window dressing to stampede retail traders into equities, and give them soft targets into which to sell. Moreover, they will spin stuff like Microsoft’s failure to meet earnings, and Amazon’s duplicate failure, as a WIN! (they won’t just do that, they DID that last night! Dow up 150 points pre market).

If the fed “only” raises rates by half a point, today I look for a 500 point rally today. If they raise by .75 points, the pundits will slobber and shout that “this is aggressive tightening and will ‘slow inflation’” leading to freedom to gush money again, soon… so you should buy, buy, buy.

Once their books are clean from all the crazy happy money froth, and all the suckers have believed their brokers, they will let this thing go…. And I am telling you, it is NOT going to be pretty.

Till then, expect every swoon to be followed by “The bottom is in! The worst is over! The time to step up is now!”

I am playing short term rallies of course. But the incessant Jim Cramer type nonsense needs to be evaluated for what it is, which is paid mouthpieces for protecting the big guys.

They are NOT your friends, and view you as chickens to be plucked.
 
I will say that after working all day on planing down 48 16 foot decking boards (man, am I beat!), I did stop in and day trade some call options. I am short a call spread so I bought back the short leg and then sold it again for about a point.

I then walked away, as Powell's nonsense about being tough, really tough, I mean hard nosed tough.... I mean you don't know how mean and vicious and tough we are about inflation..... we have raised interest rates A WHOLE ONE AND A HALF POINTS, AND YOU KNOW WHAT? WE MIGHT RAISE THEM SOME MORE, SO COME ON MR "INFLATION" WE ARE LOCKED AND LOADED FOR YOU! This is idiotic. He hasn't DONE anything yet and here he is crowing like he has single handedly stormed the beaches of Tarawa with no air or artillery support. One and a half point interest rise is hardly a gnat fart and he acts like some steely eyed tough guy...., and the fact is that when the economy collapses if/when he ever gets around to divesting the fed's balance sheets, he is going to run squealing to easy money again faster than a pouty 3 year old who skinned her knee runs to mommy. The theater here is ridiculous, but what is even more ridiculous is how knotheads lap this junk up like it is Moses coming down from Sinai with the tablets. Do you sense contempt? Well, if you do, give yourself a kewpie doll.
Anyway, one good thing was my 10 SLV Puts. I did this trade (announced it in here) 2.5 weeks ago. Sold 10 SLV 17.50 july 15 puts for 23 dollars apiece. They expired in the money, so I "rolled them out" to the NEXT week (july 22) 17.50 puts. This means I bought the July 15 puts and in that trade (as a "spread"), I sold the July 22 17.50 puts for a net credit of 13 dollars, or an extra 130. This means I have the same position, but now have collected a total of 260 dollars. I wound up doing the same thing last Thursday or Friday (can't remember right now), for another 29 cents, so I am now still short 10 puts on SLV, 17.50 strike, with a total (before commissions and fees) of 570 dollars. I could, this afternoon, have bought them back at 13 cents, as SLV finally rallied a bit back up to 17.60. I think I will just sit on them and see if they "go out" and expire worthless. No one wants to force me to buy them 1000 shares of SLV from them at 17.50, because they can get 17.60 for them in the open market... so if SLV stays above 17.50 till friday afternoon, I will just have pocketed 570 dollars for doing nothing. If SLV does go down in price, I will just "roll" them again, buying back the July 29 puts and selling August 5th puts, and picking up between 125 and 300 more dollars. Again, the WORST that could happen is someone forcing me to buy SLV at 17.50. 1000 shares is 17,500 dollars. If I "rolled" these options 4 times and collected the minimum roll (about 13 dollars, usually) I would wind up with an original premium of 23, and then 3 x 13 which is 39 + 23 which is 620. 620 gain divided by 17500 "risk" (not really b/c you are not talking about "losing" the 17,500, just being forced to buy a stock you think is a good buy), is a 3.5% return per month, which annualizes out to a non-compounded return of 42% a year. Basically, in 2.2 years, you can GIVE YOURSELF FREE the 1000 shares of SLV you "risked" having to buy.

So, while I am exasperated with the overall market, I still love being short options.
 
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