Delevering Sooner?

I don’t think I can wait for S&P 2,100 anymore. Turkeys, Santa, Jeremy Seigel, and indomitable holiday optimism would have us believe that the only way to live is long and strong. But last night, I experienced a most ominous dream.

In my dream, I was at the RentHop offices with my IB terminal open. In the place of our Director of Product, though, sat George Soros. I looked over at his screen and saw him closing all his positions. I quickly copied him. After all, who am I to question the grand master of reflexivity? A few minutes later, the markets toppled and collapsed.

Maybe I had the dream because of the leverage I’m running. Or perhaps it was from the Soros article I read right before I went to bed. Either way, I’ve found that my dreams have been surprisingly prescient (in fact, I dreamt something similar in mid-September).

There are certainly cracks in the system appearing. Fighting has broken out yet again in Ukraine. ISI is portending potential earnings readjustments. More importantly, we’ve pretty much staged a full V-shaped recovery since October.

I think starting early/mid next week, I’ll move deep ITM long options positions into OTM call options (with slightly lower delta). Implied volatility has dropped like a stone since mid-October, so this is a safer way to play potential rallies. I might fund these with 1×2 or 2×3 on the call side.

George Soros

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