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Risk Off/Risk On

Site Administrator | August 31, 2011

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The market is definitely in Risk Off/Risk On Mode right now.  While many traders focus on the VIX as a sign of volatility and fear in the markets, we feel there are three other markets worth of real estate on your quote page.  Those markets are bonds, gold and the Swiss franc.  Many people who were surprised at the rally the past two weeks look at the overall economy and wonder how in the world the markets can rally.  Most fingers right now are pointing to asset allocation in the sense that risk instruments like the ones mentioned above got overdone, the market was oversold and just like every other move in the history of the markets, a trend occurs, it gets overdone and reverses.  We basically saw traders flip from taking risk out of their portfolio (buying safe haven instruments) to putting risk on (buying equities).  The real question is where do we go from here?

The first clue that we had a "Risk On" trade occurring (where traders moved out of safe haven products like Bonds, Gold and the Swiss Franc) was the speed of decline each of these markets had last week.  That money has to go somewhere and as a result led to a rise in equities.  It is important to watch these three markets as an indication of the fear levels in the market.  In the event they continue creeping higher, that tells us that there are still possibly some skeletons in the closet and to keep our money way down deep in our pockets and be on guard.  In the current market environment we believe it is extremely important to understand the "safe haven" nature of different instruments and to know where money typically flows in times of fear.  Keep your eye on the bonds, gold and Swiss franc for further clues on the fear index, and remember to always manage risk in a way that you are around to trade tomorrow!

We have a special presentation to kick off September on Adjusting Time Spreads in options which is extremely important in volatile markets.  Click the following link to learn about Education on Option Strategies.

REGISTER HERE

Cheers,

The TradingPub
"Trade, Talk, Learn - Cheers to Success"

Disclaimer: Article intended for traders and not English majors. Disregard any misplaced commas.



The market is definitely in Risk Off/Risk On Mode right now.  While many traders focus on the VIX as a sign of volatility and fear in the markets, we feel there are three other markets worth of real estate on your quote page.  Those markets are bonds, gold and the Swiss franc.  Many people who were surprised at the rally the past two weeks look at the overall economy and wonder how in the world the markets can rally.  Most fingers right now are pointing to asset allocation in the sense that risk instruments like the ones mentioned above got overdone, the market was oversold and just like every other move in the history of the markets, a trend occurs, it gets overdone and reverses.  We basically saw traders flip from taking risk out of their portfolio (buying safe haven instruments) to putting risk on (buying equities).  The real question is where do we go from here?

The first clue that we had a "Risk On" trade occurring (where traders moved out of safe haven products like Bonds, Gold and the Swiss Franc) was the speed of decline each of these markets had last week.  That money has to go somewhere and as a result led to a rise in equities.  It is important to watch these three markets as an indication of the fear levels in the market.  In the event they continue creeping higher, that tells us that there are still possibly some skeletons in the closet and to keep our money way down deep in our pockets and be on guard.  In the current market environment we believe it is extremely important to understand the "safe haven" nature of different instruments and to know where money typically flows in times of fear.  Keep your eye on the bonds, gold and Swiss franc for further clues on the fear index, and remember to always manage risk in a way that you are around to trade tomorrow!

We have a special presentation to kick off September on Adjusting Time Spreads in options which is extremely important in volatile markets.  Click the following link to learn about Education on Option Strategies.

REGISTER HERE

Cheers,

The TradingPub
"Trade, Talk, Learn - Cheers to Success"

Disclaimer: Article intended for traders and not English majors. Disregard any misplaced commas.