Two trades for this market

The weekend’s gone, just like that. And so is the new year and the holiday season. Just like that. And now the collective breath that had been held into new year, as I’d been looking for, is about to be let out.

First, let’s hit on the markets. I think we’re about to break out of this recent trading range, but I’m less sure about the direction of that break than I have been during the last year. Which means that the best near-term trade on the broader markets is likely buying volatility — that is, buying calls on the VIX and focusing on both calls and puts in the broader portfolio for our near-term trades.

And that’s exactly what I’m doing today — buying some slightly in and out of the money VIX calls (say with strikes between $20 to $23 or so) here this morning, dated out into March or so. As you can see in the chart below, the VIX has been crushed, falling more than 50% in recent weeks including the crash it has had since I recommended buying VIX puts back in this column (An options strategy for the very near-term):

Of course, as you can see in this longer-term one-year VIX chart, there’s still risk that the VIX can fall much lower from here:

And finally, with the trashing Google’s taking today off the MMI warning on this quarter’s earnings, I’m adding some Google calls dated out into March or early summer with strikes up to nearly $700 or so. Google’s buying MMI (Motorola) and while the longs certainly would prefer that GOOG’s acquisition be pre-announcing blowout earnings, it’s the shorts that are plowing into this thing today on this news. And I do think Google’s fundamentals, both near- and long- term are much better than most analysts expect right now.

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