FTSE- What’s Really Going On?

FTSE Up 7.6% on The Year

Actually if you look at the price on Dec 8th it was 7320. We finished on 7688,so there was a rise of 368 points. FTSE opened 2017 at 7142. So….. 5.2% of that 7.6% rise was accounted for in the tiny volumes in the last 3 weeks of the year. Bogus? I couldn’t possibly comment, suffice to say it would only cost millions, not billions, to ramp up the index due to the minute volumes.

Is There a Theme Here?

I see a market hijacked by great swathes of buying that bear little resemblance to value. FTSE P/E?  22.49 against a long term historical average of 14. Remember P/E is theoretically the number of years it would take the companies to buy back the stock in issue,based on current earnings.

Personal Bias vs Perception

I have, in the dim and distant past, made  a ‘cognitive biases’ poster available here -DYOR. It’s all too easy to maintain that bias, and something we have to rail against.  I’m mostly  bearish. Why? Because in the long run it’s ok to be bullish ( I prefer to say invested), but I make more money when the market drops. It is what options are good at. We are  contrarian and capitalise on the flight of the dumb money. I use the word dumb advisedly to describe money that is only capable of one dumb action. Long only. That’s smart until it isn’t. Like selling puts-oh there are many genius put sellers, the ones who crush the volatility,until it wipes them out.

Whither The Market

I’ve no idea where it’s going, but as volatility keeps getting more and more absurdly low, the more risk is ignored and mis-priced, the greater the gains for us. We have to position for those drops and hope that in 2018 they are not the silly little one day events of 2017.

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About the Author: First found out about options in 1995.From the arcane magazine Exchange and Mart! First trade- a covered call on VOD in 1999. Made 10%,VOD almost doubled. That's when I realised I was not a good trader,and I was forgiven thanks to the amazing world of exchange traded options

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