Posted by: jhamon | March 19, 2010

MysteryHedgie: Washington Gets Busy – Watch Out

Washington is again set to make an impact on our lives, and markets, with the vote on healthcare tentatively scheduled for Sunday.

Government involvement continues to be a favored theme for 2010, along with US$ strength, which we see resuming once again after the monthlong sideways chop. Interesting that Washington may vote on a Sunday, perhaps remembering the DJIA -777 the day of the financial bailout “No” vote in realtime, 9/29/08.

With 10 day realized volatility in the DJIA at 3.4% (see below) it feels as if Washington is about to pass a bailout package for long option holders! Portfolios should be examined to make sure that one has dry powder to be buying -10% or selling +10%; short dated options on overextended items such as IWM, XRT and UNG are valuable at present.

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