Testing The Waters With Some Calls

As I said in yesterday's blog post, I was looking to get long calls in the 1229 area and I did (SPY 125). I still see the potential for 1227-25, but the trade felt right yesterday and overall it's quite small compared to my downside bet with SDS. Whether I keep the calls is another story: for example, I may hedge them above 1235 today unless we get a sharp rally. I'd rather be completely wrong with the calls and have the market finally cast off its euphoria and drop straight down, but for the time being I'm content to trade euphoria while keeping my upside risk small. I still feel that the overall market psychology at this juncture will continue until shortly after the New Year. Then I think there will be a rather widespread reassessment.