I was watching CNBC with someone at lunch today. He is not that familiar with how markets work, and I was explaining to him how I was playing the abnormal volatility we are seeing these days. No sooner had I explained this did we see the Dow Jones go swing 100 points up and then 100 points down. Literally in a matter of about 3 minutes. After the 100 down, it came roaring back and ended up almost 300 points from that level. And all it took were 20 minutes. That's just nuts. He remarked that watching it was more exciting than watching the baseball playoffs. In some regards, he is totally right.
So how am I playing? Today, I sold off my short position, SDS. I bought it at 97 and sold it at 106.2. So I got a quick 10% profit. I was debating on whether I should hold on to it or not. But then my coworker gave me some sage advice, "Don't be too greedy". He was right. I have been saying I was going to sell when the S&P broke 900. It had, and by a few percentage points, so I got out. Of course no sooner did I get out did the stock go straight to 108 on its way to 112. I felt a little twinge of regret, as it was about a $600 difference in a matter of an hour, but I still felt I did the right thing. No need to be greedy, the stock could have easily gone the other way. And ironically enough, it did, ending the day at 100.
As the market ran up, I played the other side of it. So now I'm long the S&P index. I'm very uncomfortable here, and would be happy to just get a few percentage points. If I get a 2%-3% pop in the index, giving me a 4%-6% gain, I'll head for the doors and reverse my position again. I'm willing to take about a 10% loss on this, and then I'll be out on the other end.