Bull/bear spreads. What does that mean?
When people are super optimistic about the future, they place bets or express optimism about the next three to six months in the stock market – that’s a bullish bet. When people are pessimistic, they might buy options or puts to bet on the market declining over the next three to six months.
So, there are many ways to measure this, either in VIX and volatility spreads, in sentiment, in people’s posturing, or in money flows. The only thing I would say, along with the timeless concept of “be fearful when others are greedy and be greedy when others are fearful,” is to remember that when everyone thinks that a certain outcome is fait accompli, something else is going to happen. It’s just like clockwork.
Now, am I saying you need to trade on this information every day, every week, every month? No, because you’re not going to be a hundred percent right. You’re not going to bat a thousand. The prediction markets, particularly in finance, the best may be right 51 % of the time—to get a marginal advantage.
So, just be cognizant of that information to lean against your human emotions and impulses. And if you lean against your human impulses a little bit, that habit, compounded over time will help you stay healthy, wealthy, and wise.
Just one man’s opinion.
Have a great day.
