There is a commonality between a three-year old on a family car trip and traders and investors. Both groups want to know “Are We There Yet”. While neither three -year olds or traders tend to have much patience, at least the ultimate arrival time is known in advance on a family car trip. The ultimate low is only known after the fact in the stock market.
In my article from several weeks ago, I talked about how option prices can help predict future stock prices, in this case a short-term top. It was a take on the Warren Buffett philosophy of being fearful when others are greedy. Option prices are the embodiment of this notion. When stocks rise, option prices tend to fall and vice-versa.
