Buying the Dips

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Our View

This post is from a friend of mine, former floor trader Peter Yastro. I posted it on Twitter, but felt it would also make a good post in the OP. Peter is a long stock guy so this rally has been good for him. Here are a few lines about the days ahead:

Peter Yastrow

• Expect pretty small ranges until the very end of the year.

• Look for a big whipsaw move at December end/Jan start as hedge funds all set up the “wash trade.”

  • They put on a big long, and the next day completely hedge it with a big short in a highly correlated product. (Like long stocks, short futures).

• After 364 days they have a short-term loss, and after 365 days they’ll have a long-term gain.

  • They use the loss to offset the gains for the year and benefit since tax rates are different for short term and long-term gains.