It fascinates me how quickly the market can switch from fear to greed. I think the past month has been the perfect example of this, and I hope to remember the March 9th - April 9th 2009 month decades from now.
On March 9th, people on the sidelines could not have been happier. They were winning, as others who had any money in the market slowly watched their buying power sink. However, how a rally can flip that smug person upside down. He is nervous. He is wondering how much his competition has gained in this rally, he can not be left behind by not having enough long positions. Even if the market doesn't believe this rally should hold, it could go on for a long time. The fear of losing money has turned into the fear of not keeping up, which for some reason we call greed.
Over the past month I have realized that investing is a competition. If everyone's portfolio goes up 20% your buying power relative to everyone else hasn't gone up. In order to win the competition you must lose less money on the downside, and make more money on the market upside. The fastest way to increase your relative buying power is to make money while everyone around you is losing it, that's the reward of shorting.
Activity Disclosure: In case this rally reverses I'd like to take some gains and close out my AAPL 60 Jan '11 put. I put in a conditional limit to buy back that put if APPL is marked at or below $108. AAPL is currently trading at $119.
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