Like so many of you, I like to hold a few put options in inventory each month “just in case.” You never know. Suppose investors were to awaken one morning troubled by doubts about the health of the economy? I’m not suggesting that such a thing is likely to happen, mind you, only that we should take the odds if they’re juicy enough. Well, we’ve actually taken odds that were plenty juicy in each of the last three expiration periods, only to see our put options waste away to nothing.

Most recently, as the January series was expiring, we legged into a February put spread in the QQQs at no cost, buying sixty-four of the Feb 40 puts and shorting an equal number of Feb 39 puts against them a few days later for the same price.

This was no long shot bet on a crash, either. More like a $2 bet on a strong favorite to place or show. In effect, we were betting that within the next thirty days, the QQQs would fall just three percent. That’s where we would have started to make some money, at the rate of $64 for each 0.01 decline in the underlying security. Our maximum gain would have come on a decline of 5.5 percent or more, so that anything below $39 would have yielded a $6,400 trading profit. Not bad, considering there was no risk at the outset. But in fact there eventually was risk, since we added twenty Feb 42 calls to our position, seduced by some bullish head-fakes in the broad averages. Alas, they were never quite so bullish as to afford us a gainful exit from the calls; nor were the swoons so precipitous as to reverse the steady attrition of our puts for a stretch of more than an hour or two.

No question, this is one tough market – one that has become so thoroughly dominated by mechanical trading that it seems absolutely inured to the real world. But then, what should we expect when a hundred-thousand fiercely competitive algorithms slug it out every day, each trying to extract a profit from the smallest movement in price. The result is that stocks have ceased to move – or at least, to move sufficiently to shake the money tree so vigorously that boldness, let alone mere cleverness, are rewarded with profits. That’s why some of the savviest hedge-fund managers I know have been turning away clients. How do you handicap a stock market that has been marking time for nearly seven years?