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Post by walnut on Jan 10, 2017 19:12:28 GMT -5
I don't think I have your trading judgement, actually Rob. You guys are way better chartists than me. I am just trying to pick that up finally. All my skills are statistics and securities analysis type stuff.
The smartest "hedge" that I have found that can't be beat is to just decrease your position size to something you can live with. You avoid the bid ask spreads that way too.
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Post by huh on Jan 10, 2017 20:54:28 GMT -5
Long day for me and missed all market action today. Just got back to see the carnage results.
I had an order in to buy more UVXY @ 6.24 when S&P hit 2277. Well, UVXY hit that mark long before S&P got up to 2277, and even though S&P went higher, UVXY never came back down there. I think that could be telling us something about tomorrow (bearish), but even though the indices look bearish, VX_F & Scams not really showing it yet (in fact, they look almost as bearish as the indices until and if they confirm higher, lol).
VXX came close to confirm that small double bottom (>22.25, not >23.25 as I posted in the chart. DOH!) That confirmation now falls down a couple pennies to 22.23.
I think you're dead on with that small H&S in S&P, MIst (target down to high 2240's), though it bothers me that DJI didn't fill that upside gap left yesterday (S&P did). That could still mean a quick pop yet to that 20,000 mark. BTW, DJI's top BB now sits almost exactly at 20,000. But I won't wait for it if VXX starts to climb. Once over that confirmation #, VXX becomes a buy & chase IMO.
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Post by walnut on Jan 10, 2017 21:46:07 GMT -5
Continental Gold announced today that a $250M line of credit was secured to build the plant at Buritica Mine....the plant is estimated to cost $400M so at some time I guess there will be a stock dilution. Should be innerestin' to see how Mr.Market takes this news on the pps today GL mi amigos and muchachas (a new Mexican Restaurant opened in the neighborhood). (Same chain (Anita's) as the one Ashburn, VA) where some fukking asshole couple on Saturday left a note on their bill saying the service was good but that they dont tip black people.) Jack why was it down then? Was it the convertible warrants or the presumed future dilution?
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Post by walnut on Jan 10, 2017 23:03:08 GMT -5
There are a few smart options traders over there at Yahoo MSG Boards. One of them is looking into this hedging option. Let me know your thoughts on this hedging method- As a hedging, "the only thing I can think of is to buy call options on UVXY 3 months out and 2 times the current price. I could still only short with about 30% of the portfolio and the hedge would cost about 10% every 3 months. I currently do this by selling weekly in the money calls on UVXY and own way out of the money calls 2-3 months out. If the call you sold is still in the money on expiration, just roll to the next week. It returns about 100% (on the margin capital) every 6 months in the current environment. It would return twice as much in a VIX 17-20 time period. It is a temporary loser in a VIX 20+ environment. If that environment lasts long I haven't figured out exactly what could be done. I am experimenting with a very small portion of the portfolio" Would this model work if we have prolonged selling in S&P and VIX stays elevated over 20 for few weeks, months, years, and VIX Futures maintain backwardation (i.e., the big one) - I think this model blows up. Thoughts? Still looking at this. This part: "buy call options on UVXY 3 months out and 2 times the current price." The problem is that the implied volatilities on those calls is way over 160%. That is more than double the current historical volatility of 77%. In other words they are overpriced relative to the expected variance of the underlying UVXY. So, it is almost certainly cheaper to just decrease position size. Additionally, as your UVXY is dropping, guess what is happening to your calls, they are dropping at whatever delta and you are quickly losing whatever hedging power you briefly had in addition to the intrinsic value of the call which is going against you at a lesser rate. In general, there are no bargains, the options are priced to match the risk of the underlying UVXY. If the setup seems to be working, actually it is probably not working any better than simply staying short unhedged with a smaller position size. And the hedging power of those way out of the money calls is very doubtful, I believe that you would be deep in trouble by the time UVXY came up enough for the deltas to get around .80, in the meantime you will have lost a lot of money. Selling the in the money calls I am not really understanding. If UVXY went up and they get closer to at the money, their price actually goes up to a peak in time value + intrinsic value because the time value component is increasing as the intrinsic is increasing until the calls reach the strike price, so it seems like it is working against you. Then as UVXY goes lower, those calls begin to lose value more and more slowly so you get diminishing returns even as the trade went your way. I prefer to only sell time value, selling intrinsic value can too easily turn against you dollar for dollar. Might as well just sell the underlying and get a better bid ask spread. And even worse, the implied volatilities of the in the money calls he is selling is only about 70%. So he is buying out of the money calls at double their worth and selling in the money calls for a little less than they worth. I don't like that, on a risk adjusted basis you are losing money by definition. However those are market adjusted prices, and I think that the skew is due to the fact that the UVXY returns distribution is not normal it is a Poisson distribution, so those prices probably reflect the actual risk better than it seems. Without seeing his specific trades that is about all I can see about it, I did not mean to pick his ideas apart so much but these are problems that I think I am seeing with it. I could still be wrong and he might have a winner.
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Post by theMist on Jan 11, 2017 0:17:42 GMT -5
Thanks for all the insight. I'll tell him he's a loser like the rest. Lmao
Btw how do you determine contango daily rate for uvxy? .56 x Uvxy price * 2? Since it is double leveraged ? .0056 x 6.38 = .035 x 2 = .07 cents
I really doubt it's that easy. And the rate is smaller than VXX. I'm sure it's more complicated.
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Post by walnut on Jan 11, 2017 0:21:35 GMT -5
Thanks for all the insight. I'll tell him he's a loser like the rest. Lmao Btw how do you determine contango daily rate for uvxy? .56 x Uvxy price * 2? Since it is double leveraged ? .0056 x 6.38 = .035 x 2 = .07. I really doubt it's that easy. And the rate is smaller than VXX. I'm sure it's more complicated. Yeah it's going to be .07 . It really is that easy...
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Post by walnut on Jan 11, 2017 0:23:20 GMT -5
I think he fails to take into account options prices. I think maybe he is not conscious of the fact that options have specific values, different from stocks which have arbitrary values.
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Post by jacksrbtr on Jan 11, 2017 7:47:20 GMT -5
Continental Gold announced today that a $250M line of credit was secured to build the plant at Buritica Mine....the plant is estimated to cost $400M so at some time I guess there will be a stock dilution. Should be innerestin' to see how Mr.Market takes this news on the pps today GL mi amigos and muchachas (a new Mexican Restaurant opened in the neighborhood). (Same chain (Anita's) as the one Ashburn, VA) where some fukking asshole couple on Saturday left a note on their bill saying the service was good but that they dont tip black people.) Jack why was it down then? Was it the convertible warrants or the presumed future dilution? Its a so-called "senior credit" transaction which means that the creditor gets paid off first if the company gets sold, goes BK, whatever....I guess half the volume yest were stockholders who didnt like the risk but CNL has plenty time to start making repayments so I think those fears are illusory (unless they break the budget building the plant which I am worried about).
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