Well if you are familiar with contango etc and the way VXX works then you probably can devise decent strategies. Most people aren't that familiar and make mistakes.
I think buy and hold may re-emerge in the next decade, but until the secular bear market is over, I agree that buy and hold will continue to prove to be a difficult strategy.
Wise advice, the same of which I have heard from many more experienced than I.
I originally thought I had an excellent risk to reward, and a correction had begun. After the 1 week selloff in April, I closed 3/4's at the bottom, but then erroneously started buying puts again on the way up thinking it was a bounce, with the worse part of a correction coming.
Not my best risk management to still be holding. But just one trade, and am learning my lessons.
Personally I don't think calling/betting/trading on the direction of interest rates to be any easier than equities. They are all related in someway or another. If your having success with them, definitely stick to it!
Its funny, I just rewatched the Paul Tudor Jones video from the late 1980's and its incredible to see how well history (and Elliott Wave) theory helped him in his earlier years. For anyone no familiar, see it here http://bit.ly/10jabjO
Yes history is not perfect, and buybacks etc could prop the market for some time. But I would argue that this has occurred every time; the "this time is different" argument. I try not to rule anything out, and maybe a balance sheet transformation or something else along those line could indeed create an additional put. However I think the implications of the Fed eventually withdrawing from QE could be incredibly negative. There seems to be no exit plan, and literally no one seems to believe if/when the fed withdraws, markets and the economy will be stable.
Obviously the fed can keep up with QE infinity, but I personally don't see it being extended or providing the same positive effects too much longer. The current momentum is unsustainable, we can keep going up, but that will lead to a bigger crash in my opinion. The best thing right now would probably be a correction, and without one, the seeds will be in place for an even worse correction in the future
Yes sorry I meant to state that there were QE programs before, and then sell offs. I believe you are correct on your dates.
That being said, there are signs/comments of potential tapering, and with talk of Bernanke stepping down in the next year, perhaps expectations will not be met.
Bernanke studied the great depression thoroughly and the failures of QE then, so I personally believe he may pullback earlier than others expect, but this is only speculation and nothing conclusive
I've made many mistakes, and I don't think this will be the last!
What prompted the original short was a lot of bond market and other indicators that correctly did predict a drop, albeit a very small one. From there many macro indicators turned up, hence I didn't get the follow through I was looking for. This has led me to take on a longer term bearish outlook which perhaps wasn't the best plan. I should have quickly closed and looked to maybe re-establish.
I may be wrong on this trade; I may still do quite well on it. Ultimately for me it is just one trade. I think the basis for initiating was good, and I don't think I was wrong in taking it originally. I was wrong perhaps to hold through the 1600s as I typically don't hold trades more than a few weeks, and I am now doing that.
For anyone who bought puts for the summer, I still think it was not the worse idea, and could prove to be very wise over the next months. That being said, there obviously were better entries.
I still believe a major cleansing / sell off is in the cards, but there are no immediate signs of one at this current point. But, given everything I have mentioned, I think one should prepare or be ready for one. Whether that's puts, stops, or something else; there is a lot of systemic risk currently not priced in.
And for anyone interested, I am still very much short, but take on individual long and short equity trades as well. My short Aussie Dollar trade started working well last week, so all is good.
Just like anyone else, I have been wrong. I think my original arguments were good, and just about all the divergences I noted converged. Unfortunately for me, rather than equities really selling, the relationships converged with the underperforming sectors/assets regaining strength.
I'll admit that I may be holding too firmly onto my original outlook, but I still think the arguments I noted here are sufficient to be skeptical of this rally
But arguable in the late 1990's you could have argued that the market always continues up, and that whatever the correction, prices will be higher in the next year or so?
Another thought: typically when a pattern becomes so evident that everyone realises it, this is the time when it fails...
I agree in looking backwards at history for context, and am not saying that your argument isn't valid, but rather I would suggest that it is not absolute or definitive. Buying could be tapered, Bernanke has indicated that he will likely be stepping down in the next year, and the positive impact of bond buying could fail.
I don't think longs puts on the VXX is the best strategy personally. If you can perfectly time the market, it may well have the best payoff. But the VXX really punishes you if your holding it for time. VXX, UVXY, and related leveraged ETFs are really only well suited for day traders or very short periods
And yes, since the markets can remain irrational for extended periods of times, I think this support potentially buying puts on SPY rather than calls on VXX
I believe Robert Pretcher actually said that last week was to be the absolute high according to his wave count. He is considered to be the authority in Elliott Wave. He had been very successful at times, but like many, is also prone to mistakes.
It is difficult to precisely define the probability of a trading set up. They typically change in time, depend on the context, and are inherently subjective. If a certain set-up always worked 90%, I would surely only take that setup, and take it every time!
I personally have studied options quite a bit, I am actually one course away from earnings a derivative market specialist designation. That being said, in practice, I am very much a rookie, and have much to learn
Shorting premium can definitely work, often for extended periods, but when it doesn't, you must be prepared to take a loss. Many don't know how to manage this position when it goes offside; it is no easy task.
I would suggest maybe to lower the expectations; 150k is a lot to make back unless you had a lot of money to generate returns with. Most odds/probability/trading theory suggest that you should never risk more than 5% of your capital in one trade, and that ideally this number is 2-3%. Also, consider that typically people doing what you are trying do are doing this full time and have quite a bit of experience. And even then, only the best consistently generate positive returns.
I don't claim to be an expert, but I also don't believe myself to be a "rookie unsophisticated inexperienced" trader.
I am not clear as to your point on options? Yes, surely they are the most leveraged way to play the market. The best? Well that depends on each individual investor.
The Good News, The Bad News And What's Very Ugly [View article]
Update To Short (Bearish) Outlook [View article]
Update To Short (Bearish) Outlook [View article]
Update To Short (Bearish) Outlook [View article]
Wise advice, the same of which I have heard from many more experienced than I.
I originally thought I had an excellent risk to reward, and a correction had begun. After the 1 week selloff in April, I closed 3/4's at the bottom, but then erroneously started buying puts again on the way up thinking it was a bounce, with the worse part of a correction coming.
Not my best risk management to still be holding. But just one trade, and am learning my lessons.
Many thanks
Update To Short (Bearish) Outlook [View article]
Update To Short (Bearish) Outlook [View article]
Yes history is not perfect, and buybacks etc could prop the market for some time. But I would argue that this has occurred every time; the "this time is different" argument. I try not to rule anything out, and maybe a balance sheet transformation or something else along those line could indeed create an additional put. However I think the implications of the Fed eventually withdrawing from QE could be incredibly negative. There seems to be no exit plan, and literally no one seems to believe if/when the fed withdraws, markets and the economy will be stable.
Obviously the fed can keep up with QE infinity, but I personally don't see it being extended or providing the same positive effects too much longer. The current momentum is unsustainable, we can keep going up, but that will lead to a bigger crash in my opinion. The best thing right now would probably be a correction, and without one, the seeds will be in place for an even worse correction in the future
Update To Short (Bearish) Outlook [View article]
That being said, there are signs/comments of potential tapering, and with talk of Bernanke stepping down in the next year, perhaps expectations will not be met.
Bernanke studied the great depression thoroughly and the failures of QE then, so I personally believe he may pullback earlier than others expect, but this is only speculation and nothing conclusive
Update To Short (Bearish) Outlook [View article]
All the best
Update To Short (Bearish) Outlook [View article]
What prompted the original short was a lot of bond market and other indicators that correctly did predict a drop, albeit a very small one. From there many macro indicators turned up, hence I didn't get the follow through I was looking for. This has led me to take on a longer term bearish outlook which perhaps wasn't the best plan. I should have quickly closed and looked to maybe re-establish.
I may be wrong on this trade; I may still do quite well on it. Ultimately for me it is just one trade. I think the basis for initiating was good, and I don't think I was wrong in taking it originally. I was wrong perhaps to hold through the 1600s as I typically don't hold trades more than a few weeks, and I am now doing that.
For anyone who bought puts for the summer, I still think it was not the worse idea, and could prove to be very wise over the next months. That being said, there obviously were better entries.
I still believe a major cleansing / sell off is in the cards, but there are no immediate signs of one at this current point. But, given everything I have mentioned, I think one should prepare or be ready for one. Whether that's puts, stops, or something else; there is a lot of systemic risk currently not priced in.
And for anyone interested, I am still very much short, but take on individual long and short equity trades as well. My short Aussie Dollar trade started working well last week, so all is good.
All the best
Update To Short (Bearish) Outlook [View article]
I'll admit that I may be holding too firmly onto my original outlook, but I still think the arguments I noted here are sufficient to be skeptical of this rally
Update To Short (Bearish) Outlook [View article]
Another thought: typically when a pattern becomes so evident that everyone realises it, this is the time when it fails...
I agree in looking backwards at history for context, and am not saying that your argument isn't valid, but rather I would suggest that it is not absolute or definitive. Buying could be tapered, Bernanke has indicated that he will likely be stepping down in the next year, and the positive impact of bond buying could fail.
Update To Short (Bearish) Outlook [View article]
And yes, since the markets can remain irrational for extended periods of times, I think this support potentially buying puts on SPY rather than calls on VXX
Update To Short (Bearish) Outlook [View article]
It is difficult to precisely define the probability of a trading set up. They typically change in time, depend on the context, and are inherently subjective. If a certain set-up always worked 90%, I would surely only take that setup, and take it every time!
Update To Short (Bearish) Outlook [View article]
Shorting premium can definitely work, often for extended periods, but when it doesn't, you must be prepared to take a loss. Many don't know how to manage this position when it goes offside; it is no easy task.
I would suggest maybe to lower the expectations; 150k is a lot to make back unless you had a lot of money to generate returns with. Most odds/probability/trading theory suggest that you should never risk more than 5% of your capital in one trade, and that ideally this number is 2-3%. Also, consider that typically people doing what you are trying do are doing this full time and have quite a bit of experience. And even then, only the best consistently generate positive returns.
Update To Short (Bearish) Outlook [View article]
I am not clear as to your point on options? Yes, surely they are the most leveraged way to play the market. The best? Well that depends on each individual investor.