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Daniel Sckolnik

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  • Baidu Is A Buy, Dude [View article]
    Agreed that Baidu now offers an interesting entry point, particularly in regards to the attractive risk-to-reward ratio that is now setting up. Please see comments following my recent SA article, "Time To Place A New Bet On China Equities?"
    Mar 14, 2013. 05:51 PM | 1 Like Like |Link to Comment
  • Time To Place A New Bet On China Equities? [View article]
    I happen to be a fan of Baidu, and have followed it closely for the last five years. In spite of the fact that it just fell below its 200-day MA, it seems to be finding a bit of support at its current price level.

    Too, its current one-year dive pretty much mirrors the trend of China stocks in general (though Baidu outperformed the Sino market for most of China's recent Bear market), as opposed to any true fundamental weakness, as you point out.

    From a risk-to-reward perspective, the stock's upward potential remains quite large, when you consider its strong positioning in a growth industry within the world's most populace nation.

    FXI is probably the safer play, however, considering its relative (and it is indeed highly relative) diversification amongst several vital sectors, as referenced above. As always, the choice depends on your overall portfolio strategy.

    That being said, as a dynamic mid-term play, Baidu certainly has its charms.
    Mar 11, 2013. 07:48 PM | 1 Like Like |Link to Comment
  • The Fed Rudely Reinserts Itself Back Into The Conversation [View article]
    Point taken, Mike.

    However, there is little evidence that the Fed has really used this rule other than, at best, as a cursory guideline. In any event, it is certainly not under any sort of binding obligation to do so.

    That being said, the Fed has recently proved increasingly creative in generating whatever tools it can to implement its dual mandate of keeping inflation and unemployment numbers low. Blank-check stimulus, such as in the form of the current bond purchase program, hardly would seem to apply to the Taylor rule and its focus on interest rate response in terms of actual inflation.
    Feb 25, 2013. 07:53 PM | Likes Like |Link to Comment
  • Elections The Flame, Wall Street The Moth [View article]
    Good point. It's precisely why I offered VXX/IYF as a trade, not an investment. It is suggested within the context of the article, which is focused on the immediate impact of the presidential election on the equity market. So, I would consider this trade for 1-2 weeks max.

    In spite of the multiple limitations of the VXX as a trade vehicle, often referenced in SA, it remains a valuable tool if you are aware of those limitations, e.g.; loss due to theta, its nature as a derivative of an intrinsically volatile futures contract, etc. that being said, I like it for its unique hedging capability, as it serves as an explosive vehicle to counter sharp market moves.
    Nov 6, 2012. 08:40 AM | Likes Like |Link to Comment
  • Watch Out Below If Earnings Disappoint This Week [View article]
    Correction: In the article's last paragraph, a reference is made to the Technology sector as being atop Sabrient's latest ETF Rankings. The correct sector is Financial. Therefore, the pairing of IYF (iShares Dow Jones U.S. Financial Sector Index Fund) and IYZ (iShares Dow Jones U.S. Telecommunications Index) remains the correct one.
    Oct 23, 2012. 09:14 AM | 1 Like Like |Link to Comment
  • Low VIX Levels Should Be High On Your Hedge List [View article]
    I appreciate your passion for alerting traders to the limits of VIX derivatives due to contango, Marc. However, as the title for my article clearly states, its reference to VIX is as a hedging vehicle.

    The VIX, as is the nature of the beast, retains an explosive nature that allows it to respond to sharp market drops by jumping up 15-25% in a day. This characteristic makes it particularly effective as a short term hedge, even though the contango effect serves to "mute" its impact, as you pointed out. In this regard, it is worth considering that even a muted trumpet can make nice music, though the tone is certainly different than it would be without the mute.

    I certainly don't advocate that newbies use VIX derivatives as a directional play, though it could be used effectively in that capacity by experienced traders who take into account its inherent limitations. But that's true for any trading vehicle. The assumption is, however, that traders are responsible for their actions, which would, hopefully, include doing their homework. In this case, that homework should lead them, again hopefully, to learning about the flaws of these volatility vehicles.

    The saying goes that nobody likes to pay for car insurance, but should one find themselves in an accident, they suddenly appreciate their own brilliant foresight. Such is the case of VIX derivatives, a valid insurance policy against a volatile market. In other words, a valid hedge, and one currently selling at a relatively low price.
    Aug 21, 2012. 01:51 PM | Likes Like |Link to Comment
  • Low VIX Levels Should Be High On Your Hedge List [View article]
    Thanks for pointing out the hazards of contango and VXX, Marc. It is one of the flaws mentioned towards the end of the article, and is one reason that using the VXX as a hedge requires a certain degree of attention and maintenance.

    Still, even when factoring in contango issues, I maintain that the explosive nature of the VIX does indeed lend itself to being a valid hedging tool for volatile market environments, and the VXX, though flawed, does provide traders with a useful volatility-based trading vehicle.

    That being said, personally, I prefer options on VIX futures. However, for those traders who prefer, for whatever reason, to use ETFs, VXX remains the go-to VIX derivative of choice.
    Aug 20, 2012. 04:49 PM | Likes Like |Link to Comment
  • Playing Both Sides Of The Eurozone Fence By Pairing Volatility With Germany [View article]
    What makes certain VIX derivatives, such as VXX, useful as one side of a pairs trade is that it overcompensates in regards to bad news, and is somewhat less reactive to good news. If you find a good match, as in this case, EWG, you end up with the potential of an outsized return.
    Jun 20, 2012. 07:41 PM | Likes Like |Link to Comment
  • As Wall Street Eyes Earnings, This Is A Good Time To Place A Bet On The Eurozone [View article]
    Semantics, really. Even a long-term investment is a bet that things will turn out the way you believe they will. But, as they say, whatever works...
    May 2, 2012. 12:44 PM | 1 Like Like |Link to Comment
  • Market Forecast: The Pain In Spain Is Unlikely To Stay On The Plain [View article]
    Check out the real estate market while you're there. Might be some deals to be had, though the market may still have a considerable ways to fall.
    Apr 3, 2012. 01:28 PM | 1 Like Like |Link to Comment
  • Why BATS Is A Black Swan Precursor And VIX A Strong Antidote [View article]
    You're right, Brian, there are certainly limitations to the effectiveness of VIX as a long-term hedge, but a hedge assumes you are making money in the opposite direction, and the "insurance" should be viewed as a cost of doing a profitable business. It is in this regard that I find VIX particularly effective.

    Besides using VIX derivatives as a straight hedge for one's portfolio, utilizing it as half of a pairs trade can be a reasonably good trade strategy, particularly as a shorter-term play. For example, pair the VXX, now relatively cheap, with your favorite Bullish vehicle, and you can define your risk clearly and construct a reasonably sound RRR (risk-to-reward ratio) trade.
    Mar 28, 2012. 01:27 PM | 1 Like Like |Link to Comment
  • Why BATS Is A Black Swan Precursor And VIX A Strong Antidote [View article]
    Thanks, Alan. I try to stay away from the boring subjects!
    Mar 28, 2012. 01:07 PM | 1 Like Like |Link to Comment
  • ETF Periscope: Low-Level 'Fear Gauge' Makes VXX A Sweet Pairs Partner [View article]
    Well, sir, certainly one of the more erudite responses to the phenomonon of the fear gauge, I must say (I'll assume, as well, that you are referring to T.S. rather than R.N.)

    As to the application of a Bear Call Spread towards this particular VIX derivative, I would imagine that the proper positioning, perhaps consisting of five strike prices deep, a pair of months in duration, and origination somewhere relatively close, but not to close, to being OTM, would help create more profit and less loss.
    Mar 21, 2012. 12:43 PM | Likes Like |Link to Comment
  • Greece Is To Wall Street Like A Flame Is To A Moth [View article]
    Not unusual for the VIX and its derivatives to behave badly as options expiration nears. Hardly the only factor, but such patterns do occur with some regularity.
    Feb 14, 2012. 08:05 PM | Likes Like |Link to Comment
  • Greece Is To Wall Street Like A Flame Is To A Moth [View article]
    Intentionally using the Blue Angel as a metaphor for Germany and the EU or just a happy coincidence, G&D?
    Feb 14, 2012. 12:51 PM | 1 Like Like |Link to Comment