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  • Anadarko Announces Settlement of Tronox Adversary Proceeding [View article]
    Buy cheap puts on crushed volatility. Go out a few months though. You can offset the cost by selling a further OTM put. This is a play on simple equilibrium after shorts and algos trying to rebalance/cover.
    Apr 3 03:36 PM | Likes Like |Link to Comment
  • Arbitrage Experts Feast On The Public's Ignorance [View article]
    Very good.
    Apr 2 10:49 PM | Likes Like |Link to Comment
  • Is The Entire Market Rigged? [View article]
    Every human activity from the World Series to TV game shows have been rigged. Casinos are rigged. Your cell phone is rigged. College admissions criteria are rigged-as are some of the athletic programs. Even pro wrestling is rigged!
    The scratch golfer with the 9 handicap, loan sharks and even the justice system-sorry folks.
    Elmer Gantry appears in many forms and in many places. It all started when the first descendant cracked his neighbor's skull over a rotten piece of fruit, all those many eons ago.
    Apr 2 10:47 PM | Likes Like |Link to Comment
  • Is period of low volatility coming to an end? [View news story]
    Shorting volatility has been the contra play to shorting the mortgage market back in 2008. But, you have to ask yourself, 'how many more times can I go to the well?'
    It's human nature to milk a cow for all it's worth. In this case, it's been about defective products in addition to a macro trend.
    Is the world a more volatile place than recognized? One would think so, but the other counter-weight is the vast liquidity supplied by the Fed.
    I have noticed a bit of coefficient drag relative to diminishing expectations. Probably a rise in interest rates will increase volatility. Until then, spikes will be shorted.
    Apr 2 05:05 PM | 1 Like Like |Link to Comment
  • The Stock Market Is Rigged! The Stock Market Is Not Rigged! [View article]
    How does new technology change my edge? First, recognize that if you don't have an edge, all the money management (e.g. limit orders), will do is allow you to slowly bleed to death. Concern about whether your fiber optic cable passes muster is a distraction.
    Apr 2 01:51 PM | Likes Like |Link to Comment
  • Arbitrage Experts Feast On The Public's Ignorance [View article]
    To ponder:
    Better to own SVXY or sell naked calls against VXX (or would selling ITM, ATM or OTM make a difference)?
    Consider: Is there a difference in risk? (We could be assigned short shares of VXX, but or we not then de facto long SVXY?) Not exactly, as shorting has different margin rules, etc-but this is a theoretical exercise.
    If we hold SVXY, is there an optimal point to buy puts/sell calls i.e. hedge with a collar?
    Consider also: Would it be more efficient to own SVXY, or sell an array of bear call spreads against VXX? What variables would we contemplate in reaching a decision?
    Do I dare disturb the universe?
    Another great article Peter.
    Apr 2 11:57 AM | Likes Like |Link to Comment
  • UConn Economist Fred Carstensen: Stocks Overvalued, To Trend Down In 2014 [View article]
    Just as surely as night follows the day.
    Apr 2 11:25 AM | Likes Like |Link to Comment
  • Hollow Men, Hollow Markets, Hollow World [View article]
    Eliot noted the 'sterility' of the modern world, yet he crafted his message in such a manner that the obtuse could never fathom. Since it's April, here's the opening from 'The Wasteland' (don't have time to double-check so cut me some slack):
    "April is the cruelest month,
    Mixing memory and desire,
    Stirring dull roots with spring rain..."

    This is a contra expression to the hope and excitement of previous generations and specifically invokes Chaucer's Canterbury Tales (see prologue).
    Of course, existential alienation isn't entirely new-but modern man is up against Big Blue, and is playing a game mostly ignorant of the new rules.

    "I've looked at life from both sides now,
    from win and lose, and still somehow
    it's life's illusions I recall.
    I really don't know life at all. "

    I always thought these lyrics revealing, and perhaps Popper would likewise find them apt. For me, the standard set of biases we employ many times a day are enhanced and magnified by a constant dose of collective media dribble every bit as potent as arsenic. Once again I would argue 'drink deep or taste not'- yet millions will pass another day locked in the 'chamber of maiden thought.'
    The terms 'rigged' or 'manipulated' fall woefully short.
    Apr 2 10:39 AM | 8 Likes Like |Link to Comment
  • Shorts Forum [View instapost]
    99.9% of the investing public has never read 'Remininces of a Stock Operator'- If there was only one man to study, for my money it's Jesse Livermore. Just take note of all the modern billionaire traders that pay homage to the teacher.
    Mar 31 10:08 PM | 1 Like Like |Link to Comment
  • Is It Time To Short Stocks? [View article]
    It's HFT-a new wrinkle to contemplate. I trade around the machines, the often tell-tale tracks in the option chains, and, of course, the greatest macro discontinuity of all time.
    Some still choose to read/study balance sheets and various pro forma reports. Perhaps it's too disconcerting to think that Pollyanna would play them for suckers.
    Chess? The opening gambit was to short volatility. So, in a strange sense, the shorts have made a fortune-provided they shorted volatility. What-you'd rather measure out your dividends in coffee spoons? But the phantoms want you to play your same old game. It takes a lot of suckers to support a circus.
    Mar 31 09:42 PM | 1 Like Like |Link to Comment
  • Is It Time To Short Stocks? [View article]
    The question is too vague and generic-although the material is well presented. If I'm in the market today with a fresh $1m I just inherited from my uncle-I should consider collars and other strategies. If I got in at 666-I'm doing no-brainer stuff like selling calls and maybe trading put spreads.
    Furthermore, actually shorting shares is too complicated for the average guy. That's like a novice golfer trying to play against the squinty-eyed veteran. The novice just doesn't have the shots.
    If you're Paul Tudor Jones or Stanley Druckenmiller whatever you do will likely be the right thing.
    Mar 31 03:22 PM | Likes Like |Link to Comment
  • Part VI: Non-Correlated Hedged Convexity Capture Revisited [View article]
    "Most of the performance of Non-Correlated Hedged Convexity Capture comes from the negative convexity often associated with the daily reset of the leveraged inverse exchange traded products themselves."
    Can you provide the data for 'most'? I would think time is an integral variable in that regard. Is the decay exponential or linear? If we know certain facts then we could, for instance, determine when a half-life occurs. I don't know if the subject nature will allow that degree of accuracy-unless connected with mean reversion.
    Mar 31 10:04 AM | Likes Like |Link to Comment
  • Frightening Fragility When Running Consensus Fails [View article]
    Good article and comment. A quick historical review indicates the nascent origins of central planning as a way to cope with the last depression. FHA,VA, FNMA, etc were all born in the incubator of The New Deal. The evolution that followed allowed mutations such that the original DNA can hardly be recognized.
    It's median income and limited opportunity as far as the eye can see that means that 83bps will yield substantial drag. Once uppon a time I was a happy camper to get a 10% fixed rate mortgage. But I suppose I was blindly confident in my future. The future was an extrapolation of the then present time. If one extrapolates today, we must ask 'who'll stop the rain?'
    Mar 29 01:13 PM | 1 Like Like |Link to Comment
  • The Housing Market Is Starting To Get Hammered [View article]
    Why not trade ITB based on statistical evidence...?
    It seems to me in reading most of the comments, though not all, that many folks would rather debate foreclosure rates, shadow inventory, whether their kids are from Mars-hell, I'd rather make money as easily as possible, and I've made a lot by shorting ITB-and I've been of record on this numerous times.
    I don't buy ITB when it's down because the time value of money makes that an inferior strategy to shorting.
    Mar 28 05:38 PM | Likes Like |Link to Comment
  • The Housing Market Is Starting To Get Hammered [View article]
    Dave, I've been outfront in suggesting shorting ITB at 25. Recently it waved at 26, and I was compelled to triple down (hell with a mere double-down when it's "The Same Old Song".)
    In my opnion, the residential market is morphing into a different animal-something at odds with data since 1946. Demographics, sustained lower median income, competing costs for transportation and health costs-and new dynamics in the mortgage market-and the unwind of unprecedented pooled money-all of these things represent historical shifting-yet the prism by which most view recent data is via the same old data protocols.
    Does this persist? Well, do the underlying factors persist? As I've traveled around the last couple of years, a wide swath of younger people seem to bump against an extraordinary inertia. Older people with decent pensions are buying smaller homes in retirement centers. There are 'pockets of resilience and growth', but I contend that these geographical pockets may skew the data as well as the other factors listed.
    Honestly, I don't know what to make of these observations (other than to make money by trading the obvious), but I'm fairly convinced that there's a much larger dimension to all of this.
    Mar 28 11:29 AM | 2 Likes Like |Link to Comment