Happy New year to you. Last year was quite eventful and rewarding. Performance surpassed expectations. Portfolio strategies were quite potent, resilient and worked according to plans. Directional expectations for most asset classes did not disappoint. Above all views against all odds for potential of Trump victory was proven right. In fact the trade that Trump win could cause strong rally in risk assets earned excess return.
While year 2016 was beautiful for me ..it still offered plenty opportunities to learn and improve trading strategies that must be enforced in 2017. There is always something to learn in the market.
DIRECTIONAL BIAS & BIG PICTURE
One thing I keep knocking my head about is this issue of keeping eyes on the ball. It is one of the hardest aspect of trading/investing. Most of us often fall prey to daily flow of news/rumours/punditry and so on that we forget that this is a business. We tend to forget the fact that whatever that happened in one day or any event for that matter is INCAPABLE of changing the medium term trajectory of asset class. Trying to game the outcome of any event or news in the form of daytrading is a fools game. One must therefore focus on the big picture of asset classes using forest to tree strategy. I figured that asset classes move in one direction or the other over nothing less than 5/6months.
There is no free lunch in this market. Market neutral strategies are not easy to produce consistent return. For anyone to make real money in this market one must have directional bias. I know it is hard but making money is a tough game. To be biased in one way or the other such decision must be based on abundance of market understanding and global knowledge. Numeracy is also part of the lot. I find it hard to expect anyone that lack versatility in global issues ; that is unable to decipher from enormous financial and political propaganda out there to make money in the today's market.
RISK VER REWARD
Trading/Investing is about risk versus reward. I will continue to stick to this mantra. Idea remains to minimize my risks while enhancing my reward when I am right on the call. This is very important because it is impossible for anyone to be right all the time. Trades must therefore be structured without emotions to enforce minimal downside risks when wrong while earning excess return when one is right.
As I mentioned last year ..Options is a God sent tool in this market to boost returns and mitigate risks. Anyone not employing this tool is actually missing something. However options require solid numeracy. I have no reason to apply lipstick on a pig here. Even experienced options players still continue to learn new tricks. It is a great turning point in my career to thought of myself being a proficient options player.
I take it as simply as possible though. No much complications. This year I will only be theta positive in all my options constructs. What I mean is that I am gonna be a net seller of time values. To be clear I will not ( and let no one ever) engage in naked short of options ! Options Premium has two parts: intrinsic and time ( extrinsic) values. All options bought must lose its time value at expiration ! That is all options must lose its theta value at expiration.. Yes all ( 100%) of all options. Therefore all buyers of options lose this part of premium at expiration. All sellers or net-sellers gain this part of the premium. That is one attraction of my being a net seller. So as a trader I see myself as owning an insurance company that offer insurance products to buyers lol Got that ?
1. S&P500 2200 ~2450
2. US 10 year Yield 2.2%~3.3%
3. US Dollar $103 ~ $87
4. Gold $1130 ~1500 (Silver/Copper to outperform Gold)
5. Overweight Healthcare, Industrials and Basic Materials
6. Very Bullish Europe, China and Emerging markets
7. Russia and US to work together to solve many problems in the world. Syrian war would be over. Great but positive work on Korean issue. Immigration issues in Europe to slow down.
Anyway thanks for your time. Again I wish you all a very happy and prosperous 2017. GLTA