Alpha Wolf
- Thread starter BeautifulStranger
- Start date
I suppose it could be argued an option spread has a built in hedge.
Press "print screen" and paste the image into any image editor, no need to take photos of the screen in 2020.
A butterfly is a hedged straddle.
I am now bearish on ES. Will be looking to fade rallies under 3780 for a intermediate target of 3650. “Quality time” above 3780 changes my mind. Should ES drop significantly from Friday’s close, I will use 3740 as the next resistance level and intend to short apparent failed rallies below that number. Should ES penetrate then reclaim 3740, I may change my strategy to buying declines that seem to peter out at or above the 3740 area.
Recent US economic reports have not been inspiring. Economic and debt level concerns seem likely to weigh on risk taking this week, making this the primary trading theme for me, even more than monetary and or geopolitical concerns. While Wall Street has been cheering government stimulus efforts and there is a new one in the pipeline, these stimulus efforts are based on the fact our underlying economy is struggling under the pandemic, which is sort of like applying a salve on a new wound while in a knife fight. Hopefully the Covid vaccine will also be effective on the recent new strain out of the UK as well as any new strains that may come up.
I will focus on short option strategies on stock index futures and on other risk associated assets. I do not anticipate any equity related trades this week as most of my setups on stocks involve long positions.
ES is potentially at the beginning of a significant trend change, possibly making longer term bearish strategies viable for the first time in almost a year.
Recent US economic reports have not been inspiring. Economic and debt level concerns seem likely to weigh on risk taking this week, making this the primary trading theme for me, even more than monetary and or geopolitical concerns. While Wall Street has been cheering government stimulus efforts and there is a new one in the pipeline, these stimulus efforts are based on the fact our underlying economy is struggling under the pandemic, which is sort of like applying a salve on a new wound while in a knife fight. Hopefully the Covid vaccine will also be effective on the recent new strain out of the UK as well as any new strains that may come up.
I will focus on short option strategies on stock index futures and on other risk associated assets. I do not anticipate any equity related trades this week as most of my setups on stocks involve long positions.
ES is potentially at the beginning of a significant trend change, possibly making longer term bearish strategies viable for the first time in almost a year.
Looks like China’s economic numbers grew more than expected. If heavy exporter China is doing well, it suggests the countries they export to can’t be doing that bad.
Looking at the last 20 to 30 years of broad based index ETFs prices relative to a 5 standard deviation channel based upon a one year moving average leaves me with a mixed opinion. The price of IWM is currently the furthest from it’s moving average in the twenty year history of data I currently have available to me. The current price of IWM is over 5 standard deviations away from its 1 year moving average. This outstanding performance conflicts with expectations in my own mind based on perceptions of both long term structurally based trends and current events, including the pandemic and recent US political events. There are several prominent possibilities:
1. Federal Reserve liquidity is having an multiplier effect on equity prices through not just increased available capital, but also with investor’s increased willingness to take on risk.
2. Current speculation is unsustainably high, with a likely reversal coming soon that will ultimately have a severe effect on our financial system and economy.
3. We are now entering high gear of the technological revolution that is going to completely change, well, everything. More on this awe inspiring, breath taking development below.
SPY and QQQ don’t have quite the momentum that IWM has, but on a historical basis, we may actually be early in a sustained uptrend. In other words, there may be 3 to 5 years to go before we see a deep and sustained bear market, if even then.
I believe our excellent trading environment will continue, with changes in momentum having continued worthwhile follow through. Select new issues will offer mind blowing returns even relative to the mind blowing returns of notable historic new issues. The key is understanding the science behind them.
Arstechnica.com has started a 7 part series on quantum mechanics explained in layman’s terms. The investment, market, economic, and societal implications of new technologies coming out of this is truly astounding. The way we compute, communicate, visualize concepts, provide propulsion, navigate, and problem solve will be dramatically change with the implementation of new and upcoming technologies as suggested by this series of articles. One merely has to visualize our supply chain and or a manufacturing process to feel the weight of what is in store for us. The applications of new technology based on our increased understanding of quantum mechanics is (Insert adjective here).
The first article provides foundational information about quantum mechanics. The second article gives us a solid hint of how quantum mechanics will result in new products and more:
A “no math” (but seven-part) guide to modern quantum mechanics
Welcome to "The curious observer’s guide to quantum mechanics"–featuring particle/wave duality.
MIGUEL F. MORALES - 1/10/2021, 8:00 AM
https://arstechnica.com/science/2021/01/the-curious-observers-guide-to-quantum-mechanics/
A curious observer’s guide to quantum mechanics, pt. 2: The particle melting pot
In which lasers do things that make absolutely no sense but give us great clocks.
MIGUEL F. MORALES - 1/17/2021, 8:00 AM
https://arstechnica.com/science/202...ntum-mechanics-pt-2-the-particle-melting-pot/
I have a friend with a chemistry and science background with an interest in AI that lives a few miles way from the University the author of the above articles attends. I will report back if they make contact and discuss the areas that most excite them.
Looking at the last 20 to 30 years of broad based index ETFs prices relative to a 5 standard deviation channel based upon a one year moving average leaves me with a mixed opinion. The price of IWM is currently the furthest from it’s moving average in the twenty year history of data I currently have available to me. The current price of IWM is over 5 standard deviations away from its 1 year moving average. This outstanding performance conflicts with expectations in my own mind based on perceptions of both long term structurally based trends and current events, including the pandemic and recent US political events. There are several prominent possibilities:
1. Federal Reserve liquidity is having an multiplier effect on equity prices through not just increased available capital, but also with investor’s increased willingness to take on risk.
2. Current speculation is unsustainably high, with a likely reversal coming soon that will ultimately have a severe effect on our financial system and economy.
3. We are now entering high gear of the technological revolution that is going to completely change, well, everything. More on this awe inspiring, breath taking development below.
SPY and QQQ don’t have quite the momentum that IWM has, but on a historical basis, we may actually be early in a sustained uptrend. In other words, there may be 3 to 5 years to go before we see a deep and sustained bear market, if even then.
I believe our excellent trading environment will continue, with changes in momentum having continued worthwhile follow through. Select new issues will offer mind blowing returns even relative to the mind blowing returns of notable historic new issues. The key is understanding the science behind them.
Arstechnica.com has started a 7 part series on quantum mechanics explained in layman’s terms. The investment, market, economic, and societal implications of new technologies coming out of this is truly astounding. The way we compute, communicate, visualize concepts, provide propulsion, navigate, and problem solve will be dramatically change with the implementation of new and upcoming technologies as suggested by this series of articles. One merely has to visualize our supply chain and or a manufacturing process to feel the weight of what is in store for us. The applications of new technology based on our increased understanding of quantum mechanics is (Insert adjective here).
The first article provides foundational information about quantum mechanics. The second article gives us a solid hint of how quantum mechanics will result in new products and more:
A “no math” (but seven-part) guide to modern quantum mechanics
Welcome to "The curious observer’s guide to quantum mechanics"–featuring particle/wave duality.
MIGUEL F. MORALES - 1/10/2021, 8:00 AM
https://arstechnica.com/science/2021/01/the-curious-observers-guide-to-quantum-mechanics/
A curious observer’s guide to quantum mechanics, pt. 2: The particle melting pot
In which lasers do things that make absolutely no sense but give us great clocks.
MIGUEL F. MORALES - 1/17/2021, 8:00 AM
https://arstechnica.com/science/202...ntum-mechanics-pt-2-the-particle-melting-pot/
I have a friend with a chemistry and science background with an interest in AI that lives a few miles way from the University the author of the above articles attends. I will report back if they make contact and discuss the areas that most excite them.
I see my trade history for the week us still up. Perhaps my posting this publicly will help me do better in the coming weeks.
I tried session trading currency options and realized how high the costs actually are, especially when measured in terms of percentage of session range needed to be captured in order to just break even. I traded a EUR and a AUD long call and for the life of me was not able to get an order executed at mid plus one tick price improvement, like I’m accustomed to. Paying a full spread, plus considering the effect on breaking even of 45 delta options, commissions, and fees, as well as adding even just one tick allocated towards theta decay on these weekly options left me needing to capture 20% of the session range to break even. I got lucky this time, but it is a mistake I not going to repeat. I wanted long exposure in currencies on correlated risk asset ideas using defined risk because I did not intend to watch the positions. My adjustment, until I set up automated trading, will be to require me to watch over short term positions while trading the underlying at conservative exposure levels during non RTH, if I decide to continue trading non RTH, that is.
Attached below are my trades and open positions today:
A hedging idea came to mind: “Multiple timeframe management”. It may be more efficient for me to increase the numbers of my option spread positions while extending their duration, while hedging, if needed, against seemingly short term adverse price movements, at least until my thesis has been invalidated by market action. However, one of the features of short term option spreads I covet, is the potential of rapidly increasing delta with defined risk. More work is needed. More practical experience with several option spread types should help as well as work on comparing more trade structures.
Attached below are my trades and open positions today:
A hedging idea came to mind: “Multiple timeframe management”. It may be more efficient for me to increase the numbers of my option spread positions while extending their duration, while hedging, if needed, against seemingly short term adverse price movements, at least until my thesis has been invalidated by market action. However, one of the features of short term option spreads I covet, is the potential of rapidly increasing delta with defined risk. More work is needed. More practical experience with several option spread types should help as well as work on comparing more trade structures.