Cash & Carry (Standard)

Correlations are partially used and can change. The hedging is more of a direct realtionship between the pairs.

Long USD/CHF is a long/short

and...

Long NZD/USD is a long/short

therefore the DIRECT CORRELATION, not subjective is:

USD neutral and NZD long and CHF short...

Nothing can ever change this..

Now in correlations of crosses, exotics and pairs that seem to move in correlation, non-correlation or anti-correlation and do not share the structural characteristics, illustrated above, of course will change and be subjective.

Michael B.




Quote from mahras2:

Okay. So basically you are using correlation to hedge off the excess risk?

It will be interesting to see how it deals with interest rate changes. It is great that the system is EUR and USD neutral.
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Quote from ElectricSavant:

I hope to be around that long and I hope I can continue to provide enough material for the inquiring minds of ET :)

The time needed is to exceed the Uncle Point! So far, EVERY ONE of these pair (except EUR/CZK) continue to pay interest for the last year and a half, maybe longer, it is difficult to check unless your trade forward, like I am...

The spreadsheet that I published is real live trades, with real live money.

Michael B.
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Gotcha. Any chance you could give a little primer on how to use your spreadsheet? I understand the amount of each currencies to enter, but how is adding to currencies done?

Thanks for sharing this by the way. I have been trying to build a carry strategy (well pseudo carry i guess) so this is interesting work for me to think about.
 
mahras,

Thank you for asking :)

Try to fill it out from left to right begining with the first tab and then the second tab, and ask away...

Use the base exposure factor of 0.6000 for now.

Today at interest reporting time between 15:00-16:30 est I will fill mine out and post it here so you guys can see the next line...most of the work is to transfer info from your platform to the spreadsheet. there is very little "add To's" made.(yes! the system gets paid interest 365 or 366 days a year!)

The way the system determines if there is an "add to" is if there is a wave of new highs or lows in the upl it will add to. Or if there is a chop period with just interest earning days, there will be an add to.

Michael B.

Below is a blank spreadsheet:



Quote from mahras2:

Gotcha. Any chance you could give a little primer on how to use your spreadsheet? I understand the amount of each currencies to enter, but how is adding to currencies done?

Thanks.
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Attachments

My trademark is late edits...

Re-read this entire thread....

The spreadsheet is a tool and a report...it is used extensively in this system.

Michael B.
 
Excellent. I will play with this myself.

Yet another question>What is the base currency factor? How is it calculated?

Regarding edits>Yea I do it myself (this is one).
 
The formula is there for all to see...

It simply takes the NAV and decides an exposure with a factor. I change the factor from time to time to "dial in" my APR/ROI. As time progresses and my add to's increase the daily interest, I can move the exposure to be less and less as the year progresses, thus ALSO putting more time on my side to collect that daily interest. 32% yield is MY goal...whats yours? Remember every Rose has its Thorns!

A higher factor= less exposure.

Excellent questions mahras, please let me know how you do and ask away...

Michael B.


Quote from mahras2:

Excellent. I will play with this myself.

Yet another question>What is the base currency factor? How is it calculated?

Regarding edits>Yea I do it myself (this is one).
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Are there any noteworthy differences between this system and the one described in your previous Cash & Carry journal?

How is the 0.60 exposure factor derived?
 
late apex...

Well the value point was eliminated and much has been learned about exposure and for the most part, I follow the current factor published, instead of being so over exposed. earlier I was demonstrating how NOT to trade Cash & Carry (Standard) :)

The range of base exposure factors that I use, have been derived from the past "ebbs and flows" experienced and accelerated or decelerated at key times. For a primitive example, Thursday's or Friday's would be a good time to bumb them to get interest earned over the weekend. (remember to lower the factor increases exposure, and to raise it lowers the exposure)

Also this Journal has not been closed yet!

Thanks for your interest late apex...hehe interest get it?

Michael B.

Quote from late apex:

Are there any noteworthy differences between this system and the one described in your previous Cash & Carry journal?

How is the 0.60 exposure factor derived?
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Quote from ElectricSavant:

late apex...

Well the value point was eliminated and much has been learned about exposure.

The base exposure has been derived from the past ebbs and flows experienced.

Also this Journal has not been closed yet!

Michael B.
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But it's still early...:p

OK, thanks, I did see your reply to mahras2 after posting my question on the exposure factor.

Now, here's the $64,000 question for you. Why not put on the highest value basket (approx. 32:1 leverage, from my ongoing experience trading a hedged carry basket over several months), allowed by the platform?

If an unrealized P & L swing gets too close to a margin call level (-50% UPL), we downsize the entire portfolio. No big deal.

Until and unless that happens, we happily collect 87% APR, as well as occasionally convert UPL to RPL, at a specific positive UPL threshold. Total expected annual return is significantly greater than 87%, in my experience, even with possible UPL-forced downsizings.
 
ummmm...when near a margin call partials are all losses and I suspect being in so heavy would get to a margin call quicker, than compared to a "more time exposure".

Wouldn't weathering the storm, pay more than getting it now?

Great question, by the way. And I may or may not answered it, for some.

Michael B.

P.S. I am allergic to high DD, let alone that..that...wwwworrd, Margin call!

P.P.S. A BEF (Base Expose Factor) of 0.35 pushes DD to -28%, and a yield to around 62%

Quote from late apex:

But it's still early...:p

OK, thanks, I did see your reply to mahras2 after posting my question on the exposure factor.

Now, here's the $64,000 question for you. Why not put on the highest value basket (approx. 32:1 leverage, from my ongoing experience trading a hedged carry basket over several months), allowed by the platform?

If an unrealized P & L swing gets too close to a margin call level (-50% UPL), we downsize the entire portfolio. No big deal.

Until and unless that happens, we happily collect 87% APR, as well as occasionally convert UPL to RPL. Total expected annual return is significantly greater than 87%, even with UPL-forced downsizings.
More...
 
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