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Global Macro Trading Journal
- Thread starter Daal
- Start date
You're under the assumption that I'm trying to play some sort of blow-off move at the very end of a massive bubble, i.e the move to $50 in 1979 or 1980 (whenever). I don't see it that way at all. I'm going to be out of the market and on to something else long before that happens.
You're also under the assumption that I'm going to be dicking around with these things trying to eke out some extra profits right around expiration. That's a venue for pros and the boys in the pit, I don't play there. I'm going to be out of them and on to something else well before expiration. If that means getting $4.25 on the spread instead of $5, so be it.
In case anyone is thinking of tagging along, I should emphasize the speculative nature of this trade. Silver could start a bear market tomorrow for all I know, and these options aren't being given away. The FCX, EWH, EWT puts were Jim Rogers' "finding money in a corner and picking it up" trades. They were priced so stupidly low and the market had barely had a down day in weeks, it was just a matter of buying and waiting for a tiny market shake.
You're also under the assumption that I'm going to be dicking around with these things trying to eke out some extra profits right around expiration. That's a venue for pros and the boys in the pit, I don't play there. I'm going to be out of them and on to something else well before expiration. If that means getting $4.25 on the spread instead of $5, so be it.
In case anyone is thinking of tagging along, I should emphasize the speculative nature of this trade. Silver could start a bear market tomorrow for all I know, and these options aren't being given away. The FCX, EWH, EWT puts were Jim Rogers' "finding money in a corner and picking it up" trades. They were priced so stupidly low and the market had barely had a down day in weeks, it was just a matter of buying and waiting for a tiny market shake.
ECB hikes could be the difference between life and death to EU periphery
http://ftalphaville.ft.com/blog/2011/04/05/536341/greek-and-irish-interest-rate-stress-tests/
http://ftalphaville.ft.com/blog/2011/04/05/536341/greek-and-irish-interest-rate-stress-tests/
Well, firstly, I am not talking about dynamically hedging it. Secondly, yes, there is pin risk, but again this is a portfolio held to maturity. It's not that hard.Quote from Ghost of Cutten:
Delta hedging has the possibility for substantial loss from whipsaws or gap moves. And since it's not a cash settled contract, the spread itself would have substantial pin risk if the market is near $50 at expiry.
Well, I don't know... I would agree, but only to a point, since I think generalizations are rather pointless.Commodity bull markets tend to experience rising volatility and event risk as prices increase, due to the compulsion to buy on the part of commodity consumers. In that respect, they resemble inverted stock market crashes. That is exactly the kind of wild and crazy market environment where things like trying to delta hedge, liquidate options spreads without getting raped on the bid/offer spread, and trying to manage the risks of being exercised during a delivery squeeze become problematic. Just look at a market like wheat in spring 2008 for an example. The benefit of being only long options/futures, without any short strikes, is significant in those kind of situations. It is almost certainly worth more than whatever small premium you could collect from shorting the $50 calls.
Well, again, this isn't a naked short call... Secondly, again, generalizations among commodity asset classes are not very appropriate. Finally, without knowing what the skew is like I don't see how you can conclude that outright calls are a better bet. Using simple calcs for Jan expiries, I see that the price at which the R/R on the outright call breaks even with the R/R of the 45-50 call spread is arnd 57.5. Does that tickle your fancy?If you think about it, what is the worst possible market situation to short a call in? A volatile runaway bull market. What is ralph betting on? If he thinks silver will have a gentle drift up to $50 by summer, well I would propose that he goes and looks at past commodity bull markets to get a better idea of how likely a slow steady rally is. Far more typical is for the move to end with large price spikes, normally you get a daily move of historic proportions, that is the largest in % terms for the last few years, before the rally comes to an end. I don't see how the premium collected is large enough to compensate for capping your gains in that kind of situation.
Quote from Daal:
ECB hikes could be the difference between life and death to EU periphery
http://ftalphaville.ft.com/blog/2011/04/05/536341/greek-and-irish-interest-rate-stress-tests/
If your business model or government financing scheme relies on interest rates scraping zero, than you've got no model. You're dead already and just waiting for the coroner to make it official.
Dude, it's a bit of a squeeze. Treasury GC is trading at 0 and there are bonds (3yrs) trading at -3%. I think the new equilibrium in FF shouldn't be too much lower than here, tbh, but at the moment it's all one way.Quote from Daal:
EFF averaged 9bps yesterday wow, any idea on where the market will trade today at Martin?
A very long piece for those who want to understand better Brazil's economy and politics
http://www.lrb.co.uk/v33/n07/perry-anderson/lulas-brazil
In my view much of the attributed 'wisdom' of lula is just a by product of the economic boom, the article itself mentions that most of the poverty eradication was the result of either growth or social policies(financed by gov revenues that were fueled by growth)
And the economic boom has more to do with the global commodities boom than any government policy
http://www.lrb.co.uk/v33/n07/perry-anderson/lulas-brazil
In my view much of the attributed 'wisdom' of lula is just a by product of the economic boom, the article itself mentions that most of the poverty eradication was the result of either growth or social policies(financed by gov revenues that were fueled by growth)
And the economic boom has more to do with the global commodities boom than any government policy
Steinhardt
http://video.cnbc.com/gallery/?video=3000014541
Rips buffett, is betting against the 2y UST
http://video.cnbc.com/gallery/?video=3000014541
Rips buffett, is betting against the 2y UST