Global Macro Trading Journal

[Daal]

I decided to calculate my exposures to see what are my main risks and also in the spirit of transparency. As I have been saying, I believe that talk is meaningless, ALL that it matters when it comes to truly knowing what someone thinks, its their actual trades/investments

It turns out that my portfolio was quite a bit less risky than I thought. Thats the nice thing about doing day and swing trading, as you accumulate profits you increase your cash position automatically which de-risks the rest of your portfolio and its been a good period lately as a result of the MJ boom.

The OTC - Swing trades are a bunch of marijuana stocks that I'm only as a swing trade going into the Canadian legalization. They all have mental stops so I dont think they matter much in terms of overall balance of risks.

The Risk Assets and Hedge Assets breakdown is something new I'm thinking about it. I havent implemented the 'weighthing' of different assets to come up with a better ratio, so I just straight up added them and divided. I'm only slighly above my 50% limit for risk assets but that is more than made up (right now) by the fact that I'm quite long 10y UST bond futures. If my stop gets hit on bond futures, my risk to hedge ratio goes to 1.87. The OTC swing trades will be turning into cash soon (as I take profits or hit stops), so my hedge assets are a bit understated

I also did a stress test estimate

-25% in case my melt-up and/or bull continuation thesis is wrong, doesn't seem so bad. Thats right in the range of my drawdown tolerance. I believe I could handle all the way up to -30% to -35% without going crazy

So it doesn't look like I will need to be doing a lot of derisking, at least not right now. Perhaps do some Spitznagel style S&P500 put buying when the VIX gets super low but that's about it.
Any suggestions are welcome

 

[Daal]

With regards to the Risk to Hedge ratio and the weighting, I did my first estimate

Risk/Hedge Total is the risk weighting multiplied by my exposure. My scores will change in the future as I think more about how one asset compare to another but I think my overall goal will be to keep my Weighted to Risk to Hedge ratio bellow 4. My weightings come from my gut feelings, experience and data from having done a lot of backtests in asset allocation

By having some rules around my ratios I avoid my mistakes in 2009. That is, to have a too unbalanced risk to hedge ratio for that point in the cycle. Back then sentiment was terrible, valuations were low and prices were very oversold. I barely had any risk assets on and was loaded in hedge assets. I was unbalanced
Now sentiment is more bullish, valuations are on the higher side (although I'd still argue they are resonable) and prices are up a lot. I want to own risk assets but I dont want to own too little hedge assets. So I will try to keep my ratio of risk to hedge to 4 max. I will also try to pick a good moment to start buying S&P500 puts, they provide a lot of bang for the buck in terms of hedging (hence the 300% weighting) according to some research and backtests. Trick is, you got to time it well, to just keep buying them every quarter, I have some doubts is a great strategy

 

[Daal]

My Weighted Risk to Hedge Ratio Now: 4.36

Typical 'balanced' AA portfolio(30% stocks, 55% 10y bonds, 15% gold): 1.48

Berkshire Hataway now (157% stocks + businesses, 31% cash)*: 33.76

Druckenmiller now, based on his 13-F filling (50% stocks, 50% cash)*: 6.67

Einhorn now (95% stocks, 7% gold, 76% shorts)*: 1.22

Ian Balina before his downfall (95% crypto, 5% cash)*: 380

*rough estimates

of course, Druckenmiller might be short or long other stuff through futures.

It will be interesting to analyze in the future, portfolios of other people too

 

[luisHK]

• Interesting, as often, about long Bond futures Daal, how do you feel about paying the raising interest rates on those why ur cash is probably paying less than the futures cost, interestwise ?

 

[Daal]

• Interesting, as often, about long Bond futures Daal, how do you feel about paying the raising interest rates on those why ur cash is probably paying less than the futures cost, interestwise ?

Hi
the difference is not that big (I try to buy 2%+yielding 1-2y T-bills with my excess cash whenever I can) but more importantly, I find that having the futures gives me mental flexibility. It feels more like a trade rather than an investment, so if the bond bear returns, I will get out of the way. if I switch my cash and T-bills into bonds, I will probably fight the market more

 

[Daal]

• Interesting, as often, about long Bond futures Daal, how do you feel about paying the raising interest rates on those why ur cash is probably paying less than the futures cost, interestwise ?

I also need some cash balances in some of my brokers to run day and swing trades with. These brokers often don't allow the trader to buy t-bills. IB seem unique in that regard, which is very nice.
If I keep $50K balance in a broker without being able to buy T-Bills, that is an extra $1K a year just to keep that account open. I try to keep those balances as low as possible and often buy some stocks in those brokers so the cash doesn't sit idle. Still, I need some cash so I don't run negative balances and pay margin interest

 

[m22au]

I decided to calculate my exposures to see what are my main risks and also in the spirit of transparency. As I have been saying, I believe that talk is meaningless, ALL that it matters when it comes to truly knowing what someone thinks, its their actual trades/investments

It turns out that my portfolio was quite a bit less risky than I thought. Thats the nice thing about doing day and swing trading, as you accumulate profits you increase your cash position automatically which de-risks the rest of your portfolio and its been a good period lately as a result of the MJ boom.

The OTC - Swing trades are a bunch of marijuana stocks that I'm only as a swing trade going into the Canadian legalization. They all have mental stops so I dont think they matter much in terms of overall balance of risks.

Daal just curious about your swing trades in MJ stocks.

First of all - to be 100% sure - are these long positions?

Second, you mentioned the (October 17) Canadian legalization date (https://en.wikipedia.org/wiki/Cannabis_in_Canada) as a potential reason why these stocks are rising (and/or will continue to rise). Were you long these stocks before the August 15 announcement of STZ buying a larger stake in CGC / WEED?
https://www.newswire.ca/news-releas...-global-position-and-alignment-690901721.html

Or did you buy your MJ stocks after this announcement?

The thing I find funny - especially given EMH theory - is that this announcement came out on the Wednesday morning (August 15), but it wasn't really until Monday 20th when the entire sector started to rocket higher.

.

 

[Daal]

Daal just curious about your swing trades in MJ stocks.

First of all - to be 100% sure - are these long positions?

Second, you mentioned the (October 17) Canadian legalization date (https://en.wikipedia.org/wiki/Cannabis_in_Canada) as a potential reason why these stocks are rising (and/or will continue to rise). Were you long these stocks before the August 15 announcement of STZ buying a larger stake in CGC / WEED?
https://www.newswire.ca/news-releas...-global-position-and-alignment-690901721.html

Or did you buy your MJ stocks after this announcement?

The thing I find funny - especially given EMH theory - is that this announcement came out on the Wednesday morning (August 15), but it wasn't really until Monday 20th when the entire sector started to rocket higher.

.

Hi,
yes they are all 100% long positions. I wouldn't short them right now (except MAYBE IGC, due their oustanding shelf but its tricky because its a hugely crowded short, so its high risk and high reward. its not OTC but its kinda like it). There will be a time to short them but its when they are very extended and there is some sort of catalyst (usually a sell the news catalyst, as was the January Cali legalization). The way to play these is to buy 2-3 months before the 'big event', sell a few days before it, short some names and then play the OTC bounces (which I love) which tend to be very predictable. But of course, one has to have some degree of flexibility and adapt the plan in case the price action disagrees.

Yes I bought after the CGC announcement. Some on the day, some on the day after, some a few days later. and I'm still buying them, every once and a while I find a OTC ticker that havent run and I take a shot at it with a tight stop. These tend to be easy money making trades when the market is hot (when its not, its suicide). I take profits when they get somewhat overextended and then buy back when they pull back, all the way to the time that I want to bail out of them
I mentioned here in the journal that I liked CGC after that news, I was long some but unfortunately I dont have as much confidence in listed stocks as I do in OTC. In OTCs I feel that I have a big edge going against mom and pop retail, in the NYSE I dont feel that I'm so much better than the competition, even though I'm probably am. So I tend to get shaken out. By $37 I was all out, unfortunately

 

[m22au]

Hi,
yes they are all 100% long positions. I wouldn't short them right now (except MAYBE IGC, due their oustanding shelf but its tricky because its a hugely crowded short, so its high risk and high reward. its not OTC but its kinda like it). There will be a time to short them but its when they are very extended and there is some sort of catalyst (usually a sell the news catalyst, as was the January Cali legalization). The way to play these is to buy 2-3 months before the 'big event', sell a few days before it, short some names and then play the OTC bounces

Thanks for your thoughts Daal - much appreciated.

Just wanting to check that I've got most/all of the US companies on my radar:

CGC CRON TLRY CVSI and IGC. Apart from pink sheets (eg. ACBFF and APHQF and so on), are there any others on the NYSE or Nasdaq or NYSE Amex that you are aware of?

.

 

[Daal]

Thanks for your thoughts Daal - much appreciated.

Just wanting to check that I've got most/all of the US companies on my radar:

CGC CRON TLRY CVSI and IGC. Apart from pink sheets (eg. ACBFF and APHQF and so on), are there any others on the NYSE or Nasdaq or NYSE Amex that you are aware of?

.

On the listed markets, that's pretty much the ones that I'm trading (and know). I'd note that CVSI is OTC, although I do think they will be listed in a few months as they are trying to and according to my research, they meet the criterias for the Nasdaq Capital Market and Nasdaq Global Market. Only on the Nasdaq Select they dont meet it