Why would you expect GOC to start bullshitting us now? He's never done that sort of thing in the past- not even once.
GoCs 'scalping' journal
- Thread starter Ghost of Cutten
- Start date
Why would you expect GOC to start bullshitting us now? He's never done that sort of thing in the past- not even once.
So as promised I will update the details of my gold exit. I covered my short futures at 1205, and liquidated my options at various prices around the same time - the Dec put spreads were up at 55ish. However I had altered my options positions quite considerably since the original call, as the market moved in my favour and I got more bearish. But that was me trading for a living, and so managing my positions, size, trade vehicles, hedges etc for maximum profit to risk ratio is important; whereas this is a 'brag' journal, where making bold and hopefully successful calls for big moves contrary to expert opinion is the goal.
The fact that gold fell from 1430 to 1205 in a month and a half after I posted the call, without hitting my stop, and with a maximum move against me of hardly anything, is sufficient for me to feel entitled to claim the scalp.
Adios Mr Paulson! Krugman will be the next to fall!
The fact that gold fell from 1430 to 1205 in a month and a half after I posted the call, without hitting my stop, and with a maximum move against me of hardly anything, is sufficient for me to feel entitled to claim the scalp.
Adios Mr Paulson! Krugman will be the next to fall!
Next potential victim - Mr Bill Ackman, and his HLF short. Today's close/AH price is 66.14. I place a stop at a close below $57, although I may exit earlier e.g. 57-59 if I think it's making a genuine break lower - if I exit earlier than $57, I'll post here, otherwise consider $57 to be a hard stop on a closing basis. My suspicion is that Ackman will be forced to cover, and this will happen at much higher prices in a spectacular hedge-fund feeding frenzy. Main risk is that HLF is in fact a pyramid scheme and gets shut down by the regulators.
As for Paul Krugman - JGBs have rallied steadily, but my long-term view and call remains totally unchanged - bearish. I don't wish to exit what I think is a sound trade, so I'm waiving my earlier stated stop. If I'm wrong and they just keep grinding higher, I'll cover eventually and accept defeat here. Just like his NYT column, it seems that Krugman is not as easy to get rid of as you'd think
As for Paul Krugman - JGBs have rallied steadily, but my long-term view and call remains totally unchanged - bearish. I don't wish to exit what I think is a sound trade, so I'm waiving my earlier stated stop. If I'm wrong and they just keep grinding higher, I'll cover eventually and accept defeat here. Just like his NYT column, it seems that Krugman is not as easy to get rid of as you'd think
Did you catch Ackman on Charlie Rose the other day? He talks about how he was short MBIA for 7 years and was frequently criticized in the media. Stock eventually went from $70s to $3 and CDS exploded
If you think there will be a VW type situation you are probably better off being way OTM calls rather than short the stock. First because it limits your risk (if the government says anything stock could be halted and gap down huge, or just gap down huge with news outside regular trading hours), secondly I don't think even $100 a share will be enough for him to cover. He's got less than 10% of his fund there, he's got a lot of staying power, the MBIA situation provides a perfect example. At $150+ he might cover but the calls will explode in that scenario
If you think there will be a VW type situation you are probably better off being way OTM calls rather than short the stock. First because it limits your risk (if the government says anything stock could be halted and gap down huge, or just gap down huge with news outside regular trading hours), secondly I don't think even $100 a share will be enough for him to cover. He's got less than 10% of his fund there, he's got a lot of staying power, the MBIA situation provides a perfect example. At $150+ he might cover but the calls will explode in that scenario
MBIA is not comparable, because he was not nearly as vulnerable to a short squeeze (his short position was no way near as big), and there were no signs of a squeeze taking place. Whereas with HLF he is short a giant % of the free float, and several well-financed veteran speculators are aggressively buying up the stock, which has acted bullishly. MBIA was also exposed to a once in a lifetime housing bubble with was almost certain to blow up and crush the company, whereas the case against HLF's accounting (even if we are generous and give Ackman a 50% chance of being right) is far less certain.
Don't forget that he does not have full control over covering. If he has trouble finding a borrow, he will have to start covering. If his investors get nervous and start pressuring him or withdrawing enough, he will have to start covering. If the stock goes up enough, he will have to start covering - even if he is only short 5%, there is a maximum limit to what % of his fund he can have short in one stock, before his brokers and investors, and he himself, start reaching their risk tolerance limits. For example if the stock triples it will be hard for him not to start covering, just for risk reduction.
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Obviously I considered way OTM calls, but I rejected them because I think the underlying offers better odds in a wider range of scenarios. For example if the stock goes to 100 in the next 6 months, way OTM options would lose 100% of their value, whereas the underlying will be up 50%. If the stock has a gargantuan rally, I will still make a huge gain in the underlying relative to my risk, so the options will not be all that much better even in that dream scenario.
As for hedging against a big gap down - it would prove extremely expensive, I'd have to maintain ATM options for potentially a long time until the move is over. If the market rallies as expected, I'd have to buy even more insurance at higher strikes. I also think that the market is quite likely to tip off any government announcement by acting suspiciously weak beforehand, rather than just coming out of the blue. And, I don't think the chance of an overnight announcement is particularly high. So, IMO the potential risk averted by hedging via options, is significantly less than the premium cost of those hedges, hence I am not using them for now.
If I feel I get an insight into the timing of a large rally, then I would add some OTM calls. But that would be likely to happen at significantly higher prices, once I think the buybacks are starting and Ackman is on the ropes. At that point I'd probably exit my underlying position due to the elevated risk, and replace it with OTM calls with say 1-3 months to expiry.
I said in my previous post that any government action would probably be tipped off by weak market action. Well, we got not just weak action, but a *member of the government* tipping us off about a potential investigation. So, I think the risk is now a lot higher, and I recommend not being long the stock. It may develop into a potential short, depending how this turns out.
So, this scalping attempt failed, handing me a small (approx 1%) loser. JGBs still open.
So, this scalping attempt failed, handing me a small (approx 1%) loser. JGBs still open.
Very nice trade if you managed to hold through the swings. Heres an old post but tops that trade of nicely. Who's next for the cross hairs 
http://www.businessinsider.com/bill-ackman-herbalife-short-anniversary-2013-12
http://www.businessinsider.com/bill-ackman-herbalife-short-anniversary-2013-12