I love how it seems every trader on et makes big money on volatile days. We all spanked the open as that was a no brainer. But were are the guys who sold the rally early and went short early this am as we screamed ever higher? Were are all the traders who shorted the hell out of the breakdown near 3:30 only to be squeezed to death into the close? I also had a monster day but some of the volatile days i also take 30-50k loses. Its not a one way street as et would make you think.
Grinding it out, day after day
- Thread starter lescor
- Start date
No, it's certainly not. Believe me, I've had my share of being on the wrong side of the market. Yesterday I was up 20k until the market melted in the last half hour and I actually finished red.
The equity swings can definitely be bigger when volatility goes up, but for how I trade it almost always results in bigger profits eventually. Gotta be prepared to take your lumps though.
The equity swings can definitely be bigger when volatility goes up, but for how I trade it almost always results in bigger profits eventually. Gotta be prepared to take your lumps though.
Congrats on your week!
You mentioned that you use SPY as a hedge, but why not just trade SPY itself? I'm assuming most of your profits today came from buying stocks off the open -- wouldn't it be easier to just buy say 30k shares of SPY instead of managing scores of individual stock positions? I don't usually trade the spyders myself but on a setup like today wouldn't it have been essentially the same trade on a distilled level? Curious to hear your thoughts, the reason I ask is that I'm usually using the higher beta names as proxies for playing a general market move, but it can get a bit dicey at times in deciding where to divide the buying power.
You mentioned that you use SPY as a hedge, but why not just trade SPY itself? I'm assuming most of your profits today came from buying stocks off the open -- wouldn't it be easier to just buy say 30k shares of SPY instead of managing scores of individual stock positions? I don't usually trade the spyders myself but on a setup like today wouldn't it have been essentially the same trade on a distilled level? Curious to hear your thoughts, the reason I ask is that I'm usually using the higher beta names as proxies for playing a general market move, but it can get a bit dicey at times in deciding where to divide the buying power.
Congrats on your superb performance, lescor. Watching you recover steadily from the misstep four weeks ago is truly an eye-opener.
Could you possibly elaborate on your spy hedge yesterday?
(1) When did you put it on?
(2) Did it match your total stock exposure?
(3) Was the main purpose of the hedge to guard against an abrupt equity reversal?
(4) Did you close it out at the end of the day?
Thanks in advance!
Ah...so, three standard deviations and you're fading? Thanks for the reverse engineer.
Great week, Lescor!
Seems like it would be easier to trade SPY options than a very large SPY position. They're very liquid, tight spread. To buy 30K SPY off the open today would require about $3,200,000 in buying power and if you took profits on the first run up, you'd net around $60K. But you could pick up 500 May $106 calls for around $50,000, close on the first run up and net around $100K.
I think you guys are assuming something completely different from what I'm doing. Yes, today I thought there was a very good chance of a market rally from the open. But I don't just step up and buy 30,000 spy or $3M worth of stock and let'er rip. I have a system that I execute the same way every day. I try to be ambivalent as to market direction. My hunches are not always right and most of the time I have no clue what's going to happen. I can't take big directional bets based on a gut feel, I have no edge doing that and would never want to take those kinds of risks.
Based on what I was seeing this morning, I expected my system would have me long, but I didn't know for sure. I built in a slight long skew because of what the market was doing. When I start applying a hedge, it's because my net market exposure in dollar terms is getting too great. Sure it's awesome to be long 50,000 shares of stock when the market rallies. But when it rolls over quickly it sucks and account equity can evaporate quickly. At some point I begin hedging because I'm more concerned with protecting my ass than giving up potential profits.
The reason I don't just trade spy options is because 1) I have a prop account and buying power is not an issue and 2) I have to have the stock and hedge in the same account. If my hedge saved me from a disastrous day but the stocks were naked positions in a separate account, now that account just got obliterated and I would need to get money there overnight to trade the next day. Options aren't offered in this account.
Btw, I lost $45,000 on spy today, but yesterday I made $30,000 on it and ended the day at zero overall. I'll take the smoother equity curve any day.
Based on what I was seeing this morning, I expected my system would have me long, but I didn't know for sure. I built in a slight long skew because of what the market was doing. When I start applying a hedge, it's because my net market exposure in dollar terms is getting too great. Sure it's awesome to be long 50,000 shares of stock when the market rallies. But when it rolls over quickly it sucks and account equity can evaporate quickly. At some point I begin hedging because I'm more concerned with protecting my ass than giving up potential profits.
The reason I don't just trade spy options is because 1) I have a prop account and buying power is not an issue and 2) I have to have the stock and hedge in the same account. If my hedge saved me from a disastrous day but the stocks were naked positions in a separate account, now that account just got obliterated and I would need to get money there overnight to trade the next day. Options aren't offered in this account.
Btw, I lost $45,000 on spy today, but yesterday I made $30,000 on it and ended the day at zero overall. I'll take the smoother equity curve any day.
Lescor....great job there, keep it up.
Excellent explanation about "HEDGING". Completly understand the concept of trading big numbers with and without protection. Agriculture commodity mkt's were born out of the need to protect the producers and distributers from adverse price movement, either up or down depending on ones positioning in the movement of the product before it is consumed by the final end user, the ones that eat the product.
Read the post about a ton of options and was expecting your answer, you could not have explained it any better.
Regardless how we all as individuals attack the trading game, we all must never forget that we are just speculators at the gaming table. As traders we are always weighting RISK to REWARD.
Sure, pure directional trading can offer the highest reward in a specific situation, that is a givin. There comes a point where the risk to reward tilts against even the best trading plan and thats where the "HEDGING" comes in.
Directional trading works, so does "hedging a bet", each depends on how much is at risk.
PS: The commodity exchanges worked as expected for over 150 years when position limits and proper margin requirements were met by the clearing house. Politicians such as R, Phil Gramm and others that overrode position limits for ENRON and others screwed up the works. Thus that and other pet projects for friends have us where we are today with financial regulation overhaul. FAT CHANCE we get things right again. :eek:
Excellent explanation about "HEDGING". Completly understand the concept of trading big numbers with and without protection. Agriculture commodity mkt's were born out of the need to protect the producers and distributers from adverse price movement, either up or down depending on ones positioning in the movement of the product before it is consumed by the final end user, the ones that eat the product.
Read the post about a ton of options and was expecting your answer, you could not have explained it any better.
Regardless how we all as individuals attack the trading game, we all must never forget that we are just speculators at the gaming table. As traders we are always weighting RISK to REWARD.
Sure, pure directional trading can offer the highest reward in a specific situation, that is a givin. There comes a point where the risk to reward tilts against even the best trading plan and thats where the "HEDGING" comes in.
Directional trading works, so does "hedging a bet", each depends on how much is at risk.
PS: The commodity exchanges worked as expected for over 150 years when position limits and proper margin requirements were met by the clearing house. Politicians such as R, Phil Gramm and others that overrode position limits for ENRON and others screwed up the works. Thus that and other pet projects for friends have us where we are today with financial regulation overhaul. FAT CHANCE we get things right again. :eek:
lescor,
did you hold a large chunk of your long OPG entries into the close? i closed mine out soon after the open because i don't have the stomach to watch gains evaporate as the day progresses.
assuming you held OPG longs for longer than a few minutes, when did you put on your SPY hedge? because there is uncertainty how many orders get triggered i imagine your OPG play could have been something like that:
1) Short some SPY right at the open (using some guess work as far as how many OPG may be triggered)
2) Cover some OPGs for a quick gain in the first minutes or/and get rid of the ones you don't like (you can focus on OPGs now knowing that you are at least partially hedged)
3) Adjust SPY hedge as needed (now that you know how many OPGs you are willing to hold for a longer period)
4) Focus on intraday systems the rest of the day, maybe giving limited some attention to the remaining OPG entries/SPY hedge
BTW, do you keep track what the cost of SPY hedge is after let's say 1 year?
did you hold a large chunk of your long OPG entries into the close? i closed mine out soon after the open because i don't have the stomach to watch gains evaporate as the day progresses.
assuming you held OPG longs for longer than a few minutes, when did you put on your SPY hedge? because there is uncertainty how many orders get triggered i imagine your OPG play could have been something like that:
1) Short some SPY right at the open (using some guess work as far as how many OPG may be triggered)
2) Cover some OPGs for a quick gain in the first minutes or/and get rid of the ones you don't like (you can focus on OPGs now knowing that you are at least partially hedged)
3) Adjust SPY hedge as needed (now that you know how many OPGs you are willing to hold for a longer period)
4) Focus on intraday systems the rest of the day, maybe giving limited some attention to the remaining OPG entries/SPY hedge
BTW, do you keep track what the cost of SPY hedge is after let's say 1 year?