News - Enough of an Edge?

Z

zeptoon

Is there anyone out there who makes a living trading based on news alone?

Is having a good source of news, getting it fast enough, and learning to interpret it enough to constitute an edge?
 
Two ways to look at it, it keeps you out of a losing trade, and it creates a shorter momentum based trading opportunity. As always, you want to have more than one strategy for making money in the markets, knowing how to handle the news and or trade it is a very valuable skill set.
 
Quote from zeptoon:

.....Is having a good source of news, getting it fast enough, and learning to interpret it enough to constitute an edge?
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Those are some mighty big ifs there, IMO. But even if you had all that, wouldn't you still make your entry based on some technical strategy?
 
No I wouldn't use a technical strategy I am interested in trading just based off of the news but in a short term timeframe (eg not long term fundamental analysis).
 
Having a catalyst to move the mkts (in the form of a news event) is a good strategy addition. You have something that should move the mkt, if it doesn't you're wrong. You can set an out level, "if it comes back to here, I am wrong." It sets up great contrary trades, bullish news that isn't bullish at the top of a rally, etc... News events create energy, movement, volatility. Look at the GOOG CFO comments, fantastic piece of news.
 
For volatility spreads, yes. If you note it before market open, you can take the time to contstruct a good option spread to sell volatility whether the news is good or bad. The stock often reacts opposite to its logical direction, but the volatility may spike and drop off significantly in the same day. Next time you see a major spike up or down, papertrade a short strangle on a liquid option.

If the news time is known, such as earnings or FOMC, and the stock has historically low IV, you can buy a straddle.

You of course need to monitor the option price and IV in real time.

It is a small edge you're looking for so it's important to get a very liquid option with a tight b/a spread, no more than .05-.10. Split it if you can.

When it comes to news, bad news is good news!
 
I guess it could be possible if you buy a few weeks or days before major announcements, like for example: microsoft's new OS, Amazon's new product to compete with apple's ipod, or GM's poor auto sales.. etc..

- nate
 
Quote from zeptoon:

Is there anyone out there who makes a living trading based on news alone?

Is having a good source of news, getting it fast enough, and learning to interpret it enough to constitute an edge?
More...

I have a couple of strategies that trade news. The news type is very specific and regular that provides plenty of price movement. It makes reasonably consistant money but the current size isn't large enough to make a living - when the account is x10 bigger - no problem:)
A good source of news for me is important. Speed of obtaining news isn't an issue. Interpreting the news isn't an issue either since what I look for is simple (it's either black trade it or white no trade). I enter trades at or soon after the open, long or short based on a few rules that I've learnt through trial and error.
 
From zeptoon:
Is there anyone out there who makes a living trading based on news alone?
Is having a good source of news, getting it fast enough, and learning to interpret it enough to constitute an edge?
Quote from BSAM:
Those are some mighty big ifs there, IMO. But even if you had all that, wouldn't you still make your entry based on some technical strategy?
More...
Exactly.
:)
 
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