Crap trading on my part but I've picked up 12k the past 2 days since the Fed. I covered 10 of my 15 ZB shorts this morning at 11115. A trade I certainly wish I could un-do....
Pabst's Blue Ribbon Trades
- Thread starter Pa(b)st Prime
- Start date
the ten year notes look very susceptible to a greater hit.
Long ES puts, short YM, long NQ. I've got enough on that it'll matter.
Flat Treasuries. I hate 'em BUT I think stocks are going to get hit HARD starting now. Bonds are on sell but they could do some breathing through all this. I love tech relative the rest of the list but that could change by the time I stop typing. I'll trade all night.
Watch Wheat. If the bull hold on wheat breaks, stocks will follow. Stocks don't fear inflation, they revel in it. Commodities led stocks up. They'll lead stocks down. If Gold, crude, grains pop, I'll quickly rethink stocks. For now I think the Dow plunges. Not sure about NQ. Look at the spread 1/2000-3/2000 for reference.
Flat Treasuries. I hate 'em BUT I think stocks are going to get hit HARD starting now. Bonds are on sell but they could do some breathing through all this. I love tech relative the rest of the list but that could change by the time I stop typing. I'll trade all night.
Watch Wheat. If the bull hold on wheat breaks, stocks will follow. Stocks don't fear inflation, they revel in it. Commodities led stocks up. They'll lead stocks down. If Gold, crude, grains pop, I'll quickly rethink stocks. For now I think the Dow plunges. Not sure about NQ. Look at the spread 1/2000-3/2000 for reference.
PP, 4.50% on 10 year note... expected....but based on how equity market behaves, I eventually expect yields on the 10 year to be higher then 5.3% next year.
NQ is Wheat.
Which sector would you want to be in before earnings.
NQ will end this run around 2130. That's where I'll unwind my spreads. Index margins suck BTW. The ES put spreads were legged (1525-1490's) so that even if ES ramps a bit with NQ I'll be ok.
Spectre: I don't discount Bonds rallying quite a bit more if my stock take is correct. Last October saw a similar selloff and the Bond market recovered and made new move highs EOY.
Which sector would you want to be in before earnings.
NQ will end this run around 2130. That's where I'll unwind my spreads. Index margins suck BTW. The ES put spreads were legged (1525-1490's) so that even if ES ramps a bit with NQ I'll be ok.
Spectre: I don't discount Bonds rallying quite a bit more if my stock take is correct. Last October saw a similar selloff and the Bond market recovered and made new move highs EOY.
I know it's easy to say in hindsight, but it sounds like you are pushing too hard with average or difficult trades. Big size is best reserved for those rare occasions where everything lines up in your favour e.g. you have a truly contrarian position, price action is strongly in your favour, and the market tone keeps confirming your position (e.g. if you are short bonds, they should rally sluggishly on bull news, but break hard on bear news...and drift lower on no news). As soon as the trade becomes hard or risky, you gotta cut back.
One good point that Cramer made is "avoid battlegrounds". Tough trades where 2 points of view are equally strongly held, and the market ebbs and flows between them. For example stocks this summer are a big fight between the recession camp and the cheap valuation/low rates/falling dollar camp. Is it better to bet massively on who is gonna win that one? Or to stand aside and try to pick up some profits by fading whenever one camp gets to an extreme.
The really good trades usually don't have to be forced (at least not once they get momentum behind them; if you are early then it is different). I'd suggest trying conservative trading on modest size, trying to "put beans in bags", just bide your time and grind out some income. Wait for the 2-5 trades per year where everything is set up just right, then get in and build up size by pyramiding as the market action confirms your view whilst sentiment stays sceptical. Let the market action, rather than your own opinions, determine when you trade size.
Looking at this year, there were only really a few great themes to play. Long oil from $50, short housing, long wheat, buying stocks (esp emerging markets) after the Feb mini-panic, long China, and long stock volatility since summer. If you look at them, one thing most had in common was that they were not difficult trades to hold onto once they got going. Only China stocks had any big scary corrections to fake you out. And the market was fairly complacent/sceptical of each one turning out the way it did.
By contrast, lots of people are bearish on bonds. That doesn't mean they won't go down, but it does mean there is an inherent bid simply due to the crowded nature of the short position. That suggests it is better to play on limited size or with limited risk (options/spreads) and be demanding about entry price, and not too greedy on exit. It won't be a forgiving trade like the ones listed above. So I'd recommend playing more conservative until you find another trade where all the ducks are lined up, then work on milking that for all you can. You got on the grains early - did you trade them as aggressively and with the size that you used in your bond short?
Thanks, Cutton. You of course are 100% right. There's something about me that seems to seek the most difficult trade. I've been scaling it down and although it's boring (I've made a grand total of two trades since Monday) I'm getting my swing back by staying spread.
Update: Jeez I sound like Surfer, 
I just unwound my NQ-YM. I thought NQ was going higher but I see a reason for the NDX high of 2094. That level could hold for a while. I'm long 1525-1490 put spreads. My NQ "hedge" enabled me to pay half the cost of the ES puts.
I just unwound my NQ-YM. I thought NQ was going higher but I see a reason for the NDX high of 2094. That level could hold for a while. I'm long 1525-1490 put spreads. My NQ "hedge" enabled me to pay half the cost of the ES puts.