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Wednesday, 7 February 2018

Now that's volatility!


I was glued to my notebook yesterday morning 8 am till 1 am into the wee hours early this morning.

Not since Brexit and Trump's election night have I seen such volatility!

Talk about wild swings to stop-out both longs and shorts...



The volatility has continued to this morning. First green, then giving back all those gains...

Whiplash!



For long only retail "investors" without utilising margin, its probably a non-event. You just ignore the "paper gains" for Jan 2018 like it never happened.



However, for one group of "investors" who shorted volatility using inverse ETNs, they have been wiped out...



For those into selling options to earn "passive" income, its a reminder this is what happens when you win 99% of the time, but you'll be wiped out when that 1% tail risk hits you when you least expect it!

No free lunch. 



There was a time in 1999 when I thought to myself, "This is easy!"

And you know how markets humbled me subsequently.

That's why old fogeys who have survived more than 1 bull/bear cycle behave differently from youths who have only known a bull market.








28 comments:

  1. we complain no volatility and now market gives us what we want, too much la! @$^%#^%^!@

    ReplyDelete
    Replies
    1. got a very bad feeling this time, especially those yield stocks, i guess free lunch may be ending soon.

      Delete
    2. usually i'll go long deeing this but not this time man, cos no body seems to panic, every commentators say buy, they are so confident market will recovered!

      Delete
    3. coconut,

      Those vehicles and strategies that worked in a low volatility environment may come out to bite those who just extrapolate out to infinity or believed in "Look ma! No brains needed!"


      Yup, those squeeze extra yield from stone strategies like Risk-Parity, Short Volatility, High Yield Bonds, Options Selling, and FX Carry Trades may bite even harder once interest rates "normalise".

      But then, if may never materialise as Central Bankers got speculators' backs right?

      Screw the savers!?


      No free lunch. There is a social-politically price to pay...



      Delete
  2. Alamak, I'm just 100% out & crystalised about $30K losses (from ATH) :)

    Oh well, this is the price I pay for hedging using trend following...

    But my gut & brain is telling me that this is merely short term volatility & trend following will kick me back into 90% invested by end-Feb or early-Mar...

    Let's see whether my gut is right, or FOS or both! LOL!

    ReplyDelete
    Replies
    1. Spur,

      We got to follow our money and risk management rules.

      I didn't believe the bounce from last night and shorted the SIMSCI early this morning.

      I hope this volitality can last more than a week!





      Delete
  3. Ah Hah!

    Who using the word hope in relationship to the stock market?

    Actually nobody knows what is going to happen next in the market even U think U have done your proper homework.

    After U buy of course it is hope all the way.

    And if your buy which is a hope now, doesn't go your way, what then?

    ReplyDelete
    Replies
    1. temperament,

      LOL!

      At least I didn't buy and hope :)

      Covered my SIMSCI short last night at around 8pm in the after hours market when European markets "stubbornly" remained in the green.

      Felt good when the US opened in the green; and they were green when I went to sleep.

      This morning was bemused to see the US markets closed in the red?

      Shit! Was a bit pissed that I've covered my short; what if STI gap down in the morning and I have no position on?

      Then was surprised STI gapped up instead?

      Now feeling glad I've covered my short; I've protected my profit :)

      Well, that hapiness didn't last long went STI decided to go slide down the whole morning. Even went below my covered short price last night... Idiot me!

      Guess what? After the lunch break STI boomerang right back up again :)

      So I was "right" again to cover my short last night...

      Tada! That's volatility for you!


      For part time retail "investors" - morning STI opened around 3420; in the evening closed around 3420. No change. Nothing to see. Move along now...


      For traders, if the reason we bought is no longer true, we are out!

      Even if the market reversed right after we got out :(

      I can only focus on what I can control (buy and sell decisions).


      That's the difference between buy and hope versus I "hope" volatility can last more than a week ;)





      Delete
  4. Time for a new wave of financial bloggers is coming!

    ReplyDelete
    Replies
    1. Patty,

      It already did. Last year there was a mushroom of freshly minted financial bloggers :)

      I wonder how many of these newbie financial bloggers were around in early 2016 when STI went as low as 2500?

      At the same time, I've "cleaned-up" 10 over financial bloggers at my "Ebony and Ivory" list that have stopped blogging for more than 9 months...


      Singapore STI still power! Not yet reach -10% correction territory yet.

      Buy the dip still works in STI :)

      Delete
  5. There are times when retail investors are saying Heng ah! I have already sold or Cash is King!

    ReplyDelete
    Replies
    1. CW,

      Well, the highs of Jan 2018 just provided the real life example what's "unrealised profit" - if not REALISED, its exactly what it is - unrealised!

      Just like those bitcoin acolytes that didn't sell above $18,000 -of course you still in the profit if you bought at $1,000 ;)

      I guess make less is better than lose money?


      Buying is easy; selling is a lot harder!!!


      Delete
  6. if you are bullish in the market, this morning is the time to buy!

    ReplyDelete
    Replies
    1. if you are a chicken like me, watch for the long term interest rate, buy only when it goes down.

      Delete
    2. in another words i may be not in the stock market for a long time, time to switch to futures trading?

      Delete
    3. coconut,

      I got profit-stopped this morning when STI bounced off the lows from 3340 :(

      The good news is I got what I wanted - volatility this whole week - made some money ;)

      Bad news is all these "intraday reversals" and "one day up; one day down moves" are making it hard for trend follower me to make REAL money :(

      Oh well...

      I'm satisfied with my trading this week. I stuck to my trading rules.


      Let's see what happens next week!?

      Whether STI will have lower low and break 3300, or will "buy-the-dippers" push STI back above 3400 just to mess with the shorts ;)

      LOL!

      Delete
    4. How about Yield Curve Inversions?

      Delete
    5. temperament,

      What about Yield Curve Inversions? You tell us ;)


      My question to you is whether you really out into practice Inter-Market Analysis?

      Will you go 100% into cash when the yield curve invert?


      A lot of theories anyone who got read economics or business finance will know. Don't don't just google at Investopedia can get answers oredi.

      Putting theory into action is another thing!


      Delete
    6. Alamak!

      U don't know ah........

      i already waited for more then 4 to 5 years.

      2013 or 2014 till now.

      Discount my stupidity for going into "It's Probably overpriced" in 2016.

      Will still do if i think i am stupid again when there is a good "It's Probably overpriced."

      Yield Curve Inversions or not.
      @#$%!XXX

      Besides, it can take any time from 3 months to > 36 months - the time lag before the market really going into recession based on the Yield Curve Inversions historical table.

      So for me, i actually don't really care.

      But learning history lessons is quite important in investing.

      Also i don't really read too much into where the interest rate the FED is going to set next.

      i am no trader like U lah.

      i only gong, gong wait until durians fall lol.

      But i always think why i don't want learn how to short the market during this KAN CHEONG SPIDER MARKET?

      It seems quite "predictable" to me.

      Yet very afraid of whiplash & short squeeze in the market, leh.

      So, so far have not learn the beauty of shorting.

      But actually i think i should learn especially in this time of the market.

      i think must be the 4Ks for me lol.

      Or maybe i started investing learning how to long the market is less dangerous then shorting the market lol.

      Delete
    7. If i am not mistaken, even when the economy is in recession,
      the stock market may be still in bullish phase.

      Google to confirm?

      Delete
    8. Correction:-

      2 months to 24 months accordding to historical table by Bloomberg.

      https://www.bloomberg.com/view/articles/2017-12-18/yield-curve-inversions-and-stocks-are-a-toxic-mix

      Delete
    9. temperament,

      Hee hee.

      Why answer you when I knew you have the "answer"?

      From my comment, you should be able to tell whether I know or not ;)


      You are quite well read.

      Have you noticed you were more interested to collect definitions, theories, nice quotes; etc?

      Maybe you should jio CW out to hear first hand what's "less analysing; more investing"?


      Knowledge is not competence.


      You say "predictable", then you say afraid to get short squeezed and whiplashed!?

      Your biggest stumbling block is the Mind part of the 3Ms.

      That one, no books or courses can help as they deal with Method and Money :(


      Delete
    10. U are certainly not wrong about the mind part concerning shorting the market.

      Like i said, I started investing that long the market is safer then short the market. i mean only about stock market.

      And have been doing it ever since.

      For me now after so many years, I think I should have also tried shorting the stock market.
      Because at this time, it seems quite predictable guessing which way the market is heading.

      But have not overcome the mind part.

      Better say I have not find the passion.

      Delete
    11. Knowledge is not competence?

      Of course, of course.

      Someone even said, "Knowledge without imagination is stupidity"

      What's the use of “紙上談兵”

      On the other hand, that's what we all are doing here.

      With knowledge, imagination, but without practice, still it comes to nothing.

      Which means actually we learn nothing = We are still as stupid about the matter lol.

      It up to us all to dare to try to put into practice and learn from failures.

      Success, U better try to forget about it because....


      Shorting a bear market anyone?

      It seems QED.

      LOL.

      Delete
    12. temperament,

      Hence youths who don't know what cannot be done have an advantage over us ;)

      While we are analysing and thinking... They have already done it!

      LOL!


      Most people have a mental block when it comes to "shorting".

      I guess I have an advantage here. I just see it as betting red or black on the roulette table.

      Buy up or buy down?

      Its just a bet. Nothing more; nothing less.

      :)


      Delete
  7. Now everyone can laugh at me at my US portfolio.

    Knowing going to be slaughtered one day like the turkey on the farm but still wandering happily around.

    Now U SMOL can justify, "look Ma, No Brains Investing."

    ReplyDelete
    Replies
    1. temperament,

      You don't pretend!

      Its the left over from your stock options at HP. That means your entry price even lower than CW's DBS or Keppel ;)


      No panic in the market yet lah! Unless you just bought your first stocks in Jan 2018!

      Those who started their journeys beginning of 2017 are still in the money :)

      Everyone made money in 2017 except me remember?


      I not worried until prices drop near 2009 lows.

      CW not worried until prices drop to 2003 lows.

      You not worried until prices drop to 1997 lows.

      LOL!


      What we say in retail is, "A merchandise well bought is a merchandise well sold!"

      That's our "margin of safety" :)


      Having said that, not losing money does not mean we want to leave too much money on the table...


      Delete
  8. SMOL

    Being able to sleep soundly at night without worry is the way to go. I use this method as a way in guaging whether I have overinvested my fund in stock.

    Ben

    ReplyDelete

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