All posts in "Options"

Top And Bottom Performing Stocks For Week #47

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By geralt from PixabayTop And Bottom Performing Stocks For Week #47

It is Sunday afternoon and that means we get to review the performance of last week’s historical top and bottom stock symbols in the S&P 500. As you may recall these symbols are the result of parsing a database containing over 50 years worth of statistical performance data. The idea is to extract the prospective top ten winners and losers of the coming week purely based on historical statistics. The result is then sorted by liquidity and any symbol that is scheduled to report earnings or pass ex-dividend is being excluded.

How To Trade Along

Although being no guarantor of success, the long and short candidates posted here each week are intended to perform along their respective historical bias. One way of trading along would be to simply create a small one-week portfolio by buying the long candidates and selling the short candidates on Monday morning shortly after the open. There are no official stops or targets and all transactions are reversed Friday afternoon right before the bell.

For anyone who wants to keep track I have created a new WP category that allows you to pull all pertinent posts up to date. Eventually I’ll be putting together a summary spreadsheet once we have accumulated sufficient stats.

Results For Week # 46

It seems we are back on track as the last week netted us 19.72 relative percent, which means the return of the overall portfolio of 20 stocks is 1/20 of that, or 0.986%. Kudos to phantomflash for correcting my twisted profit calculation 😉

Long Profits: FTR=2.81, MRK=-0.5, ODP=0.31, LUV=2.28, WBA=0.37, MNST=1.65, IBM=-0.13, HRL=2.44, FLO=5.78, CPB=4.85

Long Profits Total: 19.86%

Short Profits: AAPL=2.59, C=1.27, MU=-3.08, JPM=-0.65, KEY=-3.8, ABX=-0.64, MRO=3.65, HL=3.96, NEM=-1.94, BBT=-1.5%

Short Profits Total: -0.14%

Combined Profits Total: 19.72%

Published at Sun, 19 Nov 2017 18:14:20 +0000

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Rough Times For Bucky

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By geralt from PixabayRough Times For Bucky

It’s time to talk about Forex as the temporary Dollar rally has effectively ended and is now launching significant advances in various cross pairs. You may recall I have been anticipating this very scenario since Monday after seeing a potential floor pattern on the EUR/USD in particular [1][2]. Unfortunately however the one pertinent horse I had in play appears to be the lame laggard of the bunch, which means I’ll have to find myself a sturdy banana tree later this afternoon.

2017-11-15_EURUSD

Well at least I timed my Christmas shopping almost perfectly, which per my calculations saved me a few hundred bucks if you add IVA (taxes and import fees are sky high here in Europe). You don’t need to be a seasoned chartist to recognize this as being a massive break out pattern and I’m sure there’ll be a lot more to come, unless Draghi slips up and says something stupid. I hope he does as I’d love to grab a long on a dip lower.

2017-11-15_USDJPY

The reaction on the Yen has been a bit more muted but given the current formation on the daily I think we could easily see another visit of the 100-day SMA near 110 and change. I mentioned last week already that this would be an awesome dip buying opportunity which may pop out of the oven just ahead of your Christmas turkey (unless you’re not Christian then go and find your own analogy but try to make it funny).

2017-11-15_GBPUSD_update

And here’s cable which is enjoying a bit of a lift right now but nothing really to write home about. Given that I don’t think we are going to see a significant rally to the upside anytime soon and thus I decided to call a mulligan and move my stop to break/even while we’ve got the price advantage.

2017-11-15_ZB

Bonds are also on the move and if the ZB can clear its weekly NLBL near 154 it could actually lead to a little short squeeze. Which is sorely needed for this dog to finally get out of the gate.

2017-11-15_spoos

Meanwhile equities are rapidly heading lower and fortunately I had decided to tighten things up on Monday allowing me to exit at break/even. But just look at that preceding formation, which increasingly started to look as if distribution was at play.

2017-11-15_zero

The most obvious hint however was our own Zero indicator which has been pointing down down down for a week now. Especially yesterday I was seeing clear divergences between price (moving up) and momentum/participation (heading down) which looked very suspicious to me. I’m rather curious to see what it’ll do today near the open but my guess is we’re going to see some interesting signals for the remainder of this week.

Shameless Plug

Remember, trading equity futures without the Zero is like bringing a knife to a ray-gun fight. If you are not yet a subscriber then stop wasting time and sign up right now – you will find more details here. I for one would never trade the E-Mini without it and I’m sure many of its loyal subs would agree.

Published at Wed, 15 Nov 2017 13:50:33 +0000

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Soylent Green Is Retail Traders!

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By kulinetto from PixabaySoylent Green Is Retail Traders!

A few days ago I got a bit frustrated thinking that I had missed several break out patterns which in hindsight looked hard to miss. Since then however almost all have turned on a dime and I am happy to report that I have already canceled my e-Bay order of a slightly used Japanese seppuku training kit.

Now it’s a wee bit early to think about BTFD entries on some of the candidates I at least believe continue to have medium term trending possibility, e.g. the EUR/USD, bonds, precious metals, etc. Plus it’s already Friday and that is not usually a great day for snagging a break out pattern. So instead let’s address the big elephant in the room, which of course is the fact that Soylent Green Is Retail Traders!

2017-11-17_spoos

Believe me, it was rather tempting yesterday morning to hop on the bearish bandwagon as the equities across the board looked as bearish as a grizzly wearing a fur coat. I mean signs of distribution were present, we had a series of lower highs and lower lows on the short term panel, bearish divergences galore on the Zero indicator. I personally gave the downside scenario a 60% chance and what we got instead of course was an instant short squeeze from hell, which had been my 2nd scenario but it still surprised me. At least I got one thing right, which was my assumption of a significant move that would sweep a boat load of stops. At least on the volatility front, as usual, equities didn’t disappoint.

2017-11-17_VIX

Not surprisingly the VIX got hammered and in the process caused all kinds of shenanigans on various pertinent ETFs, such as the VXX, XIV, UVXY, etc. Attempting to track sharp swings outside the 2.0 BB usually leads to inconsistencies and in turn produces unexpected losses for people. Which of course, is the whole idea of running these ETNs in the first place.

Why exactly is that the case? Well, I’m glad you asked!

2017-11-17_VXX

VXX is a great example of this, loved by both retail and institutional traders, but for different reasons. The latter are enamored with the idea of being able to ‘trade volatility’ whilst in the vast majority of cases are losing their butts doing it. And the latter of course usually are the ones on the receiving end of the profit/loss equation. The main reason for all this is that retail traders in general (that means not all but many) do not understand how these ETNs/ETFs work.

For the most part VXX trades like a stock and with average volume of over 40 million shares traded each day it’s liquid as hell with about 1 penny in spread. Another aspect of its profitability is that it can be traded (long) in most IRAs once you sign a waver documenting the risks. However while it looks and trades like a stock it’s an ETN closely tied to an index maintained by the S&P which in turn manages a hypothetical portfolio of the two nearest VX short term futures contracts, the mixture of which get updated daily. Complicated, right? I feel you but it gets worse.

Now the VXX attempts to follow that index, which is published every 15 seconds as the ‘intraday indicative’ value (IV) – the Yahoo symbol is ^VXX-IV. In order to keep the VXX in sync with the IV Barclay’s uses ‘authorized participants’ who profit from intervening in the market should the VXX get too much out of sync with the IV (and thus implicitly with the hypothetical portfolio of VX futures). Which is why you often see the VXX lag behind the VIX and then suddenly catch up a few hours later, or perhaps a day later. Sometimes there’s a gap at the open which needs to be corrected, or does it? Well, depends on what the VIX and of course the VX futures are doing.

And if your head is spinning already then you may as well skip ahead as it gets even worse. You have probably heard about contango, which basically means that futures contracts trade higher than the anticipated spot price at their maturity. So in other words, a commodity futures contracts in contango loses a little bit of its value every single session. And over time this translates into a horrific time decay for anyone who holds that futures contract for more than just a few days. On the VXX we are talking on average about 4% per month, which is roughly 30% per year. So how does the VXX deal with contango related revaluation? After all, given enough time it is guaranteed to approach zero. Well, you guessed it of course – through reverse splits, accounting for the strange chart I’ve posted above.

Adding insult to injury is that the combo of VX futures that the VXX tracks aren’t doing a particularly good job and thus the VXX on average only moves about half as much as the VIX. Many times (about one fifth of the time) the VXX also moves ALONG equities, not against it. So retail traders attempting to use the VXX as a contrarian index are often disappointed when large moves are only partially tracked.

Now if you know what you are doing (and very few do) then the VXX and other pertinent ETFs/ETNs can be very profitable tool in your arsenal. But I personally know several highly intelligent quants who literally spent years of their life and significant resources/effort to produce trading systems that account for a whole host of factors. If you feel like you can beat those guys then go right ahead. Otherwise and if you don’t want to wind up in a can labeled Soylent Green then you better stay away from trading implied volatility as you most likely will be taken to the factory

Now since we are on topic I have two very juicy IV charts I’d love to share with my intrepid subs. Please step into my trading lair:

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It’s not too late – learn how to consistently bank coin without news, drama, and all the misinformation. If you are interested in becoming a subscriber then don’t waste time and sign up here. The Zero indicator service also offers access to all Gold posts, so you actually get double the bang for your buck.

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Published at Fri, 17 Nov 2017 14:35:23 +0000

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Enough Soylent For Everyone

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By geralt from PixabayEnough Soylent For Everyone

Ti’s the season and it’s time to bring back an old tradition here at Evil Speculator: our special lair baked market outlook scenarios. Reason being that what I’m seeing unfold in equities opens the possibility for large outlier moves on the immediate time horizon, which means either by Friday or next Tuesday at the latest. Let’s get to it:

2017-11-16_spoos_soylents

Now to some of you pointing in both directions as a probability may seem a bit silly at first sight and I would agree on that note. But that’s not the point of this post at all. Yes, the market will either push higher or drop lower, no crystal ball required there. But what matters right here and now is the potential vehemence of what may loom ahead of us. And I only see two scenarios that make any sense at the current time:

  • Soylent Green: We bounce right here and then proceed to slowly squeeze our way higher. By next week there’s a breach of ES 2594 and it’s off to the races.
  • Soylent Red: We drop from here and HARD. This scenario currently seems to have slightly better odds judging by the obvious signs of distribution I have reported on since late last week. My preliminary target for this would be around ES 2500 – no typo.

This is pretty much a binary situation with slightly favorable odds for the bears. Either that or it’s the bear trap of the season. What I do not think is going to happen is more whipsaw like we’ve had to endure for what – almost two months now?

2017-11-16_VIX

The reason why a massive bear trap is also still a possibility is mainly due to the VIX which has exploded over the past two sessions. We went from single digits to over 14 in a jiffy. Which by the way would be your cue to smile and praise the mighty Mole for urging you to buy long term puts all month while puts were selling at a massive discount. (Well – DID YOU??) Or alternatively you may just sign up as a subscriber – the blog doesn’t run itself, people!

2017-11-16_cable_update

Miraculously our cable campaign is still in the running and I’m leaving my stop in place slightly above break/even. I don’t have high hopes for this one but let’s give it a chance as a spurious rumor or some embarrassing clickbait on Theresa May may just earn us a few R here.

No other entries as of right now – everything else continues to run in circles or is already on the way. Time to simply watch and learn.

Words To The Wise

Don’t get too excited yet people, maybe we’ll actually see some real red candles for a change, but very few people out there actually remember those. Assuming for a moment we get Soylent Red: Dip buyers will most likely stand buy on the first few legs down, expecting an instant reversal. So if you are short and want to ride it out (that’s you GG and his gang) be prepared for wild swings on the way down. As always, have fun but keep it frosty. Most importantly, don’t play with money you cannot afford to lose.

Published at Thu, 16 Nov 2017 14:36:42 +0000

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Tripping Over Skew

 

Tripping Over Skew

by THE MOLEAUGUST 28, 2017

Apologies for the late post today but I have been on coding duty over the weekend into today, as I wanted to put together a few more weekly statistical charts for you guys. While hacking away I realized that I had actually made a mistake in labeling the weeks, and that means we are currently in week #35 and not #36. Which incidentally makes quite a bit of difference.

SPX.XO_monthly_skew_stats

But before we get to the weekly goods let’s cover a related topic which is SKEW. We covered it here before and this may be obvious to some of you guys. But nevertheless it is something I tripped over today and attempting to ‘fix it’ cost me several hours of utterly wasted time (hence the late post today) and reduced time at the gym (even worse!). Look at the mean monthly skew for the S&P 500 shown above. Does this look accurate to you? It actually is but I’m pretty certain some of you guys are wondering why the S&P has negative skew almost all year.

Skew

And this is why, it all comes down to the definition of SKEW which basically defines ‘positive skew’ as left leaning and negative skew as right leaning. No political jokes or Trump bashing please 😉

SPX.XO_weekly_change_stats

Now let’s look at week #35 which actually has a decent positive mean weekly return since 1957.

SPX.XO_weekly_skew_stats

And the SKEW for this week is -0.5. I actually pulled out all the values for just week #35 and plotted the date range just to make sure. It has a negative skew of -0.5 and understanding how skew is calculated is very helpful when observing the actual histogram:

SPX.XO_week_num_35_histogram_b

Which of course simply plots the correlation between returns and their probability. And here we are of course seeing a concentration of bars in the positive range. Which now makes a lot more sense, doesn’t it?

Most likely I will however wind up flipping the axis of all the skew charts as to not confuse people (or myself – ahem). Figuring that one out will most likely cost me another patch of hair, but in the end it’ll probably pay off as won’t have the explain the topic every single time.

More juicy stats for this week below the fold:

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It’s not too late – learn how to consistently bank coin without news, drama, and all the misinformation. If you are interested in becoming a subscriber then don’t waste time and sign up here. The Zero indicator service also offers access to all Gold posts, so you actually get double the bang for your buck.

Please login or subscribe here to see the remainder of this post.

Published at Mon, 28 Aug 2017 14:05:59 +0000

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