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When should we get greedy?

Investment discussion for beginners. Why you should invest your money, get help getting started
GoSeigen
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Re: When should we get greedy?

#490781

Postby GoSeigen » April 1st, 2022, 9:20 am

GoSeigen wrote:
GoSeigen wrote:Further technical breakdown in the S&P500 today. Target looks like 3500 area. VIX is subdued. Little sign of panic. VIX term structure inverted. Have added more straddles.

GS


Well two weeks have passed and not much has really changed! If investors were going to panic they haven't done so yet except in specific markets like Russia. Effects of sanctions are being digested and banks have been hit hard. I've bought back some bank shares where I'd previously taken profit and continued nibbling at Russian shares.

VIX has risen steadily which flatters my long options positions; given the trade seems to have been correct I have continued adding Sep S&P straddles as fast as I can afford. An uncomfortably large position is now becoming reckless. I'm uneasy because it all feels too simple, but this is a trade I'm taking with my head not my heart so hopefully the logic isn't too far wrong.


GS


Quick update:

1. I was wrong about the Ukraine war being over in a few weeks. The Ukrainian defence has been inspiring.
2. I was also wrong about the S&P dropping to the 3200-3500 area, at least it hasn't done so immediately. Ironically that makes me less bullish than I was and so I'll be taking profit on long positions as prices rise.
3. Given the normalisation in options markets I have reverted to writing S&P options over the past two weeks. This consists of a combination of progressively closing the OTM Sep put and call contracts I already hold and writing new short strangles in Apr and May contracts. Obviously I'm hoping the market will sit in the 4200-4800 range for a period of time. If not, I am protected by the ITM Sep options I already hold. My notional option exposure currently is around 10-20% of net worth.


GS

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Re: When should we get greedy?

#490793

Postby GoSeigen » April 1st, 2022, 10:01 am

As a very rough sanity check I have added up all the gains and losses on my option positions since I entered this thread when COVID was first hitting the UK. The calculation includes all positions closed after 1 Mar 2020 therefore some positions I'd opened before that date, so is really only indicative.


Total net profit over the intervening two years from closed option positions is about 1% of Mar 2020 net worth. However this includes positions in Gold futures and the FTSE100 which have not been the focus of my posts. Excluding those positions my return for S&P options trades alone has been about 0.4% of Mar 2020 net worth.

Obviously this is not spectacular in the context of the entire portfolio (looks much better if measured against the margin utilised), but still, a profit is a profit and it's paid a few months' school fees! Given I have only put up 2% of net worth as margin I guess the exercise has been more a proof of concept than anything else...

GS
EDIT: It occurs to me that the results could also be slightly distorted where I have replaced an option position with a futures position. I can't remember how frequently this occurred, probably just a very few trades.

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Re: When should we get greedy?

#491252

Postby TheMotorcycleBoy » April 3rd, 2022, 2:56 pm

GoSeigen wrote:
EthicsGradient wrote:As far as investing in Russia goes, you're taking a big risk at the moment:

The European subsidiary of Russia's biggest bank was on the brink of collapse as savers rushed to withdraw their deposits. Economists warned that the Russian economy could shrink by 5%.

The ruble lost about 20% of its value to trade at 100 to the dollar at 6 a.m. ET after earlier plummeting as much as 40%. The start of trading on the Russian stock market was delayed, and then canceled entirely, according to a statement from the country's central bank.

https://edition.cnn.com/2022/02/28/busi ... index.html


1. Agree, but I like risk. When everyone is terrified that's a good time to be buying.
2. I step into my risky purchases, I don't rush. So far new Russian exposure is <1% of portfolio value. If I lose it all I'm not going to have a sleepless night. But you have to start somewhere.

GS

Sorry to sound bitchy but I think you'd be bonkers to invest in Russian assets. From what I've read, Putin is quite content to do things like minimise economic growth (i.e. reduced budget) in order to accrue foreign reserves. Also the country is a kleptocracy, which translates to everyone being on the rob, meaning that companies will permanently see their employees skimming and nicking stuff to keep with the other crooks. And if things couldn't get worse, the country is witnessing a massive brain drain and exodus of most of their young and intelligent population. Sounds like a recipe for disaster. Perhaps it's a short gain, but on the long term seems likely to end in tears.

Matt

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Re: When should we get greedy?

#491498

Postby GoSeigen » April 4th, 2022, 12:57 pm

TheMotorcycleBoy wrote:
GoSeigen wrote:
EthicsGradient wrote:As far as investing in Russia goes, you're taking a big risk at the moment:

The European subsidiary of Russia's biggest bank was on the brink of collapse as savers rushed to withdraw their deposits. Economists warned that the Russian economy could shrink by 5%.

The ruble lost about 20% of its value to trade at 100 to the dollar at 6 a.m. ET after earlier plummeting as much as 40%. The start of trading on the Russian stock market was delayed, and then canceled entirely, according to a statement from the country's central bank.

https://edition.cnn.com/2022/02/28/busi ... index.html


1. Agree, but I like risk. When everyone is terrified that's a good time to be buying.
2. I step into my risky purchases, I don't rush. So far new Russian exposure is <1% of portfolio value. If I lose it all I'm not going to have a sleepless night. But you have to start somewhere.

GS

Sorry to sound bitchy but I think you'd be bonkers to invest in Russian assets. From what I've read, Putin is quite content to do things like minimise economic growth (i.e. reduced budget) in order to accrue foreign reserves. Also the country is a kleptocracy, which translates to everyone being on the rob, meaning that companies will permanently see their employees skimming and nicking stuff to keep with the other crooks. And if things couldn't get worse, the country is witnessing a massive brain drain and exodus of most of their young and intelligent population. Sounds like a recipe for disaster. Perhaps it's a short gain, but on the long term seems likely to end in tears.

Matt


Many people agree with you, fortunately.

GS

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Re: When should we get greedy?

#492177

Postby TheMotorcycleBoy » April 6th, 2022, 2:04 pm

GoSeigen wrote:
TheMotorcycleBoy wrote:
GoSeigen wrote:
EthicsGradient wrote:As far as investing in Russia goes, you're taking a big risk at the moment:

The European subsidiary of Russia's biggest bank was on the brink of collapse as savers rushed to withdraw their deposits. Economists warned that the Russian economy could shrink by 5%.

The ruble lost about 20% of its value to trade at 100 to the dollar at 6 a.m. ET after earlier plummeting as much as 40%. The start of trading on the Russian stock market was delayed, and then canceled entirely, according to a statement from the country's central bank.

https://edition.cnn.com/2022/02/28/busi ... index.html


1. Agree, but I like risk. When everyone is terrified that's a good time to be buying.
2. I step into my risky purchases, I don't rush. So far new Russian exposure is <1% of portfolio value. If I lose it all I'm not going to have a sleepless night. But you have to start somewhere.

GS

Sorry to sound bitchy but I think you'd be bonkers to invest in Russian assets. From what I've read, Putin is quite content to do things like minimise economic growth (i.e. reduced budget) in order to accrue foreign reserves. Also the country is a kleptocracy, which translates to everyone being on the rob, meaning that companies will permanently see their employees skimming and nicking stuff to keep with the other crooks. And if things couldn't get worse, the country is witnessing a massive brain drain and exodus of most of their young and intelligent population. Sounds like a recipe for disaster. Perhaps it's a short gain, but on the long term seems likely to end in tears.

Matt


Many people agree with you, fortunately.

GS

So what Russian assets are you targetting? Things like LON:POLY and LON:EVR, or are buying Russian stocks traded on the Moscow exchange?

Matt

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Re: When should we get greedy?

#494221

Postby GoSeigen » April 14th, 2022, 9:39 am

TheMotorcycleBoy wrote:So what Russian assets are you targetting? Things like LON:POLY and LON:EVR, or are buying Russian stocks traded on the Moscow exchange?


Just adding to existing positions in JRS and POG for now.

GS

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Re: When should we get greedy?

#494236

Postby Dod101 » April 14th, 2022, 10:13 am

According to the JRS website, the share price is at a 156% premium to NAV. Nobody accuse GS of not being adventurous and brave.

Dod

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Re: When should we get greedy?

#494245

Postby GoSeigen » April 14th, 2022, 10:31 am

Quick heads up: unusually, options expiration is today, Thursday, due to tomorrow's Good Friday holiday.

I only have one S&P position expiring, with a 4450 strike so a bit of pin risk there. I've been adding to short straddle positions. Market cooperating by continuing it's long consolidation.

GS

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Re: When should we get greedy?

#494249

Postby GoSeigen » April 14th, 2022, 10:46 am

Dod101 wrote:According to the JRS website, the share price is at a 156% premium to NAV. Nobody accuse GS of not being adventurous and brave.

Dod


The NAV is probably meaningless as many Russian stocks still do not have sensible pricing.

This morning I've sold 40% of my main holding in POG given today's announcement that they may sell off assets at firesale prices; this is not really a big deal because I've only bought a few so far, very cautiously (the sale amounts to 10% of the profit I've taken from that same POG holding). I'll probably recycle the proceeds into JRS over time.

GS

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Re: When should we get greedy?

#494481

Postby vand » April 15th, 2022, 11:06 am

vand wrote:Buy when there's - literally - blood on the streets...

I do think that a lot of frothy sentiment has blown off since the start of the year. Today should push the pendulum very much into the fear zone.

Tensions will undoubtedly escalate over the next few days, but wouldn't surprise me if the market tries to rally from today's gap down


We had our bounce to relieve the immediate short term pessimism, but there are still strong headwinds at play for the equity markets here..

High inflation
High valuation
Credit tightening

I've personally lightened up a bit on my global trackers and raised some cash. We are no longer in a strong uptrend, and I think there will be opportunities to redeploy the cash in the relative near term at more favourable price.

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Re: When should we get greedy?

#501618

Postby Tara » May 19th, 2022, 10:31 pm

GoSeigen wrote:
TheMotorcycleBoy wrote:So what Russian assets are you targetting? Things like LON:POLY and LON:EVR, or are buying Russian stocks traded on the Moscow exchange?


Just adding to existing positions in JRS and POG for now.

GS


GS

Interested to see you have been investing in JRS and POG.
Did you ever think of investing POLY? It also looks quite undervalued.

Do you think that JRS will eventually be allowed to sell all of their Russian shares as normal on the Russian stock market?
Do you see any risk of the confiscation/appropriation of the Russian shares owned by JRS?
And do you think it would be possible for JRS to relocate to Russia in order to realise the full 100% value of their Russian shares?

At present JRS are only valuing their Russian holdings at about 1% of Moex market price.

GoSeigen
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Re: When should we get greedy?

#501670

Postby GoSeigen » May 20th, 2022, 9:38 am

Tara wrote:
GoSeigen wrote:
TheMotorcycleBoy wrote:So what Russian assets are you targetting? Things like LON:POLY and LON:EVR, or are buying Russian stocks traded on the Moscow exchange?


Just adding to existing positions in JRS and POG for now.

GS


GS

Interested to see you have been investing in JRS and POG.
Did you ever think of investing POLY? It also looks quite undervalued.

Do you think that JRS will eventually be allowed to sell all of their Russian shares as normal on the Russian stock market?
Do you see any risk of the confiscation/appropriation of the Russian shares owned by JRS?
And do you think it would be possible for JRS to relocate to Russia in order to realise the full 100% value of their Russian shares?

At present JRS are only valuing their Russian holdings at about 1% of Moex market price.


Hi Tara, I'm afraid I have no good answers to any of your questions. As everyone knows the whole Russia situation is a huge mess at the moment. I misread the situation badly in the run-up and first few days of the war because I assumed Ukraine would roll over and come to an agreement with Russia to avoid the devastation of war. I also thought the Western reaction would be as insipid as it was following the initial invasion in 2014. I was completely wrong -- the Western reaction has been fierce and Ukraine have put up a very strong defence to the extent that they could even defeat Russia. This would reverse my reasoning in investing there, which was that Russia was growing in confidence, economic and military strength and regional influence and its economy would continue growing strongly. I can only think that defeat in this war would put a huge dent in that scenario. Therefore "Russia is probably not a great investment for ten years or so" is probably my current baseline thinking.

Having said that, everyone likely feels the same, and Russian asset pricing would reflect that negativity. So I think I'll keep accumulating cautiously but only to a rather underweight position compared to my previous expectation, at least until a few years out of the ten have passed.

As I said I have nothing useful to say about JRS, just waiting to see what happens. Do you have any views?

GS

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Re: When should we get greedy?

#501672

Postby GoSeigen » May 20th, 2022, 9:44 am

I also have a problem with my short straddles expiring today. They are far OTM so I don't know what to do: roll or accept assignment. In terms of cashflow it's not a problem as I'm actually long options overall, but the timing is messing with my head because the market is far from where I hoped it would be. Will update later when I've decided what to do!

GS

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Re: When should we get greedy?

#501727

Postby Tara » May 20th, 2022, 1:04 pm

GS

Thanks. I have also invested in JRS and I think that eventually it will be a good investment. I have also invested in POLY. I understand the risks of both shares but I think they will both recover long before the ten years that you mention. Any positive news on the conflict ending or the sanctions lifting should give a big rise to both shares. The sanctions seem to be hurting every country in the world through inflation, supply problems, food shortages, and so it is difficult to see the sanctions lasting for long.

I also think JRS will eventually be able to sell their shares as normal, and I don’t really see any risk of confiscation. I also think that it would be possible for the company to relocate and to realise their full NAV which is currently about £5. The PR for the company would probably not be so good though! So not likely to ever happen. I think within a year or two the conflict, or the sanctions, or both, will have ended. And so I think that JRS, and also POLY, will eventually prove to be a good investment.

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Re: When should we get greedy?

#501754

Postby TheMotorcycleBoy » May 20th, 2022, 3:22 pm

Tara wrote:
GoSeigen wrote:
TheMotorcycleBoy wrote:So what Russian assets are you targetting? Things like LON:POLY and LON:EVR, or are buying Russian stocks traded on the Moscow exchange?


Just adding to existing positions in JRS and POG for now.

GS


GS

Interested to see you have been investing in JRS and POG.
Did you ever think of investing POLY? It also looks quite undervalued.

Do you think that JRS will eventually be allowed to sell all of their Russian shares as normal on the Russian stock market?
Do you see any risk of the confiscation/appropriation of the Russian shares owned by JRS?
And do you think it would be possible for JRS to relocate to Russia in order to realise the full 100% value of their Russian shares?

At present JRS are only valuing their Russian holdings at about 1% of Moex market price.

POLYs misfortune effected me differently. I ended up selling my out as a loss cutting measure! Unfortunately I wasn't fast enough, so I ended up being down at least 60% down on that (fortunately) little adventure.

All I can I add re. POLY is that all their English board members resigned v early on in the war, so I'm not sure whether that implies, that the remaining Russians in the board might somehow able ditch their responsibilities to their non-russian share holders, in some dubious fashion.

Matt

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Re: When should we get greedy?

#502120

Postby vand » May 22nd, 2022, 12:51 pm

I'm still not convinced that the market isn't going to go significantly lower, but the S&P has now decline for 7 weeks in a row (the Dow 8 weeks), and we are overdue at least a good relief rally.

Buffett has also been busy putting his cash pile to use, so he is seeing value amid the declines.

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Re: When should we get greedy?

#502989

Postby TheMotorcycleBoy » May 26th, 2022, 3:57 pm

Tara wrote:GS

Thanks. I have also invested in JRS and I think that eventually it will be a good investment. I have also invested in POLY. I understand the risks of both shares but I think they will both recover long before the ten years that you mention. Any positive news on the conflict ending or the sanctions lifting should give a big rise to both shares. The sanctions seem to be hurting every country in the world through inflation, supply problems, food shortages, and so it is difficult to see the sanctions lasting for long.

I also think JRS will eventually be able to sell their shares as normal, and I don’t really see any risk of confiscation. I also think that it would be possible for the company to relocate and to realise their full NAV which is currently about £5. The PR for the company would probably not be so good though! So not likely to ever happen. I think within a year or two the conflict, or the sanctions, or both, will have ended. And so I think that JRS, and also POLY, will eventually prove to be a good investment.

Might this kind of occurrence threaten firms like LON:POLY eventually?

https://www.reuters.com/markets/europe/ ... 022-05-26/

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Re: When should we get greedy?

#506902

Postby GoSeigen » June 13th, 2022, 4:16 pm

GoSeigen wrote:
GoSeigen wrote:
GoSeigen wrote:
GoSeigen wrote:I've entered a new phase of my strategy now where I am gradually reducing leveraged long positions by closing a very small tranche of bank share forward contracts.

I'm doing this just to assess how wrong/premature the change will prove to be.

:-)


With the S&P pullback and a bit of fear showing there I recently bought some Sep Straddles to add to a small June Straddle position.

This morning I've taken the unusual trade of short S&P500 Feb puts and short FTSE100 Feb calls, a kind of US/UK arbitrage short straddle. There's been a strong divergence in the US and UK markets in recent weeks which has been wonderful for me as I am short the former and long the latter, but this latest trade is a bet that there will be a breather in UK outperformance or at least the two markets will trade in tandem for a while. It the FTSE outperforms S&P by more than 3.5% over the next 4 weeks I lose money on the trade (but my other positions do really well).


Doubled my S&P straddle positions on this (NY) afternoon's weakness. VIX term structure is inverted. IMO we'll either get a collapse in sentiment now or strong rebound.


Still buying straddles. The S&P has broken down technically. Bloomberg is calling a bottom; similarly in other media I see little angst either about the falls or about any underlying issues. Price action is dire and I see no extremes in bottoming indicators so I'll stick my neck out and say the S&P is headed for the 3400-3200-3000 area with a collapse in sentiment the verdict for now. There's really no technical support above that.

Don't mind a big move either way though. Worth noting that with S&P modified duration of around 75 years extreme volatility must be expected.

GS


The S&P 500 is not far from the 3400 level mentioned above -- another 10% fall and it's there. It's taken far longer than I expected. I still hold the put leg of the straddles I was buying Jan 18 to Jan 21, they are nicely in profit now -- about 20% up on the total notional amount risked when I opened the trades, excluding premium earned when I closed the call legs.

When the market has turned bullish I've been closing off OTM calls and puts. When the yield inverts I've been buying ATM straddles, the latest one today at 3800. I don't know where the decline will end up, but when things look panicky I'll start closing out those puts or maybe writing ATM puts against the ITM ones I hold.

Interesting market. It's surprised me a few times so very happy I've been taking a direction-neutral stance with this experiment.

GS

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Re: When should we get greedy?

#506922

Postby GoSeigen » June 13th, 2022, 5:20 pm

In my previous post "When the yield inverts" should read "When the term structure inverts".

GS

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Re: When should we get greedy?

#506934

Postby vrdiver » June 13th, 2022, 6:01 pm

GoSeigen wrote:In my previous post "When the yield inverts" should read "When the term structure inverts".

GS

I've been reading your posts on this thread for a while, but am still embarrassingly ignorant of what you are actually doing!

Could you point me to a primer that I could read (think Ladybird edition of "GoSeigen Straddles Mr Market") :o

VRD


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