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When should we get greedy?

Investment discussion for beginners. Why you should invest your money, get help getting started
vand
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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.

TheMotorcycleBoy
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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/

GoSeigen
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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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Re: When should we get greedy?

#507032

Postby GoSeigen » June 14th, 2022, 7:08 am

vrdiver wrote:
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


Hi VRD. "Straddle" is jargon for an option purchase of both a put and a call option with the same strike price, usually purchased "at the money" (ATM) meaning the underlying price is close to the strike price.

The effect of buying a straddle is that you stand to profit whether the market rises significantly or falls significantly. The direction doesn't matter. You lose if, by expiration, you have not closed out your options in the money (ITM) and if the market has not moved enough to cover the purchased option premium.

Here's an explanation of straddles: https://www.theoptionsguide.com/long-straddle.aspx

I've also traded strangles: they are similar but you purchase out-of-the-money (OTM) options instead. This reduces losses from a quiet market but makes it harder to profit (larger swings needed).

I track the VIX term structure to help make decisions to either buy or write (go short of) these options. The VIX measures the implied volatility of the S&P500 index; its term structure plots the price of VIX futures vs their expiration date, similar to a bond yield curve.


This thread within a thread was started during the 2020 crash when the OP asked whether it was time to buy, and I remarked that given the extreme volatility of shares (because convexity) I preferred to try a market-neutral strategy and see how that performed, which I have been tracking ever since. It has been reasonably profitable for me, however it is only a small portion of my portfolio.

The long straddle trade is nice psychologically because you are happy to close out gains on your puts when the market has fallen and equally gains on the calls when it has risen. (So you are buying low and selling high.) Conversely, when the market is quiet you are happy to watch the premium drop on your short positions. (So you are profiting from being patient and not champing at the bit.)


GS

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Re: When should we get greedy?

#507193

Postby vrdiver » June 14th, 2022, 3:49 pm

Many thanks GS.

I've started to read the link you provided, which is helping my understanding!

On the basis that "there ain't no such thing as a free lunch" I think I need to do a bit more reading before putting my toe in the water with this, but it's interesting to see the possibilities.

Now to re-read this thread...

ATB
VRD


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