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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?

#355053

Postby GoSeigen » November 10th, 2020, 4:54 am

GoSeigen wrote:
GoSeigen wrote:
GoSeigen wrote:
VIX is still high and so I continue to write options. Aug expiration ended with several calls ITM, I rolled those positions to Sep short strangles. Also opened a short Nov call around 1 Sep which looked foolish for a few days but is now well OTM and I wrote a short Nov put against the call to complete the strangle.

Sep expiration was very good with practically every position closing out of the money. Used part of the freed margin to open an Oct short strangle.

As has been the case for months, I don't have the ability to call direction in the short term and have actually been surprised at the speed and relentlessness of the bull run since March. Thus with elevated implied volatility I am happy to keep making these non-directional trades in the US market and to stock pick in the UK market.

GS


Oct expiration was fairly uneventful for me, breakeven on the Oct strangle. I was left with a few remaining short Nov strangles; with the renewed volatility curve inversion last week I bought Jun S&P straddles for the first time in months. Today the VIX is up and vol curve more inverted. Tempted to buy more straddles but will see how the day's trading goes: I'll buy more if last week's position is in profit and I have sufficient margin.

GS
P.S. Still hold a few ITM short Dec S&P calls which I'll cover if we get a decent market fall.


VIX term structure still inverted and VIX is rising. My previous Jun straddles are in profit so I doubled up today. That leaves me roughly neutral in terms of market exposure on my options (equal long/short positions), but the longs are Jun and shorts are Nov contracts. So I will use sharp underlying movements to take profit on the Nov contracts if possible.

GS


Those long straddles were in profit yesterday after the strong rise at open with the call legs well in the money. Term structure was normal. I took the chance to write some Nov S&P straddles. After the market came back down that didn't look too clever but I am protected from falls by those long Jun straddles so not too worried. I'm still bullish equities and hope yesterday's highs will be taken out again in short order.

GS
EDIT: Did take the chance to partly cover the put leg of my earlier short strangles so happy with that.
EDIT: Yesterday was a technical breakout from a brief consolidation but there are technical warning signs too, so the bullish angle is not clear-cut.

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Re: When should we get greedy?

#355055

Postby TheMotorcycleBoy » November 10th, 2020, 5:00 am

GoSeigen wrote:Those long straddles were in profit yesterday after the strong rise at open with the call legs well in the money. Term structure was normal. I took the chance to write some Nov S&P straddles. After the market came back down that didn't look too clever but I am protected from falls by those long Jun straddles so not too worried. I'm still bullish equities and hope yesterday's highs will be taken out again in short order.

Hi GS,

I curious by what exactly you mean that phrase of yours which I've emboldened. When you say "taken out", do you imply that folk will profit take and bring the highs back down slightly?

thanks Matt

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Re: When should we get greedy?

#355057

Postby GoSeigen » November 10th, 2020, 5:11 am

TheMotorcycleBoy wrote:
GoSeigen wrote:Those long straddles were in profit yesterday after the strong rise at open with the call legs well in the money. Term structure was normal. I took the chance to write some Nov S&P straddles. After the market came back down that didn't look too clever but I am protected from falls by those long Jun straddles so not too worried. I'm still bullish equities and hope yesterday's highs will be taken out again in short order.

Hi GS,

I curious by what exactly you mean that phrase of yours which I've emboldened. When you say "taken out", do you imply that folk will profit take and bring the highs back down slightly?

thanks Matt


Sorry, Americanism (I think): "taken out" in this context usually means previous highs will be exceeded.

GS

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Re: When should we get greedy?

#355244

Postby TheMotorcycleBoy » November 10th, 2020, 3:23 pm

GoSeigen wrote:
TheMotorcycleBoy wrote:
GoSeigen wrote:Those long straddles were in profit yesterday after the strong rise at open with the call legs well in the money. Term structure was normal. I took the chance to write some Nov S&P straddles. After the market came back down that didn't look too clever but I am protected from falls by those long Jun straddles so not too worried. I'm still bullish equities and hope yesterday's highs will be taken out again in short order.

Hi GS,

I curious by what exactly you mean that phrase of yours which I've emboldened. When you say "taken out", do you imply that folk will profit take and bring the highs back down slightly?

thanks Matt


Sorry, Americanism (I think): "taken out" in this context usually means previous highs will be exceeded.

GS

I see. Thanks. TBF considering as you say you are "bullish equities" I'm not sure why you even bother with these options (unless of course they offer you leverage). Why not just bung (all) yer money down and wait?

Matt

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Re: When should we get greedy?

#355298

Postby GoSeigen » November 10th, 2020, 5:03 pm

TheMotorcycleBoy wrote:
GoSeigen wrote:
TheMotorcycleBoy wrote:Hi GS,

I curious by what exactly you mean that phrase of yours which I've emboldened. When you say "taken out", do you imply that folk will profit take and bring the highs back down slightly?

thanks Matt


Sorry, Americanism (I think): "taken out" in this context usually means previous highs will be exceeded.

GS

I see. Thanks. TBF considering as you say you are "bullish equities" I'm not sure why you even bother with these options (unless of course they offer you leverage). Why not just bung (all) yer money down and wait?

Matt


Because I'm very likely wrong! And the markets are a bit wild still, being wrong can get expensive! And implied volatility is still high so you are paid well for waiting.

GS

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Re: When should we get greedy?

#355329

Postby johnhemming » November 10th, 2020, 6:47 pm

I wouldn't be bullish US Tech. When I invest in US companies it tends to be because of listings in the UK. I think the UK market has been undervalued, but there still remains Brexit uncertainty as well as some Covid uncertainty.

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Re: When should we get greedy?

#356181

Postby GoSeigen » November 13th, 2020, 12:29 pm

Quick update, as I'd covered my short puts earlier I reopened a short Nov slightly OTM put into yesterday's weakness. Just seemed more sensible than closing the calls with quite a bit of time value left and only a week to expiration.

GS

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Re: When should we get greedy?

#356196

Postby bluedonkey » November 13th, 2020, 12:48 pm

Recently topped up LGEN at 229p, HFEL at 306p and MYI at 920p. Still have 6% in cash. Now waiting for the vaccine euphoria to evaporate and the next downturn before putting more money in. I'd like to buy VUSA but just feel there must be a nasty correction coming for that market.

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Re: When should we get greedy?

#356219

Postby tikunetih » November 13th, 2020, 2:17 pm

bluedonkey wrote:I'd like to buy VUSA but just feel there must be a nasty correction coming for that market.


But how reliable are these feelings of yours?

->
    #304080 Post by bluedonkey » April 29th, 2020, 11:30 am

    As I've said before, this is the anticipated sucker rally / dead cat bounce. I think it will fade and the market will go down again. Economic recovery will take a long time.

...US market up >20% since then and broken out to new all time highs (along with for example India; while Japan has broken out to multi-decade highs). Secular bull markets in action.

Serious point being that if your personal track record is poor on these types of direction market calls then you should probably think very carefully before making long term investing decisions off the back of them.

NB not having a pop!

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Re: When should we get greedy?

#356226

Postby bluedonkey » November 13th, 2020, 2:37 pm

tikunetih wrote:
bluedonkey wrote:I'd like to buy VUSA but just feel there must be a nasty correction coming for that market.


But how reliable are these feelings of yours?

->
    #304080 Post by bluedonkey » April 29th, 2020, 11:30 am

    As I've said before, this is the anticipated sucker rally / dead cat bounce. I think it will fade and the market will go down again. Economic recovery will take a long time.

...US market up >20% since then and broken out to new all time highs (along with for example India; while Japan has broken out to multi-decade highs). Secular bull markets in action.

Serious point being that if your personal track record is poor on these types of direction market calls then you should probably think very carefully before making long term investing decisions off the back of them.

NB not having a pop!

I am doing the random walk! Thanks for reminding me of my previous post. Certainly taking a world index as a proxy, the markets shrugged off my comment in April 2020 and continued to climb, though not so much the FTSE 100. Looking back, I see I bought SMT and Fundsmith, and sold BP, RDSB, BT. Comments welcome.

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Re: When should we get greedy?

#356237

Postby GoSeigen » November 13th, 2020, 2:56 pm

tikunetih wrote:
Serious point being that if your personal track record is poor on these types of direction market calls then you should probably think very carefully before making long term investing decisions off the back of them.

NB not having a pop!


Getting the timing right on these calls is seriously difficult. In Feb IIRC I opined that we were at the start of a secular equity bull market, one month later I looked a complete idiot!

GS

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Re: When should we get greedy?

#356249

Postby tikunetih » November 13th, 2020, 3:37 pm

GoSeigen wrote:In Feb IIRC I opined that we were at the start of a secular equity bull market, one month later I looked a complete idiot!


I primarily follow the US (esp. S&P500) - the secular bull there commenced in spring 2013, when it broke above the sideways range formed over the prior 13 year secular bear market (which itself comprised two cyclical bears).

Retirement saving by the Millennial generation bulge should/will provide a favourable tailwind to (ie. sustained demand for) US equities until the early/mid-2030s, outweighing liquidations by retired Boomers that we hear so much about. Consequently, the S&P500 may be good for the 10,000+ level before this secular bull completes.

Personally, I've consciously followed very different strategies dependent on the secular market environment. Long-term hold/compounding/dip-buying (easy, minimal effort) during the secular bulls; trend-following trading strats both long and short (hard, maximum effort) during the secular bear. I don't imagine anyone reading this site follows methods akin to mine and nor probably should they! "Find and stick to what works for you" and "keep it as simple as it can be while still meeting your goals".

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Re: When should we get greedy?

#356257

Postby TheMotorcycleBoy » November 13th, 2020, 3:57 pm

bluedonkey wrote:Recently topped up LGEN at 229p, HFEL at 306p and MYI at 920p. Still have 6% in cash. Now waiting for the vaccine euphoria to evaporate and the next downturn before putting more money in. I'd like to buy VUSA but just feel there must be a nasty correction coming for that market.

Have to say I topped up SPT (2nd Nov) SCT, and XPP (5th Nov). Still have surplus pro-rata allocation left in me and Mel's ISA (we attempt a crude cost averaging scheme with slight reserve). Stopped looking/thinking-about-it after the Pfizer rush. Waiting for the next time I think there's a dip :lol:

Matt

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Re: When should we get greedy?

#356262

Postby bluedonkey » November 13th, 2020, 4:12 pm

TheMotorcycleBoy wrote:
bluedonkey wrote:Recently topped up LGEN at 229p, HFEL at 306p and MYI at 920p. Still have 6% in cash. Now waiting for the vaccine euphoria to evaporate and the next downturn before putting more money in. I'd like to buy VUSA but just feel there must be a nasty correction coming for that market.

Have to say I topped up SPT (2nd Nov) SCT, and XPP (5th Nov). Still have surplus pro-rata allocation left in me and Mel's ISA (we attempt a crude cost averaging scheme with slight reserve). Stopped looking/thinking-about-it after the Pfizer rush. Waiting for the next time I think there's a dip :lol:

Matt

Give us a shout when you call the dip.

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Re: When should we get greedy?

#356265

Postby TheMotorcycleBoy » November 13th, 2020, 4:21 pm

bluedonkey wrote:
TheMotorcycleBoy wrote:
bluedonkey wrote:Recently topped up LGEN at 229p, HFEL at 306p and MYI at 920p. Still have 6% in cash. Now waiting for the vaccine euphoria to evaporate and the next downturn before putting more money in. I'd like to buy VUSA but just feel there must be a nasty correction coming for that market.

Have to say I topped up SPT (2nd Nov) SCT, and XPP (5th Nov). Still have surplus pro-rata allocation left in me and Mel's ISA (we attempt a crude cost averaging scheme with slight reserve). Stopped looking/thinking-about-it after the Pfizer rush. Waiting for the next time I think there's a dip :lol:

Matt

Give us a shout when you call the dip.

That's gotta be worth another laugh!

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Re: When should we get greedy?

#356292

Postby TUK020 » November 13th, 2020, 5:33 pm

bluedonkey wrote:Give us a shout when you call the dip.


Wait until Christmas is cancelled?

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Re: When should we get greedy?

#356335

Postby GoSeigen » November 13th, 2020, 7:59 pm

GoSeigen wrote:
TheMotorcycleBoy wrote:I see. Thanks. TBF considering as you say you are "bullish equities" I'm not sure why you even bother with these options (unless of course they offer you leverage). Why not just bung (all) yer money down and wait?

Matt


Because I'm very likely wrong! And the markets are a bit wild still, being wrong can get expensive! And implied volatility is still high so you are paid well for waiting.

GS


I rattled that answer off in a hurry. Should really have added that:
1. Most of my portfolio is seriously long equity. Bought more in the March/April falls.
2. I am running this thread as a kind of demonstration of my claim back in March that market-neutral strategies might be a good way to "get greedy", (given the high VIX and difficulty calling direction). So any profit from this strategy is a bonus. My gross exposure in nominal terms to this strategy has averaged only about 10% of total net worth.
3. The strategy itself does incorporate long exposure. A couple of posts back I described buying long Jun straddles at the bottom of the recent pull-back. If we have a sustained bull market over the next 9 months the call legs will end up deeply ITM and there should be a decent bit of profit. In the meantime I'll aim to recover some of the Jun contract time value by going short near-month options.

GS

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Re: When should we get greedy?

#356381

Postby TheMotorcycleBoy » November 14th, 2020, 5:35 am

GoSeigen wrote:
GoSeigen wrote:
TheMotorcycleBoy wrote:I see. Thanks. TBF considering as you say you are "bullish equities" I'm not sure why you even bother with these options (unless of course they offer you leverage). Why not just bung (all) yer money down and wait?

Matt


Because I'm very likely wrong! And the markets are a bit wild still, being wrong can get expensive! And implied volatility is still high so you are paid well for waiting.

GS


I rattled that answer off in a hurry. Should really have added that:
1. Most of my portfolio is seriously long equity. Bought more in the March/April falls.
2. I am running this thread as a kind of demonstration of my claim back in March that market-neutral strategies might be a good way to "get greedy", (given the high VIX and difficulty calling direction). So any profit from this strategy is a bonus. My gross exposure in nominal terms to this strategy has averaged only about 10% of total net worth.
3. The strategy itself does incorporate long exposure. A couple of posts back I described buying long Jun straddles at the bottom of the recent pull-back. If we have a sustained bull market over the next 9 months the call legs will end up deeply ITM and there should be a decent bit of profit. In the meantime I'll aim to recover some of the Jun contract time value by going short near-month options.

GS

Ok, thanks. It sounds like a kind of insurance policy. Our foli is all long, and we went hell for leather buying in March-May. Then we continued to buy throughout the summer but less aggressively to recoup ISA allocation reserve.

By the way what's the difference between volatility and "implied volatility?" Also is VIX still high? I thought it'd settled down by now.

Matt

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Re: When should we get greedy?

#356400

Postby TheMotorcycleBoy » November 14th, 2020, 8:44 am

tikunetih wrote:
GoSeigen wrote:In Feb IIRC I opined that we were at the start of a secular equity bull market, one month later I looked a complete idiot!

I primarily follow the US (esp. S&P500) - the secular bull there commenced in spring 2013, when it broke above the sideways range formed over the prior 13 year secular bear market (which itself comprised two cyclical bears).

Retirement saving by the Millennial generation bulge should/will provide a favourable tailwind to (ie. sustained demand for) US equities until the early/mid-2030s, outweighing liquidations by retired Boomers that we hear so much about. Consequently, the S&P500 may be good for the 10,000+ level before this secular bull completes.
...

This is an interesting investment philosophy. However if one extends your line of thought, one could arrive at the following conclusions:

1. Equities will continue to rise if investment by the upcoming youngsters outweighs liquidations by the outgoing old timers. Ad infinitum.
2. With the proviso that future generations want to put "spare cash" into equities. Or indeed have the spare cash. So isn't the entire philosophy underpinned by an assumption of continuous economic growth? Perhaps explaining when this (growth) doesn't happen we get the bears you mentioned.

So I claim it's possible to cut out any mention of younger generation bulge and outgoing retirees influencing market valuations. Or does you thesis hinge on generation sizes? I.e. population count?

Matt

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Re: When should we get greedy?

#356408

Postby dealtn » November 14th, 2020, 9:19 am

TheMotorcycleBoy wrote:
By the way what's the difference between volatility and "implied volatility?" Also is VIX still high? I thought it'd settled down by now.



Volatility is a somewhat "loose" term, so will depend on the context and what someone is attempting to say. Or is just a generic expression to say a "market" is moving more (usually in both directions, and in greater than normal magnitude).

Implied Volatility is a mathematical term derived within the calculation for where options are priced. It is a tricky concept because it is in fact the "unknown", hence implied. Simplistically you know the current price, the maturity or exercise date, the interest rate (used to discount cash flows from the contract date to the exercise date), and also the current option price. (And the option pricing formula). The unknown is the "implied volatility" which translates as how much the underlying price is predicted to move, in both directions, in the potential probable paths between now and the exercise date. The higher the implied volatility, the higher the option price, reflecting the "probable" large swings in price and range of outcomes of where the underlying will come to have its price come the date of the option expiry.

Historic Volatility is a backward looking equivalent of Implied Volatility. So how much did the underlying price move in prior periods, which can be used as a comparative with current (or future!) implied volatility to make a judgement on how accurately the market's price of implied volatility might be when compared to similar episodes in the past (if you can find any - and believe they will be the same)?


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