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Re: When should we get greedy?

Posted: March 25th, 2020, 6:46 pm
by GoSeigen
Well, I've just done something I never thought I'd do, which is to open a Sep S&P straddle with implied vol at 45 on the contract. I think it's just extraordinary that with the S&P up about 20% in days VIX is still above 60 and highly inverted term structure. I am guessing there's a lot more volatility around the corner, whether a short squeeze or another huge slide.

I am still very short vol/time value in Apr and May contracts. Interesting to see what these Sep straddles will do.


GS

Re: When should we get greedy?

Posted: March 25th, 2020, 6:55 pm
by ReformedCharacter
bluedonkey wrote:I think it's important to note that today's rally (24 March) is puny compared to recent falls. At present, I'm discounting it as not predictive of a prolonged upturn.

Have to agree, those that believe we've reached some kind of 'bottom' are likely to be disappointed IMO.

RC

Re: When should we get greedy?

Posted: March 25th, 2020, 8:05 pm
by bluedonkey
GoSeigen wrote:Well, I've just done something I never thought I'd do, which is to open a Sep S&P straddle with implied vol at 45 on the contract. I think it's just extraordinary that with the S&P up about 20% in days VIX is still above 60 and highly inverted term structure. I am guessing there's a lot more volatility around the corner, whether a short squeeze or another huge slide.

I am still very short vol/time value in Apr and May contracts. Interesting to see what these Sep straddles will do.


GS

I suspect hardly anyone here knows what you mean.

Re: When should we get greedy?

Posted: March 25th, 2020, 8:16 pm
by swill453
bluedonkey wrote:I suspect hardly anyone here knows what you mean.

I suspect flagging that up will serve little purpose.

Scott.

Re: When should we get greedy?

Posted: March 26th, 2020, 9:03 am
by BrummieDave
GoSeigen wrote:Well, I've just done something I never thought I'd do, which is to open a Sep S&P straddle with implied vol at 45 on the contract. I think it's just extraordinary that with the S&P up about 20% in days VIX is still above 60 and highly inverted term structure. I am guessing there's a lot more volatility around the corner, whether a short squeeze or another huge slide.

I am still very short vol/time value in Apr and May contracts. Interesting to see what these Sep straddles will do.


GS


Me too... :?

Re: When should we get greedy?

Posted: March 26th, 2020, 11:30 am
by GoSeigen
bluedonkey wrote:
GoSeigen wrote:Well, I've just done something I never thought I'd do, which is to open a Sep S&P straddle with implied vol at 45 on the contract. I think it's just extraordinary that with the S&P up about 20% in days VIX is still above 60 and highly inverted term structure. I am guessing there's a lot more volatility around the corner, whether a short squeeze or another huge slide.

I am still very short vol/time value in Apr and May contracts. Interesting to see what these Sep straddles will do.


GS

I suspect hardly anyone here knows what you mean.


I gave swill453 a brief explanation further up the thread and there is Google for anyone interested. Let's also not underestimate the knowledge of some Fools. There was a pretty active options thread on TMF/TLF a couple of years back.

When the market is moving it is often more productive to leave off the underlying and trade the derivatives. Volatility is extraordinarily high now so this really is a once-in-a-generation trade.


GS

Re: When should we get greedy?

Posted: March 26th, 2020, 12:15 pm
by bungeejumper
GoSeigen wrote:Volatility is extraordinarily high now so this really is a once-in-a-generation trade.

Hmmmm, remind me where I've heard that before? :lol:

I sort-of agree with you, but in a much less technical way. Have been in the sector for nearly forty years (no, I'm not saying exactly how), and my "macro gut feel" for what's reasonable and what isn't has served me very well over the twenty years that I've been actively investing for myself. Reversion to the mean has been a particularly good friend. So has the Shiller CAPE formula, which still says the S&P is one and a half times as expensive as its historical median. :|

But........

These are exceptional times, and an awful lot of things have gone out of date since 1987, which was the last big crisis (in my book, anyway). Enhanced international access to portfolios, instant online access, and better control and use of derivatives, are all counterbalanced to varying extents by other factors that have kicked away all the traditional assumptions about what we "should" be able to expect. Such as open-ended funds (a potentially precarious shifting ballast in the middle of the ship?), easy shorting, and of course the emergence of a powerful China, the euro and cryptocurrencies, none of which were even there in 1987.

In other words, all the basic assumptions are up for grabs these days. If you've got a better grasp of the new fundamentals and you think this is a golden moment to use the contortions in the Vix, then good luck. Personally, I'm still focused on the possibility that quite a large chunk of mankind might be in danger of disappearance, and that the US might be at the centre of that. And that we really know damn all about the epidemiology of this CV19 thing.

What the heck, I'm probably 30 years older than you. :lol: Can't afford to go large on once-in-a-generation trades. Good luck, and maybe we'll compare notes in the autumn?

BJ

Re: When should we get greedy?

Posted: March 26th, 2020, 2:06 pm
by PinkDalek
The sub-title for this particular board being Investment discussion for beginners. Why you should invest your money, get help getting started.

Just sayin'.

Re: When should we get greedy?

Posted: March 26th, 2020, 2:11 pm
by Itsallaguess
PinkDalek wrote:
The sub-title for this particular board being Investment discussion for beginners. Why you should invest your money, get help getting started.

Just sayin'.


Given that this thread is already 6 pages long, I think it's unlikely that people are going to stop contributing to it PD, also given the thread context and the current market gyrations, so if you can think of somewhere more appropriate for it to live, then reporting the thread and asking one of the moderators to move it there might be the best alternative, perhaps?

I agree with you, by the way, that the 'How do I invest' board is probably not the most appropriate place for it to continue existing..

Cheers,

Itsallaguess

Re: When should we get greedy?

Posted: March 26th, 2020, 3:05 pm
by PinkDalek
Itsallaguess wrote:Given that this thread is already 6 pages long, I think it's unlikely that people are going to stop contributing to it PD ..


Yes, fully acknowledged, and my comment was only a gentle reminder as to the purpose of this particular board. I don't intend to report as the OP's question was probably valid for beginners (not saying the OP is one or not) and there are so many other places discussing the current issues I wouldn't know where to start.

Here's a similar one at Share Ideas commenced 9 March:

Is anyone panicking yet ?
viewtopic.php?p=289330#p289330

Re: When should we get greedy?

Posted: March 26th, 2020, 6:47 pm
by Degsy67
Tongue in cheek for those ex-TMF HYP fools with a long memory...

Q. When should we get greedy?

A. Well I’m waiting for Vodafone to dip below 100p to buy back in!

Closed today around 113p. Dipped to 98p briefly on 16th March.

Not a suggestion to buy. Just couldn’t resist the LOL.

:D

Degsy

Re: When should we get greedy?

Posted: March 27th, 2020, 5:49 am
by GoSeigen
Certain Fools have objected to my posts here (and guilty as charged, I initially replied to a post without checking which board). The TMF Options board did not survive the move to TLF. However I'm happy to have my OT posts from this thread moved to this old Options and Spread Betting thread:

viewtopic.php?f=78&t=4546


GS
P.S. I have self-reported.

Re: When should we get greedy?

Posted: March 27th, 2020, 7:39 am
by JDot
GoSeigen wrote:Certain Fools have objected to my posts here (and guilty as charged, I initially replied to a post without checking which board). The TMF Options board did not survive the move to TLF. However I'm happy to have my OT posts from this thread moved to this old Options and Spread Betting thread:

viewtopic.php?f=78&t=4546


GS
P.S. I have self-reported.

Everybody is welcome to keep posting on this thread. I am enjoying reading everyones contributions.

The main point of this thread is to pool the knowledge of everyone.

This link is interesting from this perspective
https://en.m.wikipedia.org/wiki/Information_Age

Re: When should we get greedy?

Posted: March 27th, 2020, 8:00 am
by JDot
JDot wrote:
GoSeigen wrote:Certain Fools have objected to my posts here (and guilty as charged, I initially replied to a post without checking which board). The TMF Options board did not survive the move to TLF. However I'm happy to have my OT posts from this thread moved to this old Options and Spread Betting thread:

viewtopic.php?f=78&t=4546


GS
P.S. I have self-reported.

Everybody is welcome to keep posting on this thread. I am enjoying reading everyones contributions.

The main point of this thread is to pool the knowledge of everyone.

This link is interesting from this perspective
https://en.m.wikipedia.org/wiki/Information_Age


Below is the correct link intended

https://www.youtube.com/watch?v=iOucwX7Z1HU

https://en.wikipedia.org/wiki/Wisdom_of_the_crowd

Re: When should we get greedy?

Posted: March 27th, 2020, 12:26 pm
by dspp
JDot wrote:
JDot wrote:
GoSeigen wrote:Certain Fools have objected to my posts here (and guilty as charged, I initially replied to a post without checking which board). The TMF Options board did not survive the move to TLF. However I'm happy to have my OT posts from this thread moved to this old Options and Spread Betting thread:

viewtopic.php?f=78&t=4546


GS
P.S. I have self-reported.

Everybody is welcome to keep posting on this thread. I am enjoying reading everyones contributions.

The main point of this thread is to pool the knowledge of everyone.


Moderator Message:
It can all stay here, sometimes the soup is richer that way. regards, dspp

Re: When should we get greedy?

Posted: March 27th, 2020, 3:07 pm
by GoSeigen
bungeejumper wrote:
GoSeigen wrote:Volatility is extraordinarily high now so this really is a once-in-a-generation trade.

Hmmmm, remind me where I've heard that before? :lol:

I sort-of agree with you, but in a much less technical way.

[...]

In other words, all the basic assumptions are up for grabs these days. If you've got a better grasp of the new fundamentals and you think this is a golden moment to use the contortions in the Vix, then good luck. Personally, I'm still focused on the possibility that quite a large chunk of mankind might be in danger of disappearance, and that the US might be at the centre of that. And that we really know damn all about the epidemiology of this CV19 thing.

What the heck, I'm probably 30 years older than you. :lol: Can't afford to go large on once-in-a-generation trades. Good luck, and maybe we'll compare notes in the autumn?


I'd very much like to compare notes later but will probably forget -- so maybe not that much younger than you... (have similar issues watering the compost heap too!)


I'm trying to use options trades as a discipline to avoid trading too early in the underlying. Can't say I've made much on the options over the past couple of years, but it's educational and entertaining.

The Sep straddles I opened recently would in most circumstances immediately start losing money. Two days later they've barely moved, with VIX still high and an inverted term structure. So I've doubled the position today, may add more if the trade keeps moving favourably.


GS

Re: When should we get greedy?

Posted: March 28th, 2020, 7:34 am
by JDot
GoSeigen wrote:
bungeejumper wrote:
GoSeigen wrote:Volatility is extraordinarily high now so this really is a once-in-a-generation trade.

Hmmmm, remind me where I've heard that before? :lol:

I sort-of agree with you, but in a much less technical way.

[...]

In other words, all the basic assumptions are up for grabs these days. If you've got a better grasp of the new fundamentals and you think this is a golden moment to use the contortions in the Vix, then good luck. Personally, I'm still focused on the possibility that quite a large chunk of mankind might be in danger of disappearance, and that the US might be at the centre of that. And that we really know damn all about the epidemiology of this CV19 thing.

What the heck, I'm probably 30 years older than you. :lol: Can't afford to go large on once-in-a-generation trades. Good luck, and maybe we'll compare notes in the autumn?


I'd very much like to compare notes later but will probably forget -- so maybe not that much younger than you... (have similar issues watering the compost heap too!)


I'm trying to use options trades as a discipline to avoid trading too early in the underlying. Can't say I've made much on the options over the past couple of years, but it's educational and entertaining.

The Sep straddles I opened recently would in most circumstances immediately start losing money. Two days later they've barely moved, with VIX still high and an inverted term structure. So I've doubled the position today, may add more if the trade keeps moving favourably.


GS


Hi Goseigen

Would you mind giving us beginners a little heads up as to what options are? And how they may be used to build wealth? Also I am interested to know your opinion on if now may be the time to start getting greedy whilst others are fearful or not?

Re: When should we get greedy?

Posted: March 28th, 2020, 10:57 am
by GoSeigen
JDot wrote:
Hi Goseigen

Would you mind giving us beginners a little heads up as to what options are? And how they may be used to build wealth? Also I am interested to know your opinion on if now may be the time to start getting greedy whilst others are fearful or not?


[Long... ]

Options are not really a beginner asset class (which is why some posters are complaining about my posts). Very briefly though, an option is a contract to do something if you wish to. Typically in finance there are options to buy (called "calls") and options to sell (called "puts"). These options can be embedded as part of a wider set of contractual terms, but in the investment world there are financial products which consist pretty much entirely of the option to buy or sell some security (called the "underlying"). These put and call options are tradeable on exchanges like the CME and are considered a "derivative": their value is somehow proportional to the (mathematical) derivative of the underlying. Thus trading an option is like trading on the speed of price movement of the underlying.

Options contracts typically are offered at various "strike" prices: the price at which the underlying will be traded if the option is "exercised". The buyer of the option is the one who has the right to exercise, sellers "write" the options and carry the risk of the option being exercised: they are compelled to deliver or take delivery of the underlying on exercise or at expiry of the contract. In reality many options are "cash settled" which means the underlying is not delivered, just the value of the contract at exercise or expiry.

Options contracts typically expire at three month intervals; they thus have two elements to their value: an "intrinsic value" based on the price of the underlying relative to the strike price, and a "time value" which represents the value to the option holder of the right to exercise the option; this time value declines as exercise date approaches, but also rises and falls with the velocity of the price movements as mentioned above. This velocity is known as "implied volatility" in the options world. The implied volatility of options based on the S&P 500 underlying is tracked by an index called the "VIX" and is closely followed by investors. Implied volatility of options is typically calculated using the famous Black Scholes formula.

The above is a very very brief summary of the basics of options. As you can see they are fairly complex and there is far more, which you can look up if interested: e.g. the "greeks", or options trading strategies like "straddles" that I have been mentioning.


As for whether it is time to be greedy, the essence of what I and others are saying is that prices clearly are moving extremely rapidly. If you trade risky assets now you may make or lose money very quickly. Predicting which is a mug's game. Options let you trade on the volatility itself. In the short term volatility might grow as fear sets in, but over time volatility will die down -- and probably before the direction of travel of the markets becomes clear. Straddles are a bet on growing volatility; short straddles bet on declining volatility. To a large extent the direction of the underlying market doesn't matter so straddles are "market neutral". Personally I time my trades based partly on the "term structure" of VIX options, which expresses how the implied volatility varies as a function of expiration date.

If you are mathematically inclined options may be interesting to you. If not, I personally would not bother with them, except to have a basic awareness of them to help build context around what is happening in the markets.

The markets having declined c30%, I feel it is okay to be buying, and have done so myself, but with the proviso that painful losses can still come from current market levels. I'd avoid sectors that have been performing well for a long period but are hitting long-term structural problems now. I think the airline industry is a prime example, having enjoyed a long and extraordinary globalisation and tourism boom but seemingly now coming up against Trump's protectionist instincts and growing nationalist anti-trade forces of which Brexit is a symptom.

OTOH I like banks which have made me and lost me quite a bit of money, but which have been in recovery for ten years but now look good to capitalise on growing inflation and interest rates.

Good luck with whatever you choose to do. If you're a beginner take it as slow as you can bear because you will make mistakes: small and painful is better than big and painful and in investment time is your friend!


GS

{written hurriedly, may contain errors... terms of art are in quotes...]

Re: When should we get greedy?

Posted: March 28th, 2020, 11:21 am
by dealtn
JDot wrote: And how they may be used to build wealth?


...and destroy wealth...

Re: When should we get greedy?

Posted: March 28th, 2020, 11:38 am
by JDot
dealtn wrote:
JDot wrote: And how they may be used to build wealth?


...and destroy wealth...

:lol:
Thanks for that Dealth