Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

Waiting Out the Insanity

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Well, if the market wanted to make me lose interest in trading it, then: mission accomplished. Yesterday's Rally-From-Hell and the subsequent Sorry-Just-Kidding is exactly the kind of thing that makes participating in a market like this little different than strolling through an unmarked mine field.

This is not to say I've gone flat. I still have multiple short positions, but I doubt I'm going to get anywhere past 50% committed (that is, at least half the portfolio in cash) until this stupid, idiotic, frustrating, agonizing, moronic, infuriating European Salvation Plan From God is announced. I don't feel like getting my hand blown off with the surprise announcement of a $25 trillion Euro plan served with a case of red wine and a bag full of baguettes for every citizen in the Eurozone.

I hope it's announced, I hope it falls on its face, and I hope the leaders of Europe are hung in effigy shortly thereafter. Until that happens, I'm keeping my body parts intact.

1019-sarkozy

Hedging Update — ETFs

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Hedging costs of Leading ETFs — in late June and now

Hey fellow Slopers,

In looking back at the hedging costs of the most widely-traded ETFs toward the end of June versus the same basket of ETFs on Tuesday, I figured they'd all be more expensive to hedge now. That turned out to be true of 9 out of 10 of them: the only one of those ETFs that is cheaper to hedge now is the iShares MSCI Japan Index (EWJ).

The two tables below show the costs of hedging EWJ and the other 9 ETFs against greater-than-20% declines over the next several months, using optimal puts, as of June 23rd (when the VIX S&P 500 volatility index was at 19.29), and as of October 18th (with the VIX at 31.56). First, a reminder about what optimal puts are, and why I've used 20% as a decline threshold; then, a screen capture showing the current optimal puts to hedge the one ETF with lower hedging costs now than in late June (EWJ).

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Huge Reversal (by Springheel Jack)

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Well that was a real rarity yesterday, a major distribution day on Monday that was followed by a major accumulation day on Tuesday. I posted the following chart on twitter intraday yesterday that showed an large H&S forming that would take ES to the 50% retracement level. It fit the likely reversal scenario perfectly and mid-afternoon yesterday I'm sure a lot of people were playing the expected top of the right shoulder in the 1216.5 ES area. Alas, the news about the French and German massive expansion for a massive expansion of Europe's bailout fund was released and the spike up on the news smashed this lovely short term bear scenario:

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