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.

Heading to 1900?

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The S&P 500 (SPX) price structure has plunged from the confines of its Dec-Aug top formation, and through its Oct 2011 support line in the vicinity of 1992.00.

Although my near-term work might argue for the emergence of a two-way trade, my intermediate-term work suggests strongly that the SPX has unfinished business on the downside — to 1900 at a minimum in the hours and days ahead.

Such a scenario would amount to a 10%-11% correction off of the May-July highs.

That said, however, if a garden-variety, 10% correction does not include a major capitulation, then we should be aware that a test of the Oct 2014 low will represent a 15% correction, while a test of the Feb 2013 low will amount to a 19% correction off of the highs.

full-Cf75QAolKpvvG6Xi34KWjOriginally published on MPTrader.com.

Getting Paid To Hedge VXX

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Hey Fellow Slopers,

With the VIX jumping again on today’s market drop, here’s a quick  Portfolio Armor optimal collar hedge that might of interest to some playing VXX: cap your potential upside at 20%, limit your downside risk to a max drawdown of 20%, get paid 6.47% of position value to hedge.

1 VXX

As you can see at the bottom of the screen capture above, the cost of the put leg of this collar was $2,270, or 11.48% of position value. But if you look at the call leg below, you see that the income it generated was greater: $3,550, or 17.95% of position value…

2 VXX

… So the net cost of this optimal collar hedge was -$1,280, or -6.47% of position value, meaning an investor would essentially get paid to open this hedge.*

*To be conservative Portfolio Armor calculated the cost of the puts at the ask, and the income from the calls at the bid; in practice, you can often buy puts for less (at some point between the bid and ask) and sell calls for more (again, at some point between the bid and the ask). So you would probably have collected more than $1,280 to open this hedge.