This has nothing to do with precious metals.
Over the course of any week, I read a lot of articles. Sometimes unrelated stories form connections in my head. Such a connection was made recently between two unrelated items: Elliott Rodger (the Isla Vista killer, who murdered six people and himself) and Wendi Deng, the soon-to-be-ex-wife (his third) of Rupert Murdoch. (more…)
This is one of those posts that has nothing to do with trading, the “markets”, charting, or anything else related to our efforts to claw a few dollars out of financial instruments. It’s one of those posts that may alienate some readers, deepen the commitment of others, and merely annoy some in the middle. But I have to get it off my chest, and it’s about the “diversity report” from Google that has been getting so much press this week. (more…)
The psychosis of this market has reached new heights. It’s just astonishing to me. For four years 
now, we have eased ourselves into the warm bathtub of central planning and multi-trillion dollar make-the-rich-richer intervention. Everyone has grown so accustomed to it that it seems totally normal now.
This weekend has launched a new level of the bull-ghey, as we have our second example this month of the market rallying not on something that happened, but on something that didn’t. I did a post on September 3 commenting on how our not bombing Syria was the reason for the market’s rally. Today most equity indexes made their highest levels in the entirety of human history based on one flatullent, fatuous man not throwing his hat (I thought of something funnier, but it would be politically incorrect) into the ring for the Fed chairmanship. (more…)
I didn't post yesterday on Slope… but did put out a post on my site (here) that may have saved some bears today. Now we all know from yesterday's post how deadly the RSI can be, and that we should trust the RSI more than the price.
First let me show you the intraday I have been looking at for $VIX, $SPX, /ES, and $NYA.
In a post here in December ("Market Neutral Investing in China's Fast Food Industry"), I mentioned a market neutral trade I had entered going long Yum! Brands, Inc. (YUM), the largest fast food operator in China, and shorting Country Style Cooking Restaurant Chain, Ltd. (CCSC), a start-up fast food chain in China. I figured the bigger potential there was on the short side.
Reasons I shorted CCSC as part of this trade
Getting Stopped out for a Loss
I used double digit trailing stops on this trade, and got stopped out of CCSC at $25.38, for a loss of 11.3% on the short side on Jan 4, so I sold out of YUM as well, at $48.21, for a loss of 4.8% on the long side. Total loss of 8% on this market neutral trade. Below is a chart of both stocks from when I entered the trade, on December 2nd, 2010, until when I exited, on January 4th, 2011.
Hindsight is 20/20
Had I used wider stops, I might have stayed in the trade long enough to profit from it. Below is a chart of both stocks from when I entered the trade, on December 2nd, 2010, until Monday, May 9th, 2011. Note the selloff at the beginning of March: the company released earnings on March 2nd, missing analysts' estimates.
This wouldn't have applied in the case of CCSC, since it doesn't have options traded on it, but a suggestion that has come up recently from a couple of Portfolio Armor users is extending its algorithm to find optimal calls for hedging short positions.
Recall that with Portfolio Armor (available as a web app, and an iOS app) you just enter the symbol of the stock or ETF you’re looking to hedge, the number of shares you own, and the maximum decline you’re willing to risk, (your threshold). Then the app uses an algorithm developed by a finance Ph.D. candidate to sort through and analyze all of the available puts for your position, scanning for the optimal ones to get you the level of protection you want at the lowest cost.
Adding the ability to hedge short positions with optimal calls is something I'm considering adding, if enough users request it. If we do add that functionality, we'll probably raise the price, to offset the development cost, but those who subscribed to the web app beforehand would be grandfathered in at the current cost. I don't know if we'd add the functionality to the iOS app too, but there again, if we do, current users would get the upgrade without paying more.
