The bears den

[DukeCS33]

In a sideways market, I think a long / short portfolio has the best chance to make money. Now long / short can be achieved in many way like long the markets which are rallying and short the markets which are falling. OR long the winning stocks and short the losing stocks with in the same market / across markets.

My preference is for the index rather than individual stocks and using options. Selling OTM call options with strike price outside the trading range, especially if you are long the underlying. Its better than being just long only. Selling closer to the top end of the trading range and closing the same closer to the bottom end of the trading range and then repeating the same. An alternative to this would be buying an OTM put option with strike price outside the trading range, when the underlying is closer to the top end of the trading range and closing the same closer to the bottom end of the trading range. This is especially when you do not have any position in the underlying and don't want to be net short.

Thank you for contributing your views.

I have no views on your strategy but have an opinion to share on trading options.... I think option strategies are not suitable for retail traders unless he or she knows option indepth. Retail has no edge in option pricing and this could be detrimental if done on a systematic basis.

How to swing trade in a difficult environment
Summary:
1. Stocks with good fundamentals are more likely to withstand a sell off and would be the first to recover. So choose good fundamental stocks to swing trade and hold for longer periods. (Mikedirnt78)
2. Set wider stops, trade smaller quantum to manage the risk of volatile price actions from headline news. (h.y.o.m)
3. Pick stocks according to Magic Formula. (Trader11)


Other considerations:
1. Stop trading and do research when the environment is hostile. (h.y.o.m)
2. Long Short strategy in a range bound market. Strategy can be executed via options (churnmaster)

 

[churnmaster]

I dont really have levels in mind, besides I am very unpredictable myself. I would be in cash and jump in when there is like turmoil and fear. When you watch Bloomberg and you have all Bear analysts coming on TV and giving even lower targets for the S&P500. I remember during the December 2018 market plunge, analysts on TV were saying we are going much lower like 2200 on S&P500. Unfortunately I was fully allocated at that time and couldnt make use of that opportunity.

If you had maintained your SPY 250 Put short position, you would have captured more than 60% of the value in about 2 months time and by now almost 80% of the value, which is about 2% of the notional contract value of USD 25K. The risk being the SPY 250 put getting exercised if the market tanks below 2500 level before option expiry and you getting long the underlying, close to 20% below the all time high.

 

[Trader11]

Thank you for contributing your views.

I have no views on your strategy but have an opinion to share on trading options.... I think option strategies are not suitable for retail traders unless he or she knows option indepth. Retail has no edge in option pricing and this could be detrimental if done on a systematic basis.

How to swing trade in a difficult environment
Summary:
1. Stocks with good fundamentals are more likely to withstand a sell off and would be the first to recover. So choose good fundamental stocks to swing trade and hold for longer periods. (Mikedirnt78)
2. Set wider stops, trade smaller quantum to manage the risk of volatile price actions from headline news. (h.y.o.m)
3. Pick stocks according to Magic Formula. (Trader11)


Other considerations:
1. Stop trading and do research when the environment is hostile. (h.y.o.m)
2. Long Short strategy in a range bound market. Strategy can be executed via options (churnmaster)

It's quite pointless if you discuss these things without knowing what percentage of compounding are you targeting. If you want 3% per annum like revhappy, then go buy bonds. If you want to be like Buffett or Soros, then you need to take more risks than revhappy.

 

[DukeCS33]

It's quite pointless if you discuss these things without knowing what percentage of compounding are you targeting. If you want 3% per annum like revhappy, then go buy bonds. If you want to be like Buffett or Soros, then you need to take more risks than revhappy.

I am discussing swing trading in a difficult environment with the assumption that you would need to hit your target return parameters. So points that fall into this category gets summarised and all others relating to ways to mitigate the environment gets put into other considerations. Swing is best when the trend, either up or down is firmly established. When you do not have this type of conditions, how would you still filter stocks or use technical analysis techniques to swing trade.

 

[revhappy]

If you had maintained your SPY 250 Put short position, you would have captured more than 60% of the value in about 2 months time and by now almost 80% of the value, which is about 2% of the notional contract value of USD 25K. The risk being the SPY 250 put getting exercised if the market tanks below 2500 level before option expiry and you getting long the underlying, close to 20% below the all time high.

Yeah, this is a trade that I had very high conviction, while getting into it. But I don't know why I got cold feet and got out of it. I think options trading is easy to win if you can just hold your cool.

 

[Shiny Things]

Yeah, this is a trade that I had very high conviction, while getting into it. But I don't know why I got cold feet and got out of it. I think options trading is easy to win if you can just hold your cool.

This has been a pretty consistent theme for you - you've had the right idea but you allowed yourself to get shaken out of it. You're either going to have to learn to have more courage of your convictions, or stop actively trading.

 

[DukeCS33]

Yeah, this is a trade that I had very high conviction, while getting into it. But I don't know why I got cold feet and got out of it. I think options trading is easy to win if you can just hold your cool.

Are you trading with monies that you cannot afford to lose? Once you have this scared money mentality, you can get shaken out very easily. One way of mitigating this is to define a target return and stop loss level and not look at it until either of the levels get triggered. In other words, prepare to lose all that sum of monies set aside. If you cannot, then you can never raise your trading to the next level.

 

[peterchan75]

The fish that got away was big! It makes good coffee shop topic.
If the trade that can make the balls shrink then it's probably too big a position.
Just set the stop loss and let the market do its thing. Setting stop loss is an art! Price can trigger the stop loss and take off!
Why not just set some realistic profit target and if the market is generous enough, just take it and run. A bird in the hand is worth two in the bush. It is every trader/investor's dream to close a position with a profit.

If anything goes wrong, can blame it on the process and not the discipline.

 

[Mecisteus]

Pick a few good fundamental stocks or ETFs.

Preferably from the S&P500 or DOW.

Treat any correction as a buying opportunity.

Hang on tight and just go to the massage. Go to pub if you are are a westerner.

 

[DukeCS33]

The considerations for trading and investments are different as one would be looking at different timeframes and duration hold. Take the ATVI that I flagged out earlier. That was a med term trading hold for me ie 6mths. My consideration was to enter at a good price, ride the momentum up and take partial profits along the way. As it was a med term hold for me, I would add if it comes down. My target return was 50%. But as it was a trading play, I would attempt to catch tops to take partial profits, and buy dips to trade it higher; maintaining a core hold as long as the dips do not break below my stop loss. From the time I flagged that out, I saw that the momentum has waned along with a selloff in the overall index, so I took partial profits when the low of 7 Oct gave way. As it is still outperforming the SP500 on a short term basis, I remain a buyer on dips and am guided by my read of the price action. An underperformance against the SP500 index would be an early alert for me.
At the end of the day, you need a gameplan and have the discipline to stick to it. And if you have a strong rationale backing your stock pick, then that should strengthen your resolve to stick to the plan.

 

[peipei1]

I feel frustrated by Bloomberg. They keep making sensationalist news stories on unconfirmed sources. Are they trump mouthpiece or just bearish bets?
On Monday i thought i got in upro at good price, as of today holding down 10%, got overconfidence and did not set stop loss.
Will the trade war resolve itself faster!

 

[limster]

STI only needs to fall 3% to hit 2,999... within striking distance though so many times it bounced back, likely because Hong Kong market rebounded and often the STI copies HSI.

With the current Hong Kong market weakness, I think there's an increased chance for STI to hit 2,999 and lower this year.

 

[DukeCS33]

I feel frustrated by Bloomberg. They keep making sensationalist news stories on unconfirmed sources. Are they trump mouthpiece or just bearish bets?
On Monday i thought i got in upro at good price, as of today holding down 10%, got overconfidence and did not set stop loss.
Will the trade war resolve itself faster!

What are you referring to? The media would need to sensationalise stories to attract an audience. Did they report that the news was not confirmed but that there was this type of chatter or rumors? Or did they report it as a fact and that fact was found to be untrue?

Frankly, I do not know what the optimism was over resolving the trade war? We had already so many false starts and each time optimism builds up only to be dashed later on. Looking at the state of things, there are just too many ideological differences between the Americans and the Chinese and totally conflicting intentions for a quick resolution. If anything, trade talks have regressed even further. And even if trade talks get resolved, the markets may choose to move on to other things such as rates - with trade war resolved, the Fed would not have any strong rationale to cut rates save a tanking economy.... so we may have the mother of exhaustion move and a hugh collapse thereafter.

 

[Trader11]

The considerations for trading and investments are different as one would be looking at different timeframes and duration hold. Take the ATVI that I flagged out earlier. That was a med term trading hold for me ie 6mths. My consideration was to enter at a good price, ride the momentum up and take partial profits along the way. As it was a med term hold for me, I would add if it comes down. My target return was 50%. But as it was a trading play, I would attempt to catch tops to take partial profits, and buy dips to trade it higher; maintaining a core hold as long as the dips do not break below my stop loss. From the time I flagged that out, I saw that the momentum has waned along with a selloff in the overall index, so I took partial profits when the low of 7 Oct gave way. As it is still outperforming the SP500 on a short term basis, I remain a buyer on dips and am guided by my read of the price action. An underperformance against the SP500 index would be an early alert for me.
At the end of the day, you need a gameplan and have the discipline to stick to it. And if you have a strong rationale backing your stock pick, then that should strengthen your resolve to stick to the plan.

Bro, you use cfd or options to trade ATVI?

 

[DukeCS33]

Bro, you use cfd or options to trade ATVI?

CFD or cash only. I do not employ options unless I have a very definitive timeline to exit. CFD for most short trades or momentum trades that are held for less than 3mths. Cash for positions held for 6mths or more and applies mostly to long term portfolio.

 

[Mecisteus]

I feel frustrated by Bloomberg. They keep making sensationalist news stories on unconfirmed sources. Are they trump mouthpiece or just bearish bets?
On Monday i thought i got in upro at good price, as of today holding down 10%, got overconfidence and did not set stop loss.
Will the trade war resolve itself faster!

You are very daring to buy UPRO.

I plan to buy UPRO only when S&P500 is at maximum oversold level, has substantially corrected and highest VIX.

 

[revhappy]

I feel frustrated by Bloomberg. They keep making sensationalist news stories on unconfirmed sources. Are they trump mouthpiece or just bearish bets?
On Monday i thought i got in upro at good price, as of today holding down 10%, got overconfidence and did not set stop loss.
Will the trade war resolve itself faster!

Trump has a newsletter subscription model that he send outs to his close associates just before making a market moving tweet. Unless you have access to that newsletter you shouldnt trade short term. Unless, you know technicals, Apparently, Trump admin releases fake news at key technical levels, so that is a way to make money.

 

[DukeCS33]

News befitting the bear's den:

https://www.marketwatch.com/story/u...a-trade-talks-2019-10-09?mod=newsviewer_click

 

[h.y.o.m]

News befitting the bear's den:

https://www.marketwatch.com/story/u...a-trade-talks-2019-10-09?mod=newsviewer_click

The next piece of news to follow is where PBOC will set the RMB exchange rate vs USD. This comes out every morning. If PBOC doesn't let the RMB depreciate in response to the escalating trade war, it means China is going for the long haul. Let U.S importers face the pain of their own tariffs, even though Chinese exporters will have to take the pain as well.

Who will win? You can see it being played out in the respective country's stock market. Look at the stock market reactions of China and U.S markets when trade war escalates. Last year, China lost. Recent stock market reaction suggests that China is on the winning side this year.

 

[DukeCS33]

The next piece of news to follow is where PBOC will set the RMB exchange rate vs USD. This comes out every morning. If PBOC doesn't let the RMB depreciate in response to the escalating trade war, it means China is going for the long haul. Let U.S importers face the pain of their own tariffs, even though Chinese exporters will have to take the pain as well.

Who will win? You can see it being played out in the respective country's stock market. Look at the stock market reactions of China and U.S markets when trade war escalates. Last year, China lost. Recent stock market reaction suggests that China is on the winning side this year.

This is an issue that cannot be resolved due to ideological differences. And I think it is here for the long term. I suspect that a trade solution is not the US's ultimate goal. They are targeting security and trying to diversify supply chain so as to reduce dependence on China as a manufacturing hub.

That said, its headline news / tweets like this that makes swing trading so difficult. And again my preference is to trade intraday save certain stocks where I have strong conviction. And even for those stocks, I would trade in and out while maintaining a 30% to 50% as core hold.