The day started with a roar and ended with a whimper. Not a single bit of green on the board by close. And if this keeps up I am going to own some US Steel.
US Steel - bagholder? That's what has happened to me with Lithium. What is 'PMs' in your previous post? Hence when you mention getting into industral plays, that was my original strategy, but no longer. I created an algo to find quality stocks in copper, lithium, cobalt only to have them dismally underperform. Buying supposedly cheap or undervalued stock is no longer a method I follow. For example in Australia Bluescope Steel was/is a quality stock but kept falling in spite of company buybacks and a PE = 4, currently sitting on PE=6.8
PMs = Precious Metals I'm going to index if I can. The reason I might allow shares to be put to me in this stock is they have an amazingly liquid options market, which is also a requirement for any stocks I buy. They must have penny to nickle wide options markets. I like to use options strategies to reduce cost basis. I sold those puts in X, 55 days to expiration for 10% the value of the underlying. If they aren't put to me then I make a 10% profit in less than 2 months, and if they are put to me I got in 10% cheaper than my strike price and get a little more positioned for my macro play.
Just a look at one of my short strangle positions. When I put this on, it was a 20 delta strangle, which put my calls quite a bit further out than the puts. This turned out to be a good decision to stick with because price has been bid constantly since I put this position on and price is still "comfortably" within my strikes. If price does rally up into my strikes my first defensive move will be to roll out in time and move strikes up, rolling for a credit.
Hi krugman, how do you calculate the correlations? Do you trade long only and you calculate the correlation simply based on the performance of the products or do you have a long/short strategy? I trade long/short and I have not found a satisfactory way of calculating the correlation between two strategies.
Good questions. Right now I am doing a simple back of the envelope portfolio level correlation check. A standard correlation check does not look at magnitude it just looks at direction. So using that correlation table I can quickly see my position-to-position and portfolio correlations. I obviously want a low correlation to help reduce risk and volatility of my portfolio. Above I mentioned that correlation doesn't look at magnitude of movement, so to see that I look at my beta-weighted delta's. I will check my beta weighted delta's against SPY, GLD, TLT, etc. That way I can see how directional (in notional terms) I actually am to any specific market. Because I can be simultaneously running a number of static long/short positions as well as a number of options strategies long/short straddles, strangles, spreads, calls, puts, naked/covered, etc. then I need something more complex to account for it. I used to run a spreadsheet that was a bit more complex, that took some of that into account. That spreadsheet no longer exists as I have found the correlation checks and beta weighted delta checks are good enough for right now.
This bond move is unbelievable. Nary a pullback. Have about 5 handles left of call side breathing room with 23 DTE.