Interesting point, which brings to mind how much of Japan's GDP is actually generated in Japan? I have dealt with Japanese multinationals around Asia. Everything of value is produced outside of Japan, but Corporate headquarters, marketing, purchasing, R&D and the like are based in Japan. Sales are typically USD denominated. All profits booked in Japan using transfer pricing from overseas production facilities. So Yen at 150, no impact on cost of production which is not Yen denominated, goods sold in USD and booked in Japan in Yen so corporate profits skyrocket. US squeals like a stuck pig at the 'unfair' exchange rate, but the market does not want Yen at any different value. What next I wonder. We do live in interesting times. Edit: yes I know the definition of GDP, I just don't trust the numbers.
I found this on the internet. Using ACD to trade Chinese markets! http://www.scirp.org/journal/PaperInformation.aspx?PaperID=24829 Just click on the PDF to download the research.
OK, so I didn't even know this index existed. http://www.zerohedge.com/news/2013-12-21/last-3-times-happened-markets-turmoiled Thanks to Bob "I don't get out of bed unless it's over 20" Pisani's daily diatribes about VIX (the so-called 'fear' index), we are supposed to rest assured that all is well in the ever-decreasing horizon world of equity markets. However, while VIX measures the expectations of 'normal' day to day moves in stocks, it does not offer any insight into market participants' perspectives on tail risks (or 'the big one'). CBOE's SKEW index does just that, based on the pricing differences between normal and fat-tail risk pricing in the options market, it provides a measure of the market's belief in extreme events... and for only the 4th time in history, it's flashing a big red warning signal of volatility ahead. The last 3 times this happened... markets went a little crazy... In 24 years of history, SKEW has been above 140 only 4 times (including the current)... the last 3 times were... 06/21/1990 - S&L Crisis (Stocks dropped 18% in next 3 months and the US entered recession) 10/16/1998 - Russian Default and LTCM (Stocks soared 22% in the next 3 months and the dot-com bubble was born) 03/16/2006 - Housing Bubble peak (Stock dropped 6% in next 3 months and the 'great recession' started within a year) And now? 12/20/2013... Taper...
Dear Santa, As you probably know by now, every year we stupid illogical traders have what we call a Santa Claus rally. Everyone wants to feel good at Christmas, and they make it so. Besides trading, some of us have funds allocated strictly for investment. Given the irrational valuations from QE in assorted regions, I for one have these parked in cash, waiting for the correction that just won't come. The problem is the world just BTFD, which I can't spell out because it is a little rude. So just this once Santa, could you give us all a good old fashioned CRASH for Christmas. If you don't want anything too dramatic, 20% - 30% will do, though 50% would be wonderful. Every party, no matter how wonderful, has to end sometime. I love partying until the wee hours, but this is a little ridiculous, it's noon and nobody wants to go home. Think of it as a collective gift. Yours hopefully, JT. P.S. If you ignore the periodic nights on the town, I've actually been very good this year.
Thanks very much, Maverick. This makes sense and really helped put both of these concepts into perspective. I appreciate the response.
Mav, do you trade options flies and calendars? Could you share some insights on ACD in relation to these? I'll describe what I have been doing so far. Options Flies Three step process; 1 - look for 30 day number line that is heading back to a reset, about midway. 2 - look for 5 day number line that is weak/choppy 3 - model to establish range of profitability, then look at chart to see if support/resistance will help to contain price in the required range. Results were not too bad up to September, then the taper stuff kicked in and headline driven market moves were murder on the portfolio, so the last couple of months I have been sticking to directional trading. Options Calendars Never had much joy with ATM calendars, so switched to OTM Calendars around 25 - 30 delta. In this case I want movement so use ACD to ensure I have momentum in my favour, and choose the strike for a level where I can expect support/resistance. This has worked quite well. Typical time to expiration is 10 - 25 days for both spreads.
Yes, for awhile I use to use OTM calendar spreads for directional trades but the funny thing was, my calls were so good that the calendars often suffered from stocks that were TOO strong. LOL. I got annoyed at closing out positions for flat where the the stock rallied 10 to 20%. I only do flys on an indices and that's just for hedges. I always considered downside flys really cheap hedges. At the end of the day, regarding most products, ACD was so effective, that the least risky thing to do was to take all the directional risk. There is the old saying, don't cut off your nose to spite your face.
I recently had that experience with a calendar. Wanted to buy the vanilla option, didn't get a fill at mid so I put on the calendar. Blew through the strike, I made >20%, but it would have been much more if I had just paid the Ask. Re the hedging, is there any reason why you don't just use VIX to hedge? Cost:Benefit?