Hi all, coming more from a pe/vc background in an opportunistic investment company, I was searching for some years for “my” trade. After reading Taleb’s Black Swan I got intrigued by analyzing the movement of volatility. While it is not mean reverting per se, it seems to me having a certain degree of negative convexity making it easy to go long (a bit harder to short it imho). Correlation to the index feels like -0.6 (trading vstoxx to estoxx50 and of course not stable but “average”), so my most beloved entry to the trade is waiting for an upmove in the actual index to get exhausted and then rapidly declining a bit. After doing some 5-6 trades over the year, i got 1 minor loss (10%), some ok gains (25 to 50%) and closed out today with +100% in less than a week. I have a CFD account and post 10% margin, performance is measured against posted equity (and surely not GIPS compliant ;-). Why have I closed out today as volatility is still rising? Either my ba**s are lacking size or i’m not overconfident enough to adjust my “take profit” too much. Seems to me the trade best done while sleeping: I receive price alerts and don’t look too much in between, trade 0 to 2 times per month either long or short and don’t touch the buy/sell button if price is not far outside the average of the current “trend”. Anyone likes this trade too or wants to share some nice and easy trading ideas? Feel free to write me to pelawyer1@gmail.com for further exchange off the forum. Looking forward for YOUR trading ideas or comments on this trade!
What?
ohai, this is not about the curriculum but the use of the knowledge therein or maybe i got too much text?
sounds to me you are doing technical trading. 25% to 50% sounds like a lot volatility but thats a great profit. what are the betas of your picks and how many stocks you trading at the same time?
What are the criteria for your picks and how are you picking specific stocks? Level 1 here, but this sounds very interesting. It does sound like technical trading are you actually tracking double tops and the like? I plan on opening up a trading account very soon. What sites do you recommend using? I was thinking either ScottTrade or E-Trade?
Yes, this may be a technical trade, but on the other hand, Gamma (i.e. vola) has no fundamental value, it is driven by “fear”. I am waiting for the volatility going out of the line, either 3 months high or “evergreen” low (the lowest point about 3 quarters is met about once a month this year) and then go long or short accordingly. I’m not trading stocks (or stocks volatility) but the vola of Estoxx50 with a CFD which makes handling easy and gives me a bit leverage. Although I could go as far and provide a margin of only 10%, I only double my bets actually. So my unlevered results are about half of the above quoted. Just looked a bit at amazon but these books about trading vola (I mean with actual options not CFDs) are coming 50 to 100 bucks each, so maybe I have to earn a bit more before I can afford those 
http://s1.directupload.net/images/110712/kv7wirdg.jpg to give you an idea about the distribution look at the jpg above. This this years data so far. You see that it comes down a lot but only to a certain degree in a given period (if you take longer data series, the channel was a bit higher). It only goes high a lot in market downturns, but then again falls rapidly. http://www.bloomberg.com/apps/quote?ticker=V2X:IND As stated, it is not 100% mean reverting but convex so entry points are quite easy identifiable. Guess I have too dig to traders books and would appreciate any recommendation.
lxwaar, I am based in Germany and I used flatex, but that’s only for nationals I guess.
after reading taleb, u get a feeling that one should always keep buying options at deep out of the money strikes…but he had a hedge fund where he employed same strategy but could not generate sustainable returns and had to close down eventually
I love Talib Kweli! He is great!
didn’t know he closed. found some more charts in the web: If you look at the levels of the DJIA, when do you know it’s high or low? http://schwert.ssb.rochester.edu/dj.gif But if you look at the volatiliy, it’s pretty constant downwards with differing highs: http://schwert.ssb.rochester.edu/djvol.gif making it easy to buy at the bottom. I found several papers with some googling and will dig deeper for myself.
Absolutely, there has been a lot of volatility to take advantage of. I have had the opportunity to take advantage of a few big name stocks and was finally able to hit a few home runs after 11 yrs of trading. Check out the following article from bloomberg. I did a straddle on Google pre-earnings and then rolled it out to a strangle on apple (common sense in my opinion). There is definitely some behavioral factors as well playing a large factor. http://www.bloomberg.com/news/2011-07-19/options-on-100-plus-stocks-are-underpriced-goldman-sachs-says.html
I have been scared to be in equities for the past year. i bought really deep out of the money puts which have gone up in a big way. I am now thinking of going towards call options. It does look like the end of the world is coming so on that odd chance that it doesn’t end and things get better, I want to be rich. If it ends. Then well, who gives a damn? I’ll see you MOFO’s in thunderdome!
malawyer100 Wrote: ------------------------------------------------------- > Hi all, > > coming more from a pe/vc background in an > opportunistic investment company, I was searching , Volatility is your friend both long and short, play it if you have the guts, lots of money to be made 
…nuff said.