Volatility and Bear markets are nothing new, traders like myself look forward to them. My P&L statements statements over the last 30 years tell me when I trade a bear market I have a higher return on risk and generally make more in a shorter period of time.
Current volatility, fundamentals or just overbought?
Increases in the Service Sector, Wage Inflation and Rates are said to be the cause of the recent downside volatility which could potentially ignite a bear market. Do these numbers look inflationary or problematic to you?
2000 to 2017
Median household income 2000 $58,544 to $59,471 in 2017 = +1.58%
Employment cost index 2007 3.25% down to 2.61% in 2017 = -0.64%
Prime rate 2000 8.50% down to 4.50% in 2018 =-4.00%
1 Year Treasury rates 2000 6.30% down to 1.88% in 2018 = -4.42%
30 year Mortgage rates 2000 8.26% down to 4.22% in 2018 = -4.04%
What is problematic is median household income over the last 17 years is up only 1.58% from 2000 to 2017 while during the same period consumer costs have risen 46.50% to 135.60%. In short quality of life is deteriorating for US citizens. This ongoing discrepancy will eventually generate a weak US consumer, a weak US economy, a weak market and recession but this is no news flash these fundamentals have been in for over a decade.
Prices & debt
Median home price 2000 $165,300 up to $315,200 in 2017 = +90.68%
Mortgage debt 2000 661.5 billion up to 1,231.19 billion in 2017 = 91.81%|
Median Rent Indexed to 2000 100 up to 174.10 in 2017 = +74.10%
Groceries indexed to 2000 100.00 up to 191.1 in 2017 = +91.10%
Health care indexed to 2000 100.00 up to 235.60 in 2017 = +135.60%
Gasoline indexed to 2000 100.00 up to 193.70 in2017 = +93.70%
Consumer price, indexed to 2000 100.00 up to 146.50 in 2017 = +46.50%
Household debt 2000 10.50 trillion up to 13.83 trillion in 2017 = +31.69%
Gross Domestic product 2000 12.35T up to 17.27T 2018 = +39.75%
Gold 2000 $283.50 up to $1,345.00 in 2017 = +374.43%
S&P 500 2000 1,394.46 up to 2,762.13 in 2017 = +98.07%
Rate hikes, are you kidding me? rates are half of where the Fed said they would be by now. See my SeekingAlpha article Capturing the Move Higher in 3 Month Deposit Rates 14 December 2015 for Fed estimates of where rates according to the Fed should be by now.
Gross fiscal mismanagement and poor economic guidance from US politicians and the Federal Reserve during this century? True, but again no news news here.
Federal debt 2000 5.7 trillion up to 2017 22.2 trillion 2018 = +289.47%
Fed debt per US taxpayer 2000, 44.0K up to 136.9K in 2017= +210.79%
Fed debt to GDP 57.55% up to 103.81% in 2017 = +80.38%
US population 2000 284,968,955 up to 323,127,513 in 2017 = +13.39%
Total employed population 2000 131.0M up to 147.8M = +12.83%
Yet with 16.8M more taxpayers per capita tax debt from 44.0 K to 139.9K
Sorry, the market was just overbought, it’s that simple and corrections are going to occur. Traders take profits, when they do guys like me reverse our long positions to short escalating the move lower. When downside momentum stalls we’ll reverse short positions to long, the bigger we get, the higher the volatility.
Putting economic fundamental justifications aside, doesn’t this market look just a little overbought to you?
Similarities in market price action since 1985.
After 30+ years as a professional trader, current price action and media rhetoric is like watching an old movie I’ve seen way too many times. To make my point I’ll bet you can’t match the percentage price action on the 5 charts below to the period the price action occurred.
Bull market 1
Appreciated 105.05%
Bear market that followed, down 57.59%.
5 years and 6 months from the start of the bear market until we saw a net new high, name the period or see 6 for the correct answer.
1) January 1985 – October 1987 – Bear to recovery
2) December 1987-July 1990 – Correction to recovery
3) October 1990 – March 2000 – Bear to recovery
4) March 2003-October 2007 – Bear to recovery
5) March 2009-January 2018 – Analyst 1 , Analyst 2
6) Correct answer for bull 1 – Bear to recovery
Bull market 2
Market appreciated 106.94%
Bear market that followed, down 35.93%.
1 year and 8 months until we saw a net new high, name the period or see 6 for the answer.
1) January 1985 – October 1987 – Bear to recovery
2) December 1987-July 1990 – Correction to recovery
3) October 1990 – March 2000 – Bear to recovery
4) March 2003-October 2007 – Bear to recovery
5) March 2009-January 2018 – Analyst 1 , Analyst 2
6) Correct answer for bull 2 – Bear to recovery
Bull market 3
Market appreciated 70.42%
The correction that followed, down 20.36%.
7 months from the start of the correction until we saw a net new high, name the period or see 6 for the answer.
1) January 1985 – October 1987 – Bear to recovery
2) December 1987-July 1990 – Correction to recovery
3) October 1990 – March 2000 – Bear to recovery
4) March 2003-October 2007 – Bear to recovery
5) March 2009-January 2018 – Analyst 1 , Analyst 2
6) Correct answer for bull 3 – Correction to recovery
Bull market 4
Market appreciated 412.46%
Bear market that followed, down 50.50%.
7 years and 4 months until we saw a new high, name the period or see 6 for the answer.
1) January 1985 – October 1987 – Bear to recovery
2) December 1987-July 1990 – Correction to recovery
3) October 1990 – March 2000 – Bear to recovery
4) March 2003-October 2007 – Bear to recovery
5) March 2009-January 2018 – Analyst 1 , Analyst 2
6) Correct answer for bull 4 – Bear to recovery
Bull market 5
Market appreciated 316.28%
Length of the bear market to recovery unknown, name the period or see 5 for the correct answer.
1) January 1985 – October 1987 – Bear to recovery
2) December 1987-July 1990 – Correction to recovery
3) October 1990 – March 2000 – Bear to recovery
4) March 2003-October 2007 – Bear to recovery
5) Correct answer for bull 5 – Bear to recovery Analyst 1, Analyst 2 & 3
Again it’s not breaking news that all bull markets have been followed by a bear market over the last 90 years.
I can see no rational reason why the current bull market will be be pardoned by the bear, less of a reason not to short this market when the long term up trend reverses to down and capture the moves lower like 1987, 2000-2002 and 2007-2009.
1987
2000
and 2007
1927 to 2018 will tell you the same story
Inflation adjusted prices give a clearer picture
This link will give you the 1927-2016 historical data for actual and inflation adjusted prices, no registration required (excel file).
Personally I’m surprised this gentle price action lasted from 2009 to 2018. We only had 4 out of 100 months where monthly price action was completely below the Exponential Moving Average 9. Honestly how hard was it to identify the long term trend? I believe you’ll find a 9 year old’s video game more challenging.
Recent price action should be a wake up call
To prepare for a more challenging market scenario like 2000 to 2012 structuring your trades with the trend, using defined risk trading strategy.
One simple way to define the trend and trade risk
In these examples I’m using the S&P futures contract, daily volume for this contract exceeds 130 billion USD, the S&P futures contract trades 23.75 hours a day (Sunday -Friday) and has a very liquid underlying options market with squeaky tight bid/ask spreads.
If you’re not familiar with futures contracts they are agreements to buy or sell at an agreed price on or before an agreed date.
Long = own the contract anticipating the price to move higher, once a long position is established it has to be sold on or before the contract delivery date, for example an ESH18 contract has to be offset or before March 16th 2018.
Short = Owe the contract, selling a contract you do not own, once a short position is established it has to be bought back on or before the delivery date, Trading futures there is no dividend delivery, no short squeezes.
Contract information
ESH18
ES = Chicago Mercantile Exchange S&P contract
H = Delivery month (H = March)
18 = Year
Contract value = $50 X the index, (an index at 2,825.00 = $141,250.00)
Bid/ask spread 0.25 = $12.50 , contract value = $141,250.00 at 2,825.00
Margin requirement = $5,050.00 (1/28th of contract value)
Margin call, if your balance falls below the margin requirement
Carry cost built into forward pricing (current leverage cost 0.73% annually)
Trade cost, $26.60 or less per contract (includes all fees)
Contract volume, 130+ billion USD daily, liquid underlying options market
US Taxation, 1256 rule 60% long-term, 40% short-term on all trades regardless of trade duration, 2 minutes or 2 years.
One click lets you go long or short a contract that mirrors the S&P index (worth $141,250.00 at 2,825.00) with as little as $5,050 in your account.
Long short flexibility, a 23.75 hour trading day and 130+ billion USD in daily liquidity make it very easy on days like 2nd and the 5th of February 2018 to hedge an existing portfolio or capture the move lower.
1) Defining the Trend
1 of the 12 indicators I use to define trend is an Exponential Moving Average 9 (EMA9)
Whatever data duration you’re using 1 minute or 1 month if price action is below the Exponential Moving Average 9 (EMA9) you’re in down trend, above the EMA9 a up trend.
1.1) How to define a long term trend
Using this link see if you can identify today’s long-term trend using monthly price action. (above EMA9 = up, below = down)
Example, on the chart below monthly price action is above the exponential moving average 9 (red line) telling us this market is in a long-term up trend.
1.2) Medium term trend
Using this link identify today’s medium term trend using weekly price action.
Example, on the chart below weekly price action is above the exponential moving average 9 (red line) telling us this market is in a medium-term up trend but the trend is weakening.
1.3) Short term trend
Using this link identify today’s short-term trend using daily price action.
Example, on the chart below daily price action went below the exponential moving average 9 (red line) telling us the market’s short-term trend has reversed from up to down.
1.4) Intraday trend
Using this link identify today’s short-term trend using 30 minute price action.
Example, on the chart below 30 minute price action is below the exponential moving average 9 (red line) telling us the market’s intraday trend is currently down.
1.5) Confirming the EMA9 defined trend using these indicators
In this example since the 2nd of January 2018 the overall average has changed from a 96% buy.
To an 24.00% sell on 2 February 2018.
2) Trading rules
2.1) Long-term trend, is monthly price action, above or below the EMA9 linked here? above = buy, below = sell.
Does the overall average and long-term technical opinion linked here agree with the EMA9?
If the EMA9, overall average and long-term indicators all agree long term trades of 30 to 90 days in duration are permitted using defined risk strategy.
2.2) Medium-term trend, is weekly price action, above or below the EMA9 linked here above = buy, below = sell.
Does the overall average, and medium-term technical opinion linked here agree with the EMA9?
If the EMA9, overall average and medium-term indicators all agree medium-term trades of 11 to 29 days in duration are permitted using defined risk strategy.
2.3) Short-term trend, is daily price action, above or below the EMA9 linked here above = buy, below = sell.
Does the overall average and short-term technical opinion linked here agree with the EMA9?
If the EMA9, overall average and short-term indicators all agree short-term trades of 2 to 10 days in duration are permitted using defined risk strategy.
Defining the trend is only 1 battle that needs to be won in order to win the war of profitability. How you structure your trades and maintain discipline are as, if not more important.
2.4) In today’s trading environment you have to structure your trades so you are immune to volatility for example February 2018
2.5) It is essential to remove all concerns except getting from point A to B without having to worry about excessive volatility risk during periods like C
2.6) How this is accomplished is by “collaring” every trade
- Collars define risk on the trade and for the duration of the trading period
- They eliminates any possibility of the position being stopped out.
- Properly set up a collar is premium neutral ( does not waste money on net purchases of option time premium)
3) Procedure for collared long positions
3.1) In this example I’m using weekly price action for a trade duration between 11 and 29 days. Weekly price action (medium-term trend) is above the EMA9
The trend is up, = long
3.2) The overall average is a 96% buy confirming the EMA9 defined trend
3.3) The medium-term indicators are 100% buy.
3.4) All agree, medium-term trades are permitted with the trend for a trade duration between 11 to 29 days.
On the 15th of September 2017 we buy 1 S&P futures contract 2,500.00 contract value $125,000.00, margin requirement $5,050.00
Enter a long position 2,500.00
3.5) Using the angle of the trend we set the profit objective at 2,550.00. We’re anticipating the trend will continue and the 2,550.00 profit objective will be achieved on or before the 13th of October 2017.
Set the profit objective at $2,550.00
(Use support and resistance, volatility, implied volatility and ranges to make profit objectives more precise)
3.6) Generating option premium by writing a call against the 2,500.00 long at the profit objective of 2,550.00
15 September 2017
We enter a long futures position at 2,500 (contract $125,000.00)
Write a call at 2,550.00 collecting 15.00 points = +$750.00.
Options expiration, 13th of October 2017
Contract value at 2,550.00 = $127,500
The only way our 2,500.00 long can be called away from us is at our profit objective of 2,550.00 generating a gain on the futures position of $2,500.00
3.7) Using the 15.00 points collected = $750.00 from the call write we buy the 2,450.00 put cost 17.00 points = ($850.00).
The put objectively defines risk on the 2,500.00 long position for the duration of the trading period (until 13 October 2017 expiration)
The put also negates any possibility of being stopped out of the position.
Collected on the 2,550.00 call write = 15.00 points at the profit objective
Paid out on the 2,450.00 put -17.00 points, objectively defines risk
Net cost of the hedge 2.00 points = $100.00, which defines the risk on a position worth $125,000 from 14 September 2015 until 13 October 2017.
There are 3 potential outcomes for this trade, market stays the same, goes against us our in our favor
3.8) Outccome 1, The market stays the same and settles on the 13th of October 2017 at 2,500.00
The call we wrote at 2,550 expires worthless, +15.00 points = $750.00
The 2,500.00 long futures settles unchanged at 2,500.00 = $0.00
The 2,450 put purchased expires worthless, -17.00 points = $850.00
Total bid/ask spreads, commission, exchange & regulatory fees =-$159.78
All in net profit or loss = -$259.78
3.9) Outcome 2, the market moves hard and fast against us
The market drops from our entry price of 2,500.00 (contract value = $125,00.00) down 600.00 points -24.00% to 1,900.00 contract value $95,000 in “fast market action”.
During a “fast market” it is difficult if not impossible to liquidate a position (when you’re on the wrong side).
When the market moves far enough trading is suspended and the market is “locked limit” (for today’s price limits see this link)
If a percentage drop like this occurs it would have no impact on the maximum risk of a collared position because we own the put.
The put objectively defines risk on the 2,500.000 long for the duration of the trading period.
The maximum risk (in this example) is the distance between our entry at 2,500.00 contract value $125,000.00 to where the put engages at 2,450.00 contract value $122,250.00 = $2,500.00 regardless if this market moved to zero.
Loss on the 2,500.00 long futures position (600.00) points = -$30,000.00
The call we wrote at 2,550.00 expires worthless +15.00 points =+$750.00
The put we owned at 2,450.00 is profitable 533.00 points =+$26,650.00
Total bid/ask spreads, commission, exchange & regulatory fees =-$159.78
All in net loss = -$2,759.78 on a market drop of 24.00% in fast market action.
A $100.00 hedge prevented a potential loss on this position of up to $30,000.
The market moves higher
3.10) The established trend continues to grind higher and the contract moves from our entry on the 15th September 2017 at 2,500.00, contract value $125,000 to our profit objective of 2,550.00 contract value $127,500 on or before the 13th of October 2017.
Gain on the 2,500.00 long futures position 50.00 points = +$2,500.00
The call we wrote at 2,550.00 is offset by the futures, we keep the 15.00 points in collected premium =+$750.00
The put we owned at 2,450.00 expires worthless -17.00 points =-$850.00
Total bid/ask spreads, commission, exchange & regulatory fees = –$159.78 (or less)
All in net profit or loss = $2,240.22.
If your trading desks is on their game they can offset or lay down a position at anytime using a “3 way”. An example of a 3 way, buy an S&P futures, collar it plus or minus 50.00 at a net cost of +2.00 or better for 3rd Friday expiration using weekly options.
Translated you’re long a futures contract. You’ve written a call 50.00 points above the futures fill price. Using the collected premium bought a put 50.00 points below the futures fill price. You paid 2.00 points or less net in option time premium (2.00 X $50.00 = $100.00) to a hedge your futures position through the 3rd Friday of the month.
Procedure for short positions
3.11) In this example I’m using daily price action for a trade duration between 2 and 10 days. During the trading session on the 1st of February 2018 price action moved below the EMA9 for the 3rd day.
Below the EMA9, trend is down = short
3.12) The overall average of the 12 indicators was a 24% sell, this confirmed the trend defined by the EMA9.
3.13) The short-term indicators were a 60% sell, agreeing with the EMA9 and overall average of the 12 technical indicators.
3.14) All agreed, short-term trades are permitted with the trend using a trade duration between 2 to 10 days.
3.15) On the 1st February 2018 you sell 1 S&P futures contract (ESH18) for March 2018 delivery at 2,815.00 contract value $140,750.00.
3.16) Using the angle of the trend you set the profit objective at 2,740.00, contract value $137.000.00
Your anticipating the 2,740.00 profit objective will be achieved on or before the 9th of February 2018.
(You can make the profit objective more precise using support and resistance, volatility, implied volatility and ranges)
Collaring he 2,815.00 short
- A “collar” defines risk on the trade and for the duration of the trading period
- Eliminates any possibility of the position being stopped out.
- Properly set up a collar is premium neutral ( does not waste money on net purchases of option time premium)
3.17) How to collar a short position
When you enter the 2,815 short futures position contract value = $140,750.00
Write a put against it at the profit objective of 2,740.00
Contract value $137,400.00.
In this example we’re using an expiration on the 9th of February 2018.
When you write (sell) an option you’re collecting option time premium,
On this put write, you’ve collected 27.00 points = +$1,350.00.
The only way the 2,815.00 short can be called away is at a profit
Short 2,815.00 called away at 2,740.00 = +$3,750.00 on the futures position.
3.18) Using the 27.00 points collected from the put write = $1,350.00
Buy the 2,890.00 call, cost 16.00 points = -$800.00
Contract value at 2,890.00 = $144,500.00
The call objectively defines risk on the 2,815.00 short for the duration of the trading period 1 February 2018 through 9 February 2018
The call also negates any possibility of being stopped out of the short position.
The net collected on the collar +9.00 points = +$450.00,
In this example we we’re paid $450.00 to define risk on a position worth $140.750.00 from 1 February 2018 to 9 February 2018.
Potential outcomes for this trade
3.19) The market stays the same and settles on the 9th of February 2018 unchanged from our entry at 2,815.00.
The put wrote at 2,740.00 expires worthless, we keep the 27.00 points = $1,350.00
The 2,815.00 short futures settles unchanged at 2,815.00 = $0.00
The 2,890.00 call purchased expires worthless, we lose 16.00 points = -$800.00
Total bid/ask spreads, commission, exchange & regulatory fees = -$159.78 (or less)
All in net profit or loss = +$390.22
The market moves hard and fast against us
3.20) We rally from our short entry at 2,815.00 (contract value = $144,500.00) +300.00 points +10.66% to 3,115.00 contract value $155,750 in “fast market action”.
During a “fast market” it is difficult if not impossible to liquidate a position (when you’re on the wrong side). When the market moves far enough trading is suspended and the market is “locked limit” for today’s price limits see this link.
If a rally like this occurred it would have no impact on the maximum risk on our collared position because we own the call.
The call objectively defines our risk on the trade and for the duration of the trading period. The maximum risk (in this example) is the distance between our entry at 2,815.00 contract value $140,750.00 to where our call engaged at 2,890.00 contract value $144,500.00
Loss on the 2,815.00 short futures position is 300.00 points = -$15,000.00
The put we wrote at 2,7400 expires worthless, +27.00 points =+$1,350.00
The call we own at 2,890.00 is profitable for 209.00 points =+$10,450.00
Total bid/ask spreads, commission, exchange & regulatory fees = -$159.78 (or less)
Net loss = -$3,359.78.78 on rally against us of 10.66% in fast market action.
In this example we were paid $+450.00 to prevent a potential loss of $15,000
Market moves lower
3.21) The short term trend continues lower, the price moves from our entry on the 1st of February 2018 at 2,815.00, contract value $140.750.00 to our profit objective of 2,740.00 contract value $137,000 on or before the 9th of February 2017. (These positions can be offset at anytime)
Gain on the 2,815.00 short futures position 75.00 points = $3,750.00
The put we wrote at 2,740.00 is offset by the short futures position we keep the +27.00 points in collected time premium = +$1,350.00
The call we purchased at 2,890.00 expires worthless -18.00 points = -$800.00
Total bid/ask spreads, commission, exchange & regulatory fees = -$159.78
All in net gain or loss = $4,140.22
You can set up the same type of trades for any individual stock in the S&P 500 that has underlying options liquidity with reasonable bid/ask spreads, using the tools here on SeekingAlpha
Linked below are all the stocks in the S&P 500, the SeekingAlpha links for fundamental information, quotes & charts, an additional link for company information/history and one for SEC’s filings.
How do I short a stock?
To short a stock — and this applies only to stocks, not ETFs — go to your broker site (make sure you’re set up for a margin account, which lets you borrow shares), enter the ticker, and use the command “sell to open” or “sell short.” If your stock is available for shorting — not all are — when you make the trade, you’ll see a lent payment, as a negative number, in your account. If the stock goes down, you can buy it back any time with the command “buy to close” at the lower share price. The difference is your profit.
If the stock price increases, you’ll eventually need to buy it back at the higher price and suffer the loss, so make sure you have cash to cover this possibility. In most cases, selling short is a short-term strategy measured in minutes to months rather than years.
Strings attached
There are a few issues to keep in mind with shorts: Unlike futures, you need to cough up any dividends while you borrow the shares. Second, you’ll be paying interest on the loan you’ve taken to borrow the shares, so you need to factor that into your bottom-line projections. Finally, you could be given the short squeeze: If your stock price goes up, your broker can force you out of your short position if it needs to deliver the shares back to the owner. This cannot occur trading futures.
Exchange Traded Funds, (ETF’s)
Below are 50 of the top performing ETF’s, careful with these liquidity is sometimes questionable.
| Seeking Alpha | ETF | Last | 52 Week + or – |
| YINN | Direxion FTSE China Bull 3X | 42.13 | 140.33% |
| NAIL | Direxion Homebuild & Suppliers Bull 3X | 67.57 | 131.56% |
| CWEB | Direxion CSI China Internet Idx Bull 2X | 53.99 | 128.67% |
| USOU | United States 3X Oil Fund | 52.14 | 114.39% |
| LABU | Direxion S&P Biotech Bull 3X | 85.12 | 101.99% |
| SOXL | Semiconductor Bull 3X Direxion | 136.02 | 99.59% |
| HOML | Etracs Mt Reset 2X ISE Exc Homebuilders ETN | 52.42 | 96.46% |
| EDC | Emrg Mkts Bull 3X Direxion | 126.32 | 91.92% |
| TECL | Technology Bull 3X Direxion | 109.47 | 91.21% |
| TQQQ | Ultrapro QQQ Proshares | 143.45 | 90.00% |
| GRN | Global Carbon ETN Ipath | 11.18 | 89.81% |
| XPP | Ultra FTSE China 25 Proshares | 97.45 | 88.02% |
| DFEN | Direxion Daily Aerospace Defense Bull 3X Shares | 45.12 | 83.27% |
| UDOW | Ultrapro DOW 30 Proshares | 88.25 | 78.50% |
| CHAU | Direxion CSI 300 China A 2X | 33.75 | 78.29% |
| OILU | Ultrapro Crude Oil Proshares | 43.85 | 77.17% |
| ARKK | Ark Innovation ETF | 38.39 | 71.54% |
| ARKW | Ark Web X.0 ETF | 47.03 | 70.40% |
| CXSE | Wisdomtree China Ex-Cso Fund | 88.27 | 69.42% |
| KORU | Direxion South Korea Bull 3X | 54.06 | 69.31% |
| EURL | Direxion FTSE Europe Bull 3X | 36.27 | 63.90% |
| USD | Ultra Semiconductors Proshares | 116.63 | 61.38% |
| ROM | Ultra Technology Proshares | 87.28 | 59.02% |
| KWEB | Kranes CSI China ETF | 60.49 | 58.27% |
| XIV | VS -1X VIX Short Term | 99 | 57.92% |
| EET | Ultra MSCI Emrg Mkts Proshares | 94.54 | 57.67% |
| INDL | India Bull 3X Direxion | 89.02 | 57.06% |
| FINU | Ultrapro Financials Proshares | 104.5 | 57.00% |
| FCA | China Alphadex Fund FT | 32.1 | 55.84% |
| QLD | Ultra QQQ Proshares | 75.23 | 55.77% |
| FBGX | FI Enhanced Large Cap Growth ETN | 232.12 | 54.80% |
| DZK | Dev Mkts Bull 3X Direxion ETF | 78.2 | 53.85% |
| CHIQ | G-X China Consumer ETF | 18.48 | 52.85% |
| CURE | Healthcare Bull 3X Direxion ETF | 46.58 | 52.57% |
| UPRO | Ultrapro S&P 500 Proshares | 134.01 | 52.49% |
| FLGE | CS FI Large Cap Growth Enhanced ETN | 229.06 | 52.24% |
| JPNL | Direxion Japan Bull 3X | 74.06 | 52.23% |
| CQQQ | China Technology ETF Guggenheim | 59.66 | 52.12% |
| BBC | Bioshares Biotech Clinical Trial | 30.94 | 51.54% |
| FAS | Financial Bull 3X Direxion | 65.03 | 50.25% |
| EMQQ | Emrg Mkts Internet and Ecommerce Etc | 38.54 | 50.19% |
| IBUY | Amplify Onln Rtl ETF | 42.5 | 49.91% |
| GAMR | Purefunds Video Game Tech ETF | 47.52 | 48.97% |
| BOTZ | G-X Robotics & Artificial Intel Thmtc ETF | 24.41 | 48.48% |
| DDM | Ultra DOW 30 Proshares | 126.84 | 47.92% |
| MCHI | China Index MSCI Ishares | 69.58 | 47.70% |
| PGJ | Golden Dragon China Powershares ETF | 45.86 | 47.60% |
| NGE | G-X Nigeria Index ETF | 24.23 | 47.38% |
| PTH | Dynamic Healthcare Powershares | 75.41 | 47.08% |
| REMX | Rare Earth/Strategic Metals Vaneck ETF | 28.52 | 46.86% |
How Do I Short an ETF?
Once you decide you are ready to put on a short ETF position in your portfolio there are two ways to accomplish your goals.
Sell an ETF – The most obvious way is to call your broker or log onto your online account and make a short ETF transaction. You can sell an ETF at the market (be careful with volatile ETFs) or you can designate a certain price point (again be careful, there is the possibility you do not get your order filled if the price falls).
Buy an Inverse ETF – Due to trading restrictions or margin limitations, there may be times it’s not possible to sell an ETF. A short ETF has greater risk than a long ETF position since the risk is unlimited to the upside. With a long ETF position, the risk is limited to the price of $0. So, to help investors create short ETF positions without actually selling an ETF, some ETF providers created inverse ETFs – designed to track the inverse price of an index or underlying asset. As the price of the underlying product falls, the price of an inverse ETF rises. Perfect for those who want a short ETF position, but can’t actually sell an ETF. of our collared position because we own the put.
Procedure for identifying the trend using the tools on SeekingAlpha
Click on the stock of your choice, example A , Agilent Technologies
Open the advanced chart
Set display to candels
Choose indicator
Select Moving Average Exponential
Check the EMA
It should be defaulted to 9
Setting your EMA9
Use the link at the top of the chart to sent your EMA9 (1 minute to one month)
Intraday, use 1 to 5 minutes (careful prices are delayed)
Trade duration 2 to 10 days, use daily bars (D)
Trade duration 11-29 days, use weekly bars (W)
Trade duration 30-90 days, use monthly bars (M)
Trend
Above the EMA9 = long
Below the EMA9 = short
The EMA by itself will do a reliable job of defining trend however if you want to take it a step further drop in these indicators.
Set display to candels
Choose indicator
Select Moving Average Exponential
Check the EMA
It should be defaulted to 9
Setting your EMA9
Use the link at the top of the chart to sent your EMA9 (1 minute to one month)
Intraday, use 1 to 5 minutes (careful prices are delayed)
Trade duration 2 to 10 days, use daily bars (D)
Trade duration 11-29 days, use weekly bars (W)
Trade duration 30-90 days, use monthly bars (M)
Trend
Above the EMA9 = long
Below the EMA9 = short
The EMA by itself will do a reliable job of defining trend however if you want to take it a step further drop in these indicators.
It’s hard to find a desk these days that handles 3 way premium neutral orders that provides efficient execution. You just can’t leg into them. I personally had to try 11 desks before I found 1 in Chicago (run by an X floor trader, older guy but still on his game) and one in London I use for European and Asian indices. It costs a few bucks more but I’d rather pay an extra $30.00 on a 3 way in commission than lose $150.00 on the fill when the contract is only worth $125,000.00 at an S&P price of 2,500.00.
Looking forward to the volatility looks like 2018 is shaping up to be a very fun year to trade.
Additional disclosure: I’ve been a professional trader and run a family office from Tortola, British Virgin Islands for the past 20+ years, zero income, corporate, sales and inheritance tax and would like to keep it that way. Because of the potential tax implications I do not manage U.S. accounts or sell advisory services to U.S. clients. I do however manage funds for qualified non-U.S. investors and entities. I may at times for my own accounts or for the accounts I manage have positions on that could be contrary to the ones mentioned in my reports.
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