quote:

Originally posted by Shakka How are you going to decide when to pull the hedges off?

My allocation is based on where the price is in the 52 week range. If the S&P500 looks like it's going down, I have a put bias. Using my put bias allocation method, if the S&P500 is at 30% in its 52 week range, I allocate 30% calls, 70% puts. If I have a call bias, I use the call bias method, which is just the inverse. So it would instead be, 70% calls, 30% puts. I have made the model to be dynamic just like the market so that all my output results are based on the latest market data and change just as fast as the market does so I am never left behind. It allows me to be proactive instead of reactive.

quote:

Originally posted by Comrade Stalin My allocation is based on where the price is in the 52 week range. If the S&P500 looks like it's going down, I have a put bias. Using my put bias allocation method, if the S&P500 is at 30% in its 52 week range, I allocate 30% calls, 70% puts. If I have a call bias, I use the call bias method, which is just the inverse. So it would instead be, 70% calls, 30% puts. I have made the model to be dynamic just like the market so that all my output results are based on the latest market data and change just as fast as the market does so I am never left behind. It allows me to be proactive instead of reactive.

A dynamic model? So you understand control theory? Or is yours based more on traditional neutonican calculus?

Models are dangerous things, they can lock you into really irrational situations if they aren't well developed, not to mention they only really do good at immetating what has happened not predicting what might, could, proabaly will, or might never happen.

If you do the calculations,the up and down fluctuations of daily trading don't really have that much of an impact on financial fortunes, it's the one off rare events that make and break people. My thinking is based loosly on Sorros and how he made his money spotting major market imbalances and then capitalizing on them as they correct.

Such imbalances can be seen all over right now. The most striking is that the US dollar seems to still be getting people using it as a 'safe haven'. This is insane, the US is one of the worst economies in the world right now, or I should say has the worst forward looking prospects. Short of countries in open armed conflict the national fundamentals have very little on the positive side and mountains on the negative side. If I was set to capitalize on the situation I would, but I can't.

On the more positive upside, looking for under valued assets but not over valued assets, the Euro + Real are very clearly undervalued. I think the same might be true of the Ruble (Russian?) but I haven't done enough research to say for sure.

Oh, and more specifically, companies in the US that are doing really well right now AND are exporters will do way better as the US$ declines in relative global value. CAT and John Deer come to mind as examples. They have US$ costs and a product that can be sold for Non-US$ income.

quote:

Originally posted by atbell A dynamic model? So you understand control theory? Or is yours based more on traditional neutonican calculus? Models are dangerous things, they can lock you into really irrational situations if they aren't well developed, not to mention they only really do good at immetating what has happened not predicting what might, could, proabaly will, or might never happen. If you do the calculations,the up and down fluctuations of daily trading don't really have that much of an impact on financial fortunes, it's the one off rare events that make and break people. My thinking is based loosly on Sorros and how he made his money spotting major market imbalances and then capitalizing on them as they correct.

I have to some degree used control theory inadvertently. If an output did not make sense, then I made it make sense by changing some parameters, until every output I got made sense no matter what it was. Models used wrongly can be dangerous, but for me, I wouldn't be able to survive without models. I lost money buying a deep out of the money call option, so I made a model, and it's proving to be a great success. I am up 2% on a day when the S&P500 is down more than 1%. The model compares inverse metrics to positive beta metrics to find market imbalances and recommend a course of action. This isn't exactly the formula, but the variables, are...

DJX + GSG + TNX
---------------
UUP + GLD + VIX

The higher the result, the more likely the market is topping out. The lower it is, the more likely the market is bottoming out.

quote:

Such imbalances can be seen all over right now. The most striking is that the US dollar seems to still be getting people using it as a 'safe haven'. This is insane, the US is one of the worst economies in the world right now, or I should say has the worst forward looking prospects. Short of countries in open armed conflict the national fundamentals have very little on the positive side and mountains on the negative side. If I was set to capitalize on the situation I would, but I can't. On the more positive upside, looking for under valued assets but not over valued assets, the Euro + Real are very clearly undervalued. I think the same might be true of the Ruble (Russian?) but I haven't done enough research to say for sure. Oh, and more specifically, companies in the US that are doing really well right now AND are exporters will do way better as the US$ declines in relative global value. CAT and John Deer come to mind as examples. They have US$ costs and a product that can be sold for Non-US$ income.

One thing I am sure of is my 4 out of 5 overweight put options on the S&P500 index ETF (SPY).

Here is what my model says after today's big down day.



Recommends increasing puts on GSG and decreasing puts on SPY.
--------------------------------------------------------

My hedge is on its second even more successful day. Here is my performance and all my positions.




As you can see my SPY puts are extremely successful. This model is so far, proving to be a huge success.

quote:

Originally posted by Comrade Stalin

I see you own APOL. It's a contentious short for me right now (the whole for-profit education sector is a big hedge fund short but it really depends on how big Arne Duncan's balls are). What are your personal thoughts on the name and the sector?

We're supposed to be getting the latest NegReg results any day now--this group is about to make a big move one way or another considering how they reacted to the news of Shireman's resignation.

PBS/Frontline did a great documentary on the for-profit sector. There are so many problems with it that need to be addressed.

fuck if I can't figure out how to embed this video.

Last edited by Shakka on May-22-2010 at 02:42

quote:

Originally posted by Shakka I see you own APOL. It's a contentious short for me right now (the whole for-profit education sector is a big hedge fund short but it really depends on how big Arne Duncan's balls are). What are your personal thoughts on the name and the sector? We're supposed to be getting the latest NegReg results any day now--this group is about to make a big move one way or another considering how they reacted to the news of Shireman's resignation. PBS/Frontline did a great documentary on the for-profit sector. There are so many problems with it that need to be addressed.

I personally think that a basic education and profit do not go together. APOL's fundamentals to value ratio is very high meaning it's a good quant buy based on the financial statements and current stock price. Qualitative speaking, it's shit. But this pick isn't in my portfolio for moral reasons, it's there because my model says it should be there. Once the valuation falls below market, I'm out of APOL. I have actually taken a few basic courses at University of Phoenix and I must say, it is a shit school that charges private school tuition. I did not read hardly anything in any classes and I still easily pulled off A's and B's. And for that, I get charged the same amount to go to a really good actual university.

quote:

Originally posted by Comrade Stalin I personally think that a basic education and profit do not go together. APOL's fundamentals to value ratio is very high meaning it's a good quant buy based on the financial statements and current stock price. Qualitative speaking, it's shit. But this pick isn't in my portfolio for moral reasons, it's there because my model says it should be there. Once the valuation falls below market, I'm out of APOL. I have actually taken a few basic courses at University of Phoenix and I must say, it is a shit school that charges private school tuition. I did not read hardly anything in any classes and I still easily pulled off A's and B's. And for that, I get charged the same amount to go to a really good actual university.

he he he, economic eduation.

In about 2005 I set out to look into doing graduate work. It turned out that I couldn't find anyone who was studying what i wanted to study, smith, ricardo, keyens. Economic research seemed to be caught up in being popular and proving value to the cool kids (kids with money). So I'm really not surprised at any of the on going fall out from a bankrupt academic frame work.

Say what you will about Friedman et al. but at least they thought and discussed economics. Now there are people running around with degrees in economics, who call themselves economists and advise others, who did nothing but write multiple choice exams for 3 - 5 years. ah, fail.

Personally I think economics needs some updating and that means throwing out almost everything written after 1980 until the real classics are re-evaluated. A long plan but I'll do it in time

Shakka, I'm creating one hell of an options trading model. Can I ask you if you know of any good trading chat rooms or forums where you hedge fund pros hang out?

Last edited by Comrade Stalin on May-26-2010 at 09:42

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Originally posted by Comrade Stalin Shakka, I'm creating one hell of an options trading model. Can I ask you if you know of any good trading chat rooms or forums where you hedge fund pros hang out?

I'm actually not aware of any! (Honestly, I hardly have the time to worry about what other fund traders are doing with their own strategies). Maybe it's because I'm not in NYC, but I don't find the hedge fund world to necessarily be as "clubby" as the public seems to think. Don't get me wrong, I have plenty of discussions with other friends and people I know in the industry, but it's not like we're colluding to drive prices up or down.

I can tell you that the Ira Sohn conference is today and that some hedge fund heavyweights (Bill Ackman, David Einhorn, Steve Eisman, Niall Fergusen, and others) will be presenting their best ideas.

I have what I would consider a really sophisticated series of financial models. I have spent thousands of hours on them. I know it can make millions if given the chance. What should I do with it? I have had limited success courting any investors to invest in my company but the capital I have been able to acquire is much too small to use my models anywhere close to their full potential. I need something like $100,000. Got any ideas? I'm also trying to secure at least an internship at local investment banks like Wells Fargo Securities. Called the last 3 days in a row and still have only gotten a, "I'll talk to my partner and get back to you." Or a secretary, "They are with a client/in a meeting/on the phone, would you like the voice mail." Of course I get no call back. So alas, I call tomorrow again.

Last edited by Comrade Stalin on May-27-2010 at 05:59