Thursday, 31 July 2014

Bonds Sell of as US GDP Beats

Expected was a 3% GDP number and it came out at 4% which was a massive beat. The US Dollar rallied, and Bonds sold off big. The 30yr had the second biggest move of the year, and the Bund moved from 148.55 to sub 148. I had been short Bunds via options for over a month, and annoyingly I got out on the first spike down, as in general they had been very strong and clearly I was going against the grain. It just shows no matter how long you have been trading for you can still mess up big, and getting out early cost me a pretty packet. Still getting over it but nothing I can do to change it right now.
Meanwhile I continue to hold ES synthetic puts which is doing ok on the back of the sell of today, but relatively the ES remains super strong, barely down 2% from highs given that the Russell 2000 and Euro indices are down much more. Im hoping there is some convergence between these indices, ideally the ES coming down another 2% or more.

On the spread front, yesterday was a monster volume day in the Eurodollar Spreads, with over 500k contracts traded in some Eurodollar months. I concentrated on the back end of the curve shorting mainly 21s in Dec16Mar17 nicking half a tick at a time, so that worked out ok. I have a small position long Jun15Sep15 at 25.5, thinking this should be good for at least 1/2 given the GDP print.
Euribors remain an irrelevant play right now, as ECB policy has killed that market, where as Short Sterling is in a state of limbo, with the next big event which is likely to move it, is the inflation report in 2 weeks.

Yesterday also yielded 5 ticks profit on the 30 Year Bond strategy with an entry at 138.11 and exit at 138.16 which has meant the system has accumulated 26 ticks worth of profits in the past 2 months so far.

Monday, 28 July 2014

30 Yr Bond Trading System - Jack Broz

In this time where day trading has become a lot more difficult, I've been often looking for some more mechanical strategies that can help P&L. Its quite tough to find something which doesn't take up much capital, ideally has no overnight risk but yet supplement income.
I came across a guy called Jack Broz, some of you may have heard about him. He has been trading from the bond pit for more than 15 years.and uses some unique mechanical set ups. He gets his information both from pit and also electronic market. Jack has a trading room and daily newsletter and he uses these set ups on daily basis.
One of the strategies I have come across is his 30 Year Bond extension trade which is a simple yet effective system, but for those who trade via ninja trader, it has been automated, once the parameters have been set.


The Beauty of the system is when you run it then you can just focus on other markets since it places stop and profit target on its own when our entry level gets triggered. I've been back testing the system for around 2 months, and its generated a positive P&L so far, the details are below:


So as you can see its not a get rich quick scheme, its a slow and steady income generator. For more information email rajenkapadia@yahoo.com.

Tuesday, 22 July 2014

Equities back at highs - BTFD

So you have a lot of tension in Ukraine as well as Gaza, a Plane was shot out of the SKY, yet the buyers came in force to push these markets back near highs again. The disconnect is huge, this is simple supply and demand, and when there is Billions sitting on the sidelines at various funds, they will keep pushing this up regardless of the macroeconomic picture.
Netflix is a prime example, its run up almost 100% in the past few months, and has an inline earnings report, yet it still edges further up in after hours trading. Now you would have thought the big run up would price in an inline number, doesn't seem like it, maybe the 100% move up was pricing in a miss, so the fact it came inline was a good thing. Either way this cheap money is just pushing Equities higher, Bunds higher, Treasuries higher, pretty much everything is going higher apart from the agricultural products which have been taking a battering of late.
Lot of data out this week as well as earnings reports so this might provide a lot of BTFD (Buy The Fucking Dip) opportunities, as the only strategy that is working well is to buy on any down tick.
On the Spread front, generally volumes are very low, so trying to scalp during moments momentum is the main play right now. Bunds are still above 148 although they have come off quite a bit lately, but the 1.1% yield on the Bund isn't stopping the upward momentum. It is likely that it will remain around these levels till September expiry in my opinion, unless we start getting higher inflation numbers. 

Thursday, 17 July 2014

Bunds reach all time highs on the back off Plane Crash

It seemed like your standard day, no real volume anywhere, the ES made back a 12 dollar early loss, as it always tends to do and Spreads were not moving much, until news crossed the wires of a Malaysian Airline plane being shot down over the border of Ukraine and Russia, instantly you had an immediate sell of in Stocks, and the Bunds which were already trading over 148, shot up even further as safe haven buying pushed it up to 148.50 which are all time highs!
Its crazy at these levels and I will be shorting it tomorrow buying calls as protection. This has been my strategy of late, as there is so much whipsawing that its hard to stay long/short playing with stops, but its a matter of just holding the position regardless of how much your offside, and this is best done buying Calls against your position. I have been short ES for a bit of time, and today it finally worked out, although It would have been nicer had it just gone down without the need for a fatal Plane crash. I'm hoping there is some follow through and this isn't simply another opportunity for people to load up as they have been doing of late, but we shall see if there is any legs in this latest move down. Bare in mind we were at all time highs yesterday, so there could be a bit of a way to go, its barely come off over 1%.

On the Spread front I have been trading alot more Eurodollars as there is a lot more volume, and it makes a much better trade. Theres a solid 300k Contracts being traded in many of the months, which is a big difference to the Euribor which is struggling to get over 10k contracts on certain months. There was a time when 100k was the norm, for the 5th to 8th month out, then when times were bad it was 40k, and now its struggling to hit 20k and I suspect this wont change until the ECB mega easy policy changes.

Going forward not much data out tomorrow, but there's likely to still be spill over effects from today's tragedy, and now Israel is sending tanks into Gaza, so middle eastern tensions continue which will keep Bonds bid.

Tuesday, 8 July 2014

STIR Volumes Dropping off a Cliff

I was away the past two weeks and came back to trade Monday, and haven't managed to put on a single lot in the Euribor as of now. Volume has become so low that I wonder how the exchange will survive..ok taking a bit far there. But the only real rescue for us day traders is a pick up in inflation. The super easy central bank policy has taken all the volatility out of this market, leaving the only real play in Short Sterling.
The BoE meeting on Thursday will be interesting as it will provide insight into the thinking from the BoE at this stage. Manufacturing production unexpectedly came in weaker which gave cable a knock down from its highs in the  high 1.71s. Any bullish activity could spur on Short sterling quite a bit, giving some much needed opportunities.

On the Equity front, we are finally seeing a bit of red here, as there has been 2 days of selling which is a very rare event in recent times. The question is how quickly will the dip buyers rush in and push this all the way back up. That has been the pattern of late, as the massive cash piles are being put to work on every down tick. Hopefully there is a bit more to come here which can then give some opportunities to go long. Shorting this market is tough but I have sold the ES futures by buying calls against it, and I will keep rolling those calls over until we get some kind of decent pullback. Risk is defined, so it will prevent me from being stopped out in the conventional way. A sell of although overdue, will happen when you least expect it, and will happen fast, so being in the position is the best way to capture it. Playing the VIX is another good way to give you some exposure to a sell off, with the very low levels, the downside is limited, making it a good risk/reward trade. I may be wrong, but playing these set ups with the risk/reward at the moment, makes it a good play.


Short Sterling spreads nudge higher on hawkish Fed; Walmart blowout

As most must know trading Short Sterling is a bit of a bore, and has been for a while. Having managed to get out of my 2 month hold before,...