Friday, 28 August 2015

Markets gone wild in this not so lull Summer

Its been a long time since my last update, a lot has happened since then. It was always coming a major dump in this market, and the inevitable bounce back but this move had a lot more to it then many of the other ones since 2009 I have seen. There was a serious capitulation seen in the markets Monday, liquidation throughout. Mini flash crashes occurring all over the place, with the most notable being Apple, which dropped 12 dollars to a low of $92 of the open before retracing it all. Now in hind site, there was a bucket load of opportunity then and the following days, but its hard to be subjective when a move of that intensity happens, and generally the first thought for most people is account preservation. I can't imagine there were many that were totally flat as that move happened, either they were already loaded up, or like me when you saw the market drop 3% or 5%, you started getting long, and hey why not considering in the past 4 years no meaningful pullback over 5%, and in the past every pullback was followed by a sharp snap back. Either way as I got long deltas via selling puts and some long stock positions, the expansion in Option Vol pretty much destroyed any leveraged account. Given that selling puts has been the strategy of choice over the past few years, I can imagine many were badly burned as a result. The thing is the move happens so fast that it makes it hard to get out, and as expected the market has come back but volatility is still remaining high with the VIX still in backwardation. Monday was a bad day for premium sellers, and as the saying goes, its not whether you are write or wrong in trading that counts, its whether you can stay solvent to see your view play out.

In the Bond space, as you would expect you saw a rally across the curve with Short Sterling giving some great opportunities to get long the curve on the drop down. Jun16Jun17 Short Sterling dropped to 46 on Monday for it then rebound 7 ticks to around 53 in the coming days. Its now dropped back to 50s. Using this as a guide I'll be looking to go long again with a further dip if it comes.

Next week should see the usual raft of data coming, with the looming Sep Fed meeting the focal point in the month, with a potential rate rise on the cards. Although personally I think they will bottle it.

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,...