Narrative:
Ancient history - The Nifty 50 were the only stocks to own... Until that price contraction proved otherwise. have the Nifty Fifty become the the Nifty Six of this era? Facebook Amazon Apple, Netflix Google and Microsoft? Absolutely is my narrative based on the percentage of the indices for the Nifty Six..
The $100 drop in Netflix after reporting great earnings but reporting moderate guidance would support the narrative.
Therefore I reason - any slip this week from Microsoft will move /ES lower.
What will I do?
I will watch for Microsoft to present earnings if earnings or guidance is below what is expected (I look at Estimize - a free site - to see what the analysts suggest while using the wisdom of the crowds before earnings). If Microsoft is below earnings I will sell /ES and ride the bounce downward and exit before the close of futures trading.
At the same time I will buy UVXY. Volatility will trade upward with an 80% historical correlation to the drop in /ES.
This is precisely what occured with Netflix.
I take the short term money.
If UVXY goes upward as it did this week I recall the past..
Volmageddon 2018 UVXY from $12 to $38.
Covid drop UVXY from $12 to $132 with VIX at 80 there was an exact 1.5 times VIX price movement. the UVXY portfolio managers did their job.
And then...
I could always be wrong.
Now position sizing advice for the unwary:
Stay in the game.
I set up to invest 2% of capital account value at most. Or subtly, when convinced I invest to lose 2% of account value - a distinct difference. It is always the oversize bet that went right that convinces us that we are bound to be correct based on our narratives. The brain loves a good short story.
If that were to mean selling /MES and not /ES fine. do that.
the trick is to stay in the game...
If UVXY goes my way what should I do?
If I bought the common and it is a wasting asset I would sell the calls for $7 for 45 days to take the UVXY common from me at $12....
My cost in UVXY then is $4. Likely I roll the calls.
Be careful out there. The narratives that the sky is falling could always be wrong. And remember my friends...
It is easier to make money on the violent drops than on the slow grinding rises.
Stay in the game with position sizing and enjoy the ride...
Microsoft to the downside could be a year in a day to make 20% annualized portfolio growth.
thats all I've got..
all the best
Ancient history - The Nifty 50 were the only stocks to own... Until that price contraction proved otherwise. have the Nifty Fifty become the the Nifty Six of this era? Facebook Amazon Apple, Netflix Google and Microsoft? Absolutely is my narrative based on the percentage of the indices for the Nifty Six..
The $100 drop in Netflix after reporting great earnings but reporting moderate guidance would support the narrative.
Therefore I reason - any slip this week from Microsoft will move /ES lower.
What will I do?
I will watch for Microsoft to present earnings if earnings or guidance is below what is expected (I look at Estimize - a free site - to see what the analysts suggest while using the wisdom of the crowds before earnings). If Microsoft is below earnings I will sell /ES and ride the bounce downward and exit before the close of futures trading.
At the same time I will buy UVXY. Volatility will trade upward with an 80% historical correlation to the drop in /ES.
This is precisely what occured with Netflix.
I take the short term money.
If UVXY goes upward as it did this week I recall the past..
Volmageddon 2018 UVXY from $12 to $38.
Covid drop UVXY from $12 to $132 with VIX at 80 there was an exact 1.5 times VIX price movement. the UVXY portfolio managers did their job.
And then...
I could always be wrong.
Now position sizing advice for the unwary:
Stay in the game.
I set up to invest 2% of capital account value at most. Or subtly, when convinced I invest to lose 2% of account value - a distinct difference. It is always the oversize bet that went right that convinces us that we are bound to be correct based on our narratives. The brain loves a good short story.
If that were to mean selling /MES and not /ES fine. do that.
the trick is to stay in the game...
If UVXY goes my way what should I do?
If I bought the common and it is a wasting asset I would sell the calls for $7 for 45 days to take the UVXY common from me at $12....
My cost in UVXY then is $4. Likely I roll the calls.
Be careful out there. The narratives that the sky is falling could always be wrong. And remember my friends...
It is easier to make money on the violent drops than on the slow grinding rises.
Stay in the game with position sizing and enjoy the ride...
Microsoft to the downside could be a year in a day to make 20% annualized portfolio growth.
thats all I've got..
all the best