Sunday, December 30, 2018

Delta Neutral Update...12.28.18

A mildly volatile day with low range exposure meant the mode never triggered and we're left net/net at the close.  Another shortened trading week may see pump and dump action renewed while tantalizing news that Chinese trade negotiations are "going well" may provide the grease necessary to move the markets.  Underlying economic data is woeful but that's never impacted the markets before so why expect things to change now.
With delta neutral we don't care.

Thursday, December 27, 2018

Delta Neutral Update...12.27.28

Another surprise day...this time with the NYAD rising from a bearish .20 one hour prior to the close to a closing value of 1.07. Blame the pension funds once again trying to avoid cash.
Tomorrow is December options expiration so we may see volatility once again as rollovers surge and traders try to pin the close.  Meanwhile our longer term silver (SLV) calls close out tomorrow for a nice gain over the past few months.

Wednesday, December 26, 2018

Delta Neutral Update....12.26.18

Well, that was a surprise...especially to the majority of CTAs... who were 100% short at today's open.
Pension fund buying was the reason given for the surge..that and short covering.  Let's see if the surge continues through the weekend.

Tuesday, December 25, 2018

Delta Neutral Update...12.25.18

A scary slide in a shortened trading day on the 23rd has once again produced a nice gain for DN traders. I did notice some weirdness 90 minutes in to the day when the Qs were down 1.2% and QLD was only down 1.7% ...when properly balanced leveraged should have made QLD down 2.4% , our trade trigger.  Needless to say, by the end of the brief 3 1/2 hour trading day the QQQ/QLD skew had returned to the expected 1:2 ratio.

Sunday, December 23, 2018

Delta Neutral Update... 12.23.18

Futures are all over the place Sunday evening as the fear index hits new highs.  Expect low volume but high volatility Monday (shortened session).  No hedging here just straight rules based delta neutral setups and remember to implement trailing stops once the limit stop trigger.  We're still looking for the high volume capitulation trade but until we see the NYAD at .10 or below that's unlikely to happen.  The govt. (partial) shutdown is not helping the risk outlook.
Tee DN trade remains the safest and laziest trade at this time....if you follow the rules.

Thursday, December 20, 2018

Delta Neutral update...12.20.18

The DN model continues to be the gift that keeps on giving as new selling pressures arise daily.
The House passed a stopgap budget that includes 5 billion for the wall but the Senate will probably kibosh it and the odds of a resultant govt shutdown Friday night are looking ominous. 
The good news is that as DN traders we really don't care...these volatility swings make us money with extremely limited risk.  What greatly surprised me is the recent blow up of supposedly savvy high profile "delta market" hedge funds.  Clearly they had a different concept of "neutral" than me.

Tuesday, December 18, 2018

Delta Neutral Update...12.18.18

A modest reversal day as traders try to game FED day tomorrow.  After hours looks ugly with QLD down 1% so expect some volatility tomorrow and the possibility that we see new lows across the board.  The prospects for a Santa Claus rally this year are fading fast although the apparent avoidance of a govt. shut down on Friday is a positive.

Monday, December 17, 2018

Delta Neutral Update ....12.17.18

Another good day for the DN model.  Anticipation of a govt. shutdown on Friday and uncertainty about the FED has the markets spooked.  Technically speaking we are in oversold territory and a rally looked possible today but risk off positions are few and far between even as overall market short interest is extremely low. 
The NYAD (NYSE advance/decline line) hit a low of .13 today.  We typically see major market capitulations when the NYAD hits .10 or less. This could happen at any time.

Wednesday, December 12, 2018

Delta Neutral Update...12.12.18

Another reversal day the left us net flat for the day.  Per previous comments this was the expected market behavior short term where the previous close to current close demonstrate considerably less volatility than the open to close metric.
Note the crossovers in the 2 Day Alert, TrendX and Skew...all of which correspond to a declining close to close volatility.

Tuesday, December 11, 2018

Delta Neutral Update...12.11.18

A nasty reversal day apparently based on Trump's confrontation with Pelosi, et al.  And if you thought the bulls were in charge today it didn't pan out that way.
And once neutral saves the day.

Monday, December 10, 2018

Delta Neutral Update...12.10.18

The QLD limit stop of 72.05 never got hit today (low of the day was 72.15) so the model never triggered and closed net flat for the day.  I suggested last week that we might be in store more a more or less range bound market for a while and this may be a harbinger.  On the other hand, the talking heads are predicting a bull surge into Xmas so anything's possible.  The good news....with DN we really don't care.

Saturday, December 8, 2018

Delta Neutral Update....12.08.18

Another nice day for our delta neutral strategy.  It started out looking positive but our limit stops did not fire until QLD turned red and blew through our 2.5% stop.
I've rearranged the charts a bit to show the 60 day relative volatility of QLD and QID.  The actual platform is actually much bigger graphically but we lose resolution when we try and display it on the blog platform.    FYI, the full platform is shown below.
Keep in mind that once volatility fades the frequency of trade triggers will also decline and the equity line will once again flatten out as to look like the May to September portion of the equity chart below.
We're seeing a divergence of the 2 Day Alert and the TrendX (which is closely tracking volatility) so we may see some pullback on further volatility gains for a bit....or Monday could be a washout day.
Major political upheaval in France , England, Italy and imminent demise of the EU, the Saudi issue and other geopolitical questions have spooked the markets...and rightly so.
Pity the poor guys that bought bitcoin at $18, around $4000. 

Thursday, December 6, 2018

Delta Neutral Update...12.06.18

Our trailing stop IN QID kicked us out of a another nice DN trade today and now we're looking at the possibility that today was a key reversal day,  Tomorrow will be a better indicator of  reversal confirmation although at this time the markets are red in afterhours.  Our trailing stop close gain is not reflected in the metrics shown fact the true value of the 5 day return is 4.5%. and all the other DN metrics are 1.5% better than shown.

Tuesday, December 4, 2018

And That's Why We do Delta Neutral....12.04.18

What a difference a day makes. 
As I mentioned yesterday, delta neutral really shines on those big down days that start out with a whimper and today was probably one of the best examples of that axiom ever.
Markets are closed Wednesday so Thursday open could be interesting.
For the really lazy bones traders here's the current update on our Z-score based MOZ model silver(SLV) trade over the past 6 months (see below).

Monday, December 3, 2018

Delta Neutral Update....12.03.18

Well,  the DN model has certainly lagged the past few days...and why is that?  If you understand the mechanics of the DN strategy it should be no mystery.  What's happened is that we've seen a couple recent blow out days that have exceeded our limit stops so orders never got filled on either side.  This is the price we pay for DN protection when the market decides to exceed those limit stop values to the downside/  Still, we're in this for the long run and risk management is always job #1 with us.
Today's news was that even some of the "smartest guys in the room" have cratered badly.
Should've called Bob.