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Dan
I apologize if I missed your question. In between the violin recital and
today was a bad case of food poisoning brought on by some really bad
Indonesian food.
Anyway, I'll try to answer your question.
As you know from watching my posts, our signal is based on trading S&P
futures. We feel that the S&P index is the best indicator of the overall
health of the market. Now, that aside, you have to understand that these
forays into stocks are new to us (our total experience with equities is
about 10 months), so we're feeling our way here. When selling short, we
short the indices. Just the other day though, we bought a few in the money
Puts (OEX) that we sold the next morning for a 100% return in 24 hours. No
big deal as it was just 3 puts for a total profit of $5k, but $5k is $5k.
Sorry for the meanderings. Anyway, we have tried to balance our investment
as follows. We have been trading 1 unit of SPY, 1 unit of DIA and 3 units
QQQ sort of as a group. These are just approximations. What seems to have
happened here, is that the QQQ has a lot more volatility and really moves
once it gets going. Since the 3 'markets' seem to follow each other,
generally, this is the reasoning we currently use, but again we're just
feeling our way and its just trial and error. We are not, I repeat NOT,
shorting anything on margin. This last short, I was only 75% invested on
the short side while my brother was 100% short.
Again, you have to remember that while our positions are fairly large (at
least for us) these indices don't really move a heck of a lot. At least it
doesn't appear to us to move, but that may be because we're futures traders
and look at equities as one big yawn. :) For example, with all of the
movement in the equities to the down side, I'm ahead a little less than 2%.
I guess, if you're an equity trader and aren't too hyperactive this isn't
bad for a week or so (I forget when we actually went short without looking
it up). Contrast that with our futures trading where we're up 25% based on
initial margin or 8% based upon capital (the difference being how we manage
our money), or about 4 times the percent return from equities. We're
trading equities primarily because we needed to diversify and spread the
risk, and the numbers were too large to allow for much sleep with everything
in one basket.
We're now studying options and looking at how they might apply to our
trading system and we have just applied for the forms to allow us to write
naked puts and calls based upon our trading methodology. We're looking into
how we can make the time decay work in our favor. Anyway, it's pretty
interesting. Interesting enough that I'm giving up my .COM CTO position
(and most of those founder's shares) to come back to work on this full time
again. And we have to get moving on our own web site. We have a bunch of
contacts in the Far East who want to subscribe to our signals. We'll see
what happens.
Guy
-----Original Message-----
From: owner-metastock@xxxxxxxxxxxxx [mailto:owner-metastock@xxxxxxxxxxxxx]On
Behalf Of Dan Harels
Sent: Thursday, May 04, 2000 1:05 PM
To: metastock@xxxxxxxxxxxxx
Subject: RE: Lessons Learned From Market Downturn
Guy,
A question I posed when you entered your short positions got lost between
violin recitals and somewhere else. You have said that you short QQQ, SPY
and DIA. How do you decide how much capital (%) to place in each? They
don't always move in tandem and they don't always offer similar risks and
rewards in terms of volatility.
Thanks,
Dan
>From: "Guy Tann" <grt@xxxxxxxxxxxx>
>Reply-To: metastock@xxxxxxxxxxxxx
>To: <metastock@xxxxxxxxxxxxx>
>Subject: RE: Lessons Learned From Market Downturn
>Date: Thu, 4 May 2000 12:11:44 -0700
>
>We do have a mechanical system, Kent, and it hasn't given us the signal to
>buy back in yet. We're still waiting. Unfortunately we got in a day early
>on the short side, but are now doing quite well with the trade.
>
>Guy
>
>
>-----Original Message-----
>From: owner-metastock@xxxxxxxxxxxxx
>[mailto:owner-metastock@xxxxxxxxxxxxx]On
>Behalf Of Kent Rollins
>Sent: Thursday, May 04, 2000 10:39 AM
>To: metastock@xxxxxxxxxxxxx
>Subject: Re: Lessons Learned From Market Downturn
>
>"Yes, the markets really tanked. I'm just fortunate I followed my trusted
>rule of **always** selling when the _____price of the stock_____ indicator
>went below
>_____stop that I entered when I bought the stock_____ level."
>
>"Frankly, I don't plan on re-entering those particular securities until
>the
>_____lump in my throat_____ indicator drops below _____knot in my
>stomach_____ again!"
>
>You can't trade the markets mechanically like you're asking unless you have
>a system that is a winner and if you had such a system, it would have told
>you when to sell and when to buy back in. Frankly, I think the bulk of the
>selling is done. If you listen to CNBC, you will hear that many fund
>managers are totally confused on the markets or have large cash positions.
>This is a good sign. In addition, cash is still coming into the markets in
>the form of savings. This means continued upward pressure. But probably
>not like it was during the last 6 months. I'm currently 115% long. Of
>course, historically that is a bad sign.
>
>Kent
>
>
>-----Original Message-----
>From: Nicholas Kormanik <nkormanik@xxxxxxxxxx>
>To: metastock@xxxxxxxxxxxxx <metastock@xxxxxxxxxxxxx>
>Date: Thursday, May 04, 2000 1:16 PM
>Subject: Lessons Learned From Market Downturn
>
>
>
>It's likely that over the past couple of months many here have had some
>important lessons reinforced.
>
>I'm hoping that some of you 'senior' members wouldn't mind filling in the
>following blank lines....
>
>"Yes, the markets really tanked. I'm just fortunate I followed my trusted
>rule of **always** selling when the _____A_____ indicator went below
>_____B_____ level."
>
>"Frankly, I don't plan on re-entering those particular securities until
>the
>_____C_____ indicator rises above _____D_____ again!"
>
>Thanks in advance for sharing your ideas. I hope some interesting and
>helpful discussion is generated from your input.
>
>I personally am still a 'freshman,' and continue to look for these answers.
>
>Nicholas
>
>
>
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