Jan 5 2026

 First day of trading after venezuela's kidnapping of her president Maduro. CVX/SLB incating higher because they already have some presence in the country

Real Estate: I need to meet Yury for some remaining jobs, needing to be at Hudson to cleanup and make sure it is ready for the new tenant. I should go tonight! 

My investment return in 2025 was unsatisfactory: single digits vs. almost 20% for spx and more for ndx. 

Here are some of the key reasons: 

1) Overtrading! - need to study my trading patterns and reduce mistakes.

2) bought at the high and sold at the low: When the vix index jumped 2 pts, I usually reduce exposure, but failed to increase exposure on the rebound. What was worse was: effectively my max exposure at the market peak and lowest exposure at the market bottom - worse timing! 

 bought CNQ because it came down 6% due to invasion of venezuela (over done). The co has a long history of increasing dvd and long reserve life. 

added 200 shares of vitl at the support level. If it breaks, I need to unload these and more. 

added small PBR, which only came in 1.5% on maduro. 

Happy New Year

Random thoughts : 

• Trade reviews
• Strategy reviews - Value?
• Think more and react less
• Deal with my biggest enemy - myself

Spike Option Strategy

 I would venture to set up this type trade in the beginning. 1. Set up a straddle (or buy stock and put position delta neutral). 2. When it is reaching a frenzy, sell OTM put position (GME case sell $250 put for $120 for instance). 3, sell the stock and call after a climax top (tricky here), exit the put positions at the same time ?. 4. after the collapse, add to the call position

Fed Summary

Summary of Fed Facilities in Response to Covid-19 Government Shutdown of Economy:
Unlimited QE - UST
• Unlimited open-ended purchases of US Treasury and GSE MBS securitiesQE - MBS
• Purchases of MBS securities backed by US GSEs$1 Trillion Repo Market Interventions
• Purchases of US T-Bills in order to avoid disruption to the short-term Repo marketTALF (Term Asset-Backed Securities Loan Facility)
• Eligible collateral expanded to AAA CMBS and newly issued collateralized loan obligations. Size of facility remains $100bn. Only static CLOs will be eligible. Single-asset single-borrower CMBS and commercial real estate CLOs will NOT be eligible.Municipal liquidity facility
• Total size: Facility is being funded initially by $35bn from the Treasury using funds from the Exchange Stabilization Fund (ESF) and the SPV can purchase up to $500bn. As it stands, the SPV will terminate on September 30, 2020.PPPLF (Paycheck Protection Program Lending Facility)
• Facility established to lend to small businesses under the Paycheck Protection Program (PPP) of the CARES act, taking PPP as collateral and with no recourse to borrowerPMCFF (Primary Market Corporate Credit Facility)
• Eligible issuers must be rated at least BBB-/Baa3 as of March 22, 2020. May purchase corporate bonds as sole investor in issuance. May purchase no more than 25% of syndicated loan or bond at issuance. Corp bonds & loans levered 10 to 1, other assets levered 7 to 1.
SMCFF (Secondary Market Corporate Credit Facility)
• Eligible issuers must be rated at least BBB-/Baa3 as of March 22, 2020. If downgraded after March 22, rating must be at least BB-/Ba3 on date that the facility purchases the issuance. ETF purchases will be aimed at providing exposure to the US IG credit sector with remainder for ETFs that provide exposure to the US HY credit sector. IG purchases levered 10 to 1 and HY purchases levered 7 to 1. Other assets levered in 3:1 to 7:1 range depending on risk.
Main Street Lending Program
• Fed will buy 95%, eligible lender will retain 5%, recourse loan up to 4 years.
• Total size: $600bn. Treasury will back it with $75bnSupport for the Paycheck Protection Program
• The Fed also announced details of the new Paycheck Protection Program Lending Facility. Depository institutions that originate PPP loans are eligible to borrow from the Fed with the PPP loans - which are guaranteed by the SBA - as collateral. They will be funded at 35bp, essentially serving as a discount window for PPP loans. The loans will remain on bank balance sheet but will not consumer capital - assigned a risk weight of zero percent under the risk-based capital rules.

Lessons of 2020 - 04-08-20

Market:

up 1-2% pre-open. Mortgage players have more good news NLY came out and said there is no margin call issues, share buybacks too. The whole space is rallying again. IWM seems to run ahead of other indices.

Corona: US. tops 400k, altho the rate is slowing. That is the news which has been driving the market.

Corona stocks (GPS, UAL, DRI, MAC, APO, CAKE, RCL, BA, HLT, BX, KSS, M, CCL, F, C, FITB + 5% - 12%) and Mortgage REITs (MITT, TRTX, NRZ, NLY, ACRE, AI + 20%+) are leading the way. Very few stocks were even weak. The breadth is close to 5:1. BKLN/HYG are up 1-1.5%. The fed's action was really timely.

Portfolio:

BIIB, NFLX, and AMZN are basically doing nothing while the corona and REITs are soaring. The portfolio is effectively short. BIIB and NFLX calls should be closed because there does not seem much upside to them. Closing BIIB/NFLX against QQQs.

Given how much index vols came in, it may make sense to turn the portfolio into a reverse dispersion where long index (more than 1 to 1) vs. stocks which have very high vols.

Timing in trading stocks are critical: the stocks trade in waves or follow certain kind of rhythm. Good idea + timing is everything!

The portfolio suffered two consecutive days of big losses:

•  Lessons & lessons: Now, all I had was the lessons + the sleepless nights:)
• One positive note was the discovery of some of the mortgage REITs, and MSR servicers.
• The positions were made sense when it was first set up, but over-stayed its welcome. 
• All the stocks were 100% correlated and went down together. When the trade is set up to long cheaper vol names, which happened to be the stocks least affected by the corona virus. During the market bounce, good names bounced along with the bad, but the vol really came in hard, with high vol names have more room to fall, therefore, benefiting the trade. 
• When the market tanked again, it was also favorable because the good names did not tank as much. 
• During the latest rally of past 3 days, the worst names had their biggest move. Since the vols already had fallen (no room to fall), it was all negative delta. 
• Also the rally happened when AMZN, NFLX, BIIB were already sitting on the top of the chart. They were not about to make new highs. As such, they were like cash. The short side was a naked short as it turned out.  
• Even if the idea makes sense, the timing of the trade needs to be optimal: figuring out how much expectations are baked into the stocks. 
• The other blinding issue is that the market value of the long gives the impression that it is market neutral, but not in reality. 
• Also, admittedly I expect the market to go down.

Trading Ideas

Ideas:

"We lose money on every sale, but make up for it with volume"

• Market observations
• Leading stocks - to see if the leaders are driving the market higher or lower
• Lagging stocks - to see if the market is still in trouble or see what the short sellers are doing
• Breadth - For the market to move big in 1 way or the other, it needs to have majority 90% + of the stocks to move in 1 direction. If there are traitors (backing the trend), directional move will be sabotaged.
• Dispersion: This sharp downturn brought down almost every stock. As a result, the correlation among stocks are very high (almost 1). Index options are jacked up as a result. We all know the correlation can only go down from here. It should make sense to set up a dispersion trade of shorting index vol and long its members vol. NDX should be a good choice because tech is relatively less affected by the economic impact. I just picked lower vol stocks against QQQ (65%) and IWM (65%): AMZN (49%), NFLX (63%), GOOG(50%), BIIB(49%). 
• Relative Vol Value: Many of the NDX memebers that are trading super high vols: AMAT (99), HPQ (93), KLAC (92), DELL (88), INTC (74). Despite the high vol, I don't expect these names would be the leaders once the market started to rally. Why not short the calls of these names against QQQ, capturing nearly 30-50 pts in vol. What is the downside.
• Long vol: setting up straddles (TLT vs call (22% vol)).
• Climax: How to trade a stock going thru a climax whether it is the top climax or bottom? Can it be a strategy? 
• Usually, it takes 3-5 days of building up or down (work both ways). When it goes parabolic, go the opposite way towards the close of the 3rd, 4th or 5th day. 
• Equity REITS/XLU: it tends to follow 3 day rule. If it declines for 3 days straight, long the 3rd day towards the close the hope for the best.
• KR was perceived as a safe stock with the corona virus, so it was speculated from a normal 28 to 36 and back down as the market rallies, the players to unwind their trade. Maybe they can put the on trade again? the stock is up a little. Get started.
• Hedging Ideas:
• Can you long IWM (BKX or a bad bank stock) puts and short QQQ puts as a hedge against market downturn? This is because IWM (BKX) seemed to underperform QQQ by a large margin (over 10% this time) during the market downturn.  
• Shorting mortgage REITs: The reason is that they are all leveraged. The the market is under stress, their assets (mortgages) will decline, triggering margin calls from brokers. They need to sell more in order to reduce leverage, the assets get further depressed, triggering more margin calls. A slippery slop into a downward spiral into a black hole. The banks have the same problem, but their loans are not market to market everyday, plus they are financed by depositors, not the market sensitive brokers!
• Sell safer stock puts to finance Index puts such as SPY or IWM
• Short term trading
• Against the market:
• During a selling panic pre-open (2-3 days of intense selling), on the 3rd/4th day, market is down again pre-open: buy index ETF
• During a short-covering panic Pre-open: crowded short stocks were up 10-70%. Selling bunch of them. Cover after the market opens. 
• Short ideas: 
• USO - this the crude futures that should have difficulties of rallying because it is driven by the supply and demand of the underlying futures market, not by the short squeeze occurrences in equities. Given the high cost of USO, and the negative carry (in rolling the contract from one month to the next). I don't expect oil would recover anytime soon. 
• Banks
• Retailers, GM/F
•  

Searching for the Bottom

Search for the bottom

• VIX made a high of 83 on 3/16/20
• QQQ/SPY made a low on 3/20/20 (170/223)
• Market (VIX) is most likely to test the lows (high) within the next 1 - 2 weeks. 
• Start looking for stocks that made higher lows.