"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
