So I bought S&P 500 2500 puts

NYEXPAT said:
It is a Santa Claus Rally! Enjoy it while it lasts!
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It's more than that, this is largest one day gain (by points, not %) in history. As I understand it, the Santa Claus rally is usually in the 1.7% range, this is 5% today. But heck, possible that given this market it could be down 10% tomorrow.

But if that's the Santa Claus effect, I can't wait for the January Effect to hit. :)
 
bobandsherry said:
It's more than that, this is largest one day gain (by points, not %) in history. As I understand it, the Santa Claus rally is usually in the 1.7% range, this is 5% today. But heck, possible that given this market it could be down 10% tomorrow.

But if that's the Santa Claus effect, I can't wait for the January Effect to hit. :)
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It's arguable, I always heard 1.4%, but it was preceded by the worst Christmas Eve in history. RM thinks 12% is conceivable vs my 6%-8% range. Based on today I think he won "the Internets" but I will happily accept the extra 4%-6% ( of my 20%) as a "booby prize"!
 
Lsbcal said:
You may be right on your investments. But I don't see why one would look at 1931 as any kind of model akin to today's market. That economy was in the early stage of a depression and the volatility was like nothing we have seen in our lifetimes. In 1930, one year before, t

Agree with you, many controls supposedly in place today to prevent this, but hey who knows. But something that is forgotten is leading up to that was nearly 44% rise in the S&P proceeding the depression so this is definitely not the same. Here's 10 year period from 1928 to 1937, pretty wild times for sure.

Year% Change
192843.81%
1929-8.30%
1930-25.12%
1931-43.84%
1932-8.64%
193349.98%
1934-1.19%
193546.74%
193631.94%
1937-35.34%

https://seekingalpha.com/instablog/.../4831186-annual-returns-s-and-p-500-1928-2015
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Running_Man said:
With the VIX increase this morning I sold another 30% of my put position this morning leaving me at 40% of my original position, though far higher value than that in dollars. After tax assumption I have nearly 6 times the total original investment, covers me around 2200 on the S&P 500. I have not purchased any stocks yet to get me back to 25% equities.

Issue is the last time the market fell 1.5% or more on six successive trading days was 1931 and it followed that up with a 12% rise in one day!. I would still expect quite a bit of tax selling at this point to harvest some losses, and 2100-2200 could still easily be hit in the next days but seems prudent to shave back at this point.
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He is not saying this resembles 1931, just pointing out a little known "factoid"!
 
Lsbcal said:
You may be right on your investments. But I don't see why one would look at 1931 as any kind of model akin to today's market. That economy was in the early stage of a depression and the volatility was like nothing we have seen in our lifetimes. In 1930, one year before, the market was down about -28%. And 1929 was no beauty either.
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I was not looking at 1931, I was referencing any other time in history the stock market went down 1.5% or more six successive days and what happened afterwords. Only 1931 came up which should give some pause. I wish I had absolute confidence I would have sold the other 40% and bought calls, but I am actually being incredibly conservative in my investment style and if the market were to actually go and make a new high I would be thrilled actually, probably start worrying about inflation but thrilled nonetheless.


No market goes straight down and Bear markets are notorious for tremendous sharp up moves, I was looking for similar activity and only 1931 matches. What we are seeing in this market is historic volatility.
 
Running_Man said:
I was not looking at 1931, I was referencing any other time in history the stock market went down 1.5% or more six successive days and what happened afterwords. Only 1931 came up which should give some pause. I wish I had absolute confidence I would have sold the other 40% and bought calls, but I am actually being incredibly conservative in my investment style and if the market were to actually go and make a new high I would be thrilled actually, probably start worrying about inflation but thrilled nonetheless.


No market goes straight down and Bear markets are notorious for tremendous sharp up moves, I was looking for similar activity and only 1931 matches. What we are seeing in this market is historic volatility.
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I was just quibbling a bit.

True we do have very high volatility. I would like to think that we are not entering a recession any time soon and the numbers (jobs, leading index, yield curve) seem to bear this out. So I'd prefer, for my own sanity, to see this as similar to other big corrections with (no recession) that have lasted 5 to 14 months from the previous high. We are 3 months out from the high.
 
The more I read here, the more I think that very little can be known about market or stock action. Humans are pattern-seeking organisms, and therefore we will find patterns. But these patterns may be too variable to bet on. I believe that the only reasonable way to choose stocks, especially if one must trade in a taxable account, is to seek value and be very careful to look for financial stability.

Ha.
 
haha said:
The more I read here, the more I think that very little can be known about market or stock action. Humans are pattern-seeking organisms, and therefore we will find patterns. But these patterns may be too variable to bet on. I believe that the only reasonable way to choose stocks, especially if one must trade in a taxable account, is to seek value and be very careful to look for financial stability.

Ha.
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You are probably spot on, trading today is no longer driven by human, it's largely machine driven. So machines just over react essentially feeding off, and and at the same time, into the trading. Obviously something even in machine trading has changed as there was a period of no/low volatility. Looks like today will take a dip, so past three days may end up settling back to neutral.
 
bobandsherry said:
You are probably spot on, trading today is no longer driven by human, it's largely machine driven. So machines just over react essentially feeding off, and and at the same time, into the trading. Obviously something even in machine trading has changed as there was a period of no/low volatility. Looks like today will take a dip, so past three days may end up settling back to neutral.
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This would be interesting to understand in more depth. Are machine algorithms highly variable over time? How many big money people run them? How many different types are there? Do they concentrate on very short term trading?

We are somewhat familiar with moving average approaches. There are X day averages where X varies between maybe 20 and 200. There are simple moving averages and exponential ones. Mostly that is all I hear about. I kind of doubt big money types are using these.

I personally think there are some techniques that bear fruit but are not all that known or acknowledged. One should understand the past variability of any investment approach before using real money.
 
^^ Machines also monitor news feeds for key words and act accordingly. This has caused some panic selling on company issues before a human intervened. As I understand it, machines aren't set to just re-act, they also "learn" over time. But I'm no expert, just from what I've read and heard. I'm sure someone with more expertise can weigh in on specifics.
 
On the drop this morning I have sold the remainder 40% of my position.
 
Running_Man said:
On the drop this morning I have sold the remainder 40% of my position.
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So I understand you are now totally out of the market but not hedged for a decline? Nice timing.

BTW, I came across this October Ben Carson article which is a nice analysis of past declines: https://awealthofcommonsense.com/2018/10/can-the-stock-market-predict-the-next-recession/

...66% of the time, the market has experienced a double-digit drawdown with no recession as the main cause.

Of those 31 which occurred outside of a recession, the losses were -18% over 154 days, on average.
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Let's see, we are down around -20% in 90 days. Seems about an average (nasty) decline so far.
 
Lsbcal said:
So I understand you are now totally out of the market but not hedged for a decline? Nice timing.

BTW, I came across this October Ben Carson article which is a nice analysis of past declines: https://awealthofcommonsense.com/2018/10/can-the-stock-market-predict-the-next-recession/



Let's see, we are down around -20% in 90 days. Seems about an average (nasty) decline so far.
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I do not believe he is totally out of the market. You cannot HEDGE a position you do not have! I believe he is like me 20% stocks and 0 hedge or net short position. I am thinking technical bounce and RM has his own reasoning as to why the markets will trade up another 9%-10% from here. We also know that he has a 7.5% gold position in one form or another which may act as a partial hedge.

If we continue the "run up" I will hedge in my exposure and get slightly net short. I suspect RM will buy "puts" again in the near future?
 
If you think the market is going to trade up from here, why are you not buying calls?
 
Lsbcal said:
So I understand you are now totally out of the market but not hedged for a decline? Nice timing.

BTW, I came across this October Ben Carson article which is a nice analysis of past declines: https://awealthofcommonsense.com/2018/10/can-the-stock-market-predict-the-next-recession/



Let's see, we are down around -20% in 90 days. Seems about an average (nasty) decline so far.
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No I never sold any equities, in early October I was 25% equities and purchased the puts in order to offset a decline in the market I feared was likely. I now have the cash to purchase equities to get me back to 25% equities which I have enough after tax cash to cover to around 1900-2000 depending on how the overall valuation of the portfolio happens but overall a basically 8 percent after tax return for my total portfolio from a 1 percent position. I reflect and take this as an early very bad sign, not a V recovery that is going to be inevitable.

Again for reasons of forced retirement selling, declining from historic corporate profit margins and decreasing GDP. The timing of this will be interesting to me in 2019, staying positive for 2019 is going to be a challenge I fear. Ironically, CNBC is stating that pension funds were some of the big buyers yesterday and today as they are re-balancing their equity position because of the fall in stock prices.

And there is nothing average about this decline so far. It was just a few months ago people were posting this was impossible, I believe "snowball's chance in hell" and "no way for this to be profitable" "need a decline that has only occurred 2 times in 100 years" were a few of the opinions offered.
 
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I mean it was a nice gamble and all but a person could buy a Jan 18, 2019 $250 SPY call for $3.60 today and make a 500% return if the January effect takes hold and SPY goes to around 270.
 
gstillson said:
So now what happens if the S&P does drop to 1200?
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I expected a move to 2100 to 2200 originally and I will evaluate what the FED does, based on what I have seen so far I am not too optimistic the FED understands the problem. I still feel it is extremely likely the market will fall around that 1200 value in the coming 12-24 months. I am not in a hurry to re-deploy my funds into the market and get my equity percentage back to 25% even though come January if I stick to my plan that is what I will do. Most likely by the purchase of dividend paying stocks. But I will continue to evaluate over the coming weeks as we are in the midst of historic moves in the stock market.

On CNBC they just said if you are an individual and do not have all your cash invested, you are a gambler not an investor. This was in response to a question of someone who had cash and was waiting for an excellent opportunity in order to invest in something with a great opportunity. The response was classic passive market pablum, " there are so many markets to not have your cash deployed means you are not an investor, there are foreign markets, ETF's of so many sectors, so many markets to invest in that to not be fully strategically deployed means you are just a trader."

I am a conservative investor. The effect of my actions to this point financially are equivalent to selling at S&P 500 @ 2985 and buying the same shares (not dollars) back around 2000, a further 15-20 percent fall from here and being able to keep the cash. I have a double digit gain on a very conservative portfolio for 2018. So I have time to reflect on the market and what actions I want to take with that cash. My options were vulnerable to whipsaw bear market rallies so I claimed the protection I had to around the 2000 level.
 
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