Black Tuesday

NEW -> Contingent Buyer Assistance Program
C

crucialtaunt_IHB

New member
Alright. Someone had to start this discussion thread, so I will do it.

It's OK for the bears to come out of hiding now. This link pretty much sums up what happened today... So what's on your minds, people?

A) Is this a buying opportunity?

B) Is this an ominous sign of worse things to come in the future?

C) What the heck happened to gold today?
 
The PPT conference call is taking place as we speak. Watch for a 300 point gainer tomorrow morning.

Do I hear helicopters?

132574962-O.jpg
 
I am betting on things getting worse. A 3% drops in a single day is not a head-fake or a one-off phenomenon. This is how a medium-term reversal move announces itself.

Personally, I shorted the DOW earlier today when it was down about 180 points. I thought I was late to the party. Fortunately, I was not too late, and the Dow finished off over 400 points. I may short it even harder tomorrow. I will probably spend this evening picking some individual stocks to short. I may load up on March puts to really leverage the short term drop. In short (pun intended), I am putting (pun intended) my money where my mouth is.

Markets tend to be forward looking. Today the market took off the rose colored glasses and saw the recession coming as a result of the housing market meltdown. Over the next 30 days in particular, the market will probably be very volatile and over-correct for its failure to see this sooner. The economy will turn down and dip into recession by the end of the year. 2008 probably won't be pretty either because the housing market implosion will be in full swing.

The good news in this, if there is any, is that the FED will probably think about lowering rates again. It won't do much for the housing market; that problem is beyond repair, but it may prop up stocks and promote overall business expansion.

BTW, OC_Fliptrack, you find the coolest pictures.
 
Talking about shorts: Last week I loaded up on QID in anticipation. Not a bad rally in those today. I wish I had some call options on VIX - man that thing just popped beautifully today!!!

Speaking of the housing market slowdown, I like the idea that Freddie Mac issued effectively a 6-month notice: "The McLean-based company says that as of Sept. 1 it will no longer buy subprime mortgages with a high likelihood of excessive payment shock and possible foreclosure." This should turn off the easy money spigot a little bit...
 
"as of Sept. 1 it will no longer buy subprime mortgages with a high likelihood of excessive payment shock and possible foreclosure"

Translation:

"we have been buying subprime mortgages with a high likelihood of excessive payment shock and possible foreclosure".
 
I am curious as to how much of a percentage of your liquid (non-retirement) assets you are willing to play on the short side. So say you have $100k in your investment account and you use $10k to go short that is only 10%. If we use percentages no one will have to know how much money that is. We already know how actually letting people know what your money situation is can start a wild fire. I hope you don't mind me asking and of course you don't have to answer. I am still a little gun shy when it comes to shorting or buying puts. I did take advantage of the builders though.

I also invited Trader Chris from http://iamafuturestrader.blogspot.com/ to the forum. Hopefully he will come by and share his opinion as I know he will add some great insight. Go check his blog out and encourage him to come by.
 
"Do you guys think Freddie Mac gave it 6 months to wean buyers off this stuff? If there is a spring rally, it will be the last hurrah."

I was really pondering this one myself. If they know (OK, 'are willing now to acknowledge') it is not a good idea, why the wait? 30 days ought to be more than enough...

SCHB
 
graphix,

Risk management is the cornerstone of all successful trading. I never put more than 1.5% at risk on any given trade, and I never have more than 10 trades going with risk to original capital. In theory, if I were fully exposed to a downdraft like todays, I would not lose more than 15% of my account. Now once I move my stoploss up to breakeven, which I try to do quickly if the trade moves in my favor, I can invest more capital. The goal is to have as many open positions as I can create that have no risk to original capital. In a trending market I sometimes use all my capital, all my margin, and start buying options to increase my leverage further. It is a bit like shooting craps. Once you hit your number and get your money back, it often pays to let it ride. Eventually you crap out (or get stopped out in the case of the market), but sometimes you can really make a bundle. For instance, I was up 30% last January.

To answer your question more directly, I don't limit long or short positions to any fixed percentage. If the market is trending downward, I will load up on short positions, and if the market is trending upward, I will load up on long positions. The puts I bought today were the first short positions I have opened since last August.

Those puts I bought this morning were entertaining, but I didn't buy very many of them. I probably put less than 1/2% of my capital in them. Although, it was really cool to see them more than double today. Makes me wish I had really loaded up -- well, not really, the risks are too great, but it is fun to fantasize.
 
IrvineRenter: "To answer your question more directly, I don't limit long or short positions to any fixed percentage. If the market is trending downward, I will load up on short positions, and if the market is trending upward, I will load up on long positions. The puts I bought today were the first short positions I have opened since last August."

Amen! (for the most part)

I like to keep no more than 5% of my nonretirement portfolio in puts (or calls when the trend is with you). As summed up by IrvineRenter, the trend is your friend. Also, having many small positions (depending on small things like beta, or correlation, for example) helps manage risk.
 
Irvinerenter and crucialtaunt - Thanks for responding. Risk management is important especially when the market turns. Most people don't take advantage of the sources out there like you both are. Since I have had only minimal experience with the short/puts side of the market I wanted to hear what other strategies people were using. The trend is your friend is a good way to look at it. I think irvinerenter makes a good point in playing with the house's money. IR do you have the abilty to do title searches? If you do check out how many people with the name Deutsche own property right now.
 
You must log in or register to reply here.
Back
Top