Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

Hedging Update: Social Media Stocks After Facebook’s IPO

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Hey fellow Slopers,

Last time we looked at the costs of hedging social media stocks, I mentioned Tim's bearish post on Facebook's upcoming IPO, and a bearish article by Bloomberg, citing doubts about the company by institutional investors. The bears have so far proved prescient, of course, as Facebook's stock has continued to deflate following its fizzled IPO. But this week I spotted one Facebook bull on Twitter, early stage tech investor Dave McClure:

 

 

McClure bet 37 Signals partner David Hansson (@dhh) a beer that FB would close at $40 or above on the anniversary of its IPO. In response, I noted the high hedging costs of Facebook suggested Hansson was more likely to win that bet:

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Binary Options (by Market Sniper)

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Binary options are fairly new to the speculation/trading landscape. They are called binary options as there can only be two possible outcomes. There are two types. Either cash-or-nothing binary options or asset-or-nothing binary options. They are binary in that you get all or nothing. They are also called all-or-nothing options, digital options (more common in forex/interest rate markets), and Fixed Return Options (FROs) (on the AMEX). Binary options are usually European-style options.

There are two ways of going with this as well. There is exchange traded binary options such as offered on the NADEX and there is non-exchange traded options. Each are structured differently. With exchange traded binaries, there is a set strike price. With most non-exchange traded binary options, you set the strike price upon entry. Your strike is your entry in the trade. It then expires in or out of the money. Structure of payouts are also different. Both Amex and CBOE listed options have values between $0 and $1, with a multiplier of 100, and tick size of $0.01, and are cash settled. In 2009 Nadex, the North American Derivatives Exchange, launched and now offers a suite of binary options vehicles. Nadex binary options are available on a range Stock Index Futures, Spot Forex, Commodity Futures, and Economic Events.

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Which Neckline Will Count?

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For a few weeks now, I've been almost completely in-synch with the market. The last couple of days have been a bit disappointing, because they went like this:

+ On Wednesday, I was up at my peak $X dollars (consider X a decent amount);
+ At Wednesday's close, I was down $X/2 dollars;
+ On Thursday, I was up as much as $X/2 dollars;
+ Then, at the close, I was down $X/4 dollars 

So on both days, I saw a nice profit flip around into a loss half the size. Neither loss was horrible by any measure, but it's disspiriting to work hard and see green become red.

And, in each instance, it was a full-on-retard ES spike near day's end that did the damage. So, besides looking over my shoulder at all times for the Bernank, now I've got Euro-rumors to worry about.

Thus, I remain 50% in cash with the other 50% in a bewildering variety of small short positions. The Euro precisely reached my 1.25 target (and, for good measure, even dipped 5 pips beneath it), so objectively speaking, I've got to wonder if it's Euro-bounce time. My GLD and SLV hedges from last night were closed profitably this morning, but I really can't join the bull bandwagon right now.

I continue to monitor the Russell 2000 closely; the head and shoulders formation is very well-formed, but it's unclear to me which neckline possibility (each of which I've tinted) will be reached. The depth of the Euro's sell-off urges me to remain cautious, so I'm not as fervantly bearish as I was in recent weeks.

0525-rut

Free-Floating Anxiety

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I am, by nature, a worrywart. Sometimes this is good, and sometimes it is bad. When I was father to very young children, my ability to walk into a room and instantly assess any potential dangers was very valuable. As a trader, though, my worrisome nature can sometimes be costly.

A good example over the past few months has been with miners (symbol GDX), which I have mentioned 0514-worried something like fifty-thousand times this year. I was very vocal about my bearishness on the miners last year. I got a lot of nasty emails about how loony I was to think such a think. Precious metals kooks can be a passionate bunch, and they were firmly convinced not only of gold's imminent lift to $5,000 per ounce but, naturally, the value of miners following right along.

Well, my bearishness on miners was bold, visionary……….and poorly executed. I have worried myself out of that position countless times. In retrospect, simply shorting the holy hell out of miners and then just updating stops from time to time woudl have been a very profitable approach. Instead, I've tried to capture nickels and dimes along the way, sometimes winning, sometimes losing, and – in the end – making dramatically less than I ever would have just staying put.

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