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 — Commodity ETFs

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Commodity ETF Update

Hey fellow Slopers,

A number that stood out when compiling the data for this post was the current cost of hedging the first gold ETF, GLD. Back in August, the cost of hedging it against a greater-than-20% drop over approximately the next 7 months was less than 0.95%; as of Monday, it was nearly 2.5%. The table below shows that, as well as the costs, as of Monday's close, of hedging several other commodity ETFs against greater-than-20% declines over the next several months, using optimal puts.

Comparisons

For the individual oil ETFs, I added the PowersShares DB Energy ETF (DBE) as a comparison, and for the individual agricultural commodity ETFs I added PowerShares DB Agriculture (DBA) as a comparison. First, a reminder about what optimal puts are, and why I've used 20% as a decline threshold; then, a screen capture showing the current optimal puts to hedge the comparison agricultural commodity ETF, DBA. 

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Trade Like a Patriot (by phantomcapital)

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Trading is financial war.  Losses are casualties, profits are territory conquered.  An innumerable amount of trading lessons can be drawn from the study of military victories; however one specific war applies best to the individual trader:  The Revolutionary War.

On April 18th, 1775 a disjoined group of local militia fired the first shots at Lexington against the greatest military force the world had ever seen and changed history forever.  However, it is how the Colonials won the war that provides a cardinal lesson for the individual trader.  Very simply we, the individual trader, are the Colonials waging war against the financial superpowers of our time consisting of the Fed, the ECB, and corrupt investment banks.  It is an honorable fight, but a battle that must be waged correctly.

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Internet Hedging Update

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Internet hedging update

A couple of things stood out when updating the hedging costs for this basket of Internet stocks. Again, it was still too expensive to hedge LinkedIn (LNKD) and Pandora Media, Inc. (P) against greater-than-25% drops over the next several months. Among the stocks for which there were optimal put option contracts available, Netflix (NFLX) was the most expensive to hedge — no surprise, given the awful numbers it released this week; the surprise to me was that there any optimal contracts for it. The table below shows that, as well as the costs, as of Wednesday's close, of hedging several other leading Internet stocks against greater-than-25% declines over the next several months, using optimal puts.

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Waiting Out the Insanity

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Well, if the market wanted to make me lose interest in trading it, then: mission accomplished. Yesterday's Rally-From-Hell and the subsequent Sorry-Just-Kidding is exactly the kind of thing that makes participating in a market like this little different than strolling through an unmarked mine field.

This is not to say I've gone flat. I still have multiple short positions, but I doubt I'm going to get anywhere past 50% committed (that is, at least half the portfolio in cash) until this stupid, idiotic, frustrating, agonizing, moronic, infuriating European Salvation Plan From God is announced. I don't feel like getting my hand blown off with the surprise announcement of a $25 trillion Euro plan served with a case of red wine and a bag full of baguettes for every citizen in the Eurozone.

I hope it's announced, I hope it falls on its face, and I hope the leaders of Europe are hung in effigy shortly thereafter. Until that happens, I'm keeping my body parts intact.

1019-sarkozy

Hedging Update — ETFs

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Hedging costs of Leading ETFs — in late June and now

Hey fellow Slopers,

In looking back at the hedging costs of the most widely-traded ETFs toward the end of June versus the same basket of ETFs on Tuesday, I figured they'd all be more expensive to hedge now. That turned out to be true of 9 out of 10 of them: the only one of those ETFs that is cheaper to hedge now is the iShares MSCI Japan Index (EWJ).

The two tables below show the costs of hedging EWJ and the other 9 ETFs against greater-than-20% declines over the next several months, using optimal puts, as of June 23rd (when the VIX S&P 500 volatility index was at 19.29), and as of October 18th (with the VIX at 31.56). First, a reminder about what optimal puts are, and why I've used 20% as a decline threshold; then, a screen capture showing the current optimal puts to hedge the one ETF with lower hedging costs now than in late June (EWJ).

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