Friday, February 1, 2013

100% Short

JTS remains short. The CCI is now also short.  JT Comp moves to 100% short.  I will follow along with a 50% long TZA position.   Speaking of TZA, now that January is gone we will forget about shorting SPXL/buying SPXU.  Those were only temporary ETF's to avoid shorting small caps during January (a time typically favorable to small caps).  I will get more aggressive with shorts next week if we continue to rally. 

In other news, January stats have been calculated.  I'll be tracking the 100% JT Comp strategy alongside the traditional JT Comp stats.


Thanks and have a great weekend!
Best wishes,
J

27 comments:

  1. Thanks J, and a good weekend to you.

    Could you tell me why you would buy TZA rather than short TNA?

    I ask because TNA costs about 8x per share than TZA, so you would need to buy fewer shares, which, if you're using IB, results in lower commissions.

    Of course, there are also shorting costs, so I'm not sure which way is ultimately cheaper.

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    1. Algyros, don't forget, too, if you short TNA (instead of longing TZA), you are "swiming downstream" with regard to the bleed... and TZA is a serious bleeder. I'm w/Algyros -- I'll always short TNA/TZA before longing either... esp long TZA... stinky ETF.

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    2. Actually if the trade goes in your favor, you are better off being long TZA. A simple example: If you go long $100 of TZA and for 3 days it goes up 5% a day, you end up with $115.76 or a 15.76% gain thanks to compounding. Had you shorted $100 of TNA, it would be worth $85.74 so you would end up with a 14.26% gain. The danger is in holding through large draws which is why they say not to hold these ETFs too long.

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    4. Thanks, but do your numbers account for commission and decay?

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    5. The point is that there is no "decay" if the trade goes in your favor. As a real world example you can check for yourself, consider if you went short TZA on 11/15/12 at $18.62 and covered last Friday at $10.82, you would have made 42%. If you went long TNA the same day at $47.60 and sold Friday at $78.48, you would have made 65%.

      This difference is because TNA basically went straight up in that period. You could continually add to your short as your profit grew, but that would be more work and commissions.

      The decay comes in if you held TNA and it went down 20%, now you need it to go up 25% to get back to even.

      As far as commissions, it depends on your broker but another thing to consider is that shorting ties up more of your capital since you need to satisfy margin requirements.

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    6. Granted... the decay is small over a short time period but this "if it goes in your favor" is only relevant on a few short days. The more likely that you may be to, say, get stuck, and sit and hold, the more time decay works in your favor. Algyros, just run the numbers over a few prior market cycles, and you'll see what I mean. TZA sports some pretty good bleed.

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    7. Yup, mathematics tells us TZA can certainly benefit from compounding so long as the market takes a sustained nosedive. Since nosedives are typically swift, this limits the amount of compounding you'd experience. Much more common is the decay due to methodical melt-ups which ultimately crush leveraged shorts. If your timing is perfect and you have the guts to hold onto the trade without taking profits, you could theoretically win big.

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    8. My post was aimed at this system which does not hold very long. My point is that there is little benefit shorting the opposite ETF in this instance and if the system is successful you may actually make more going long.

      Many people mistakenly think these ETFs act like options with an automatic time decay, but that is not true. The decay comes from continual rising and falling like my first example. If you are going to hold for a very long time, shorting is the way to go, but that is very dangerous since there is no limit to the down side.

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    9. Thanks for your input, 1f38058a-6da9-11e2-9182-000f20980440.

      Can I call you that, or would you prefer 1f38058a for short?!? :-D

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    10. You can call me Roy. Sorry, I don't know where the number is coming from. I am posting from an AIM account.

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  2. Because my broker always seems to force me to cover my short position when I don't want to... It's downright annoying. I'll live with the bleed.

    Check this out: http://bbs.cobrasmarketview.com/download/file.php?id=37645&mode=view

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  3. And this...

    http://bbs.cobrasmarketview.com/download/file.php?id=37646&mode=view

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  4. J is right Brokers always force you to cover your short position when you don,t want to It,s always good idea to play on long side .Alygros SPXU is good chose if you want to save money on commission

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    1. Alex, that's an overstatement. I sit and hold shorts for quite long times... mkts go down for me and I don't get "forced to cover"... rarely does that happen, in fact. Over the past 2 years, I've seen it happen about 3 times to my account. You must use a pretty shitty broker that they can't hold shorts for you. Move to IB, buddy, or start trading YM/NQ/ES instead -- then there's no buy-in risk.

      By the way, and when it does happen, I just pile on more futs shorts to make up for it. And at those tiomes i go heavy because I know that that's a pretty juicy time to be short.

      If you take the time to go read the prior posts here, you will see that we discussed this last year on this board.

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    2. JKH, my broker (ST) definitely falls into that category. But too busy and/or unmotivated to switch at this point.

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    3. JKH is right about IB: hardly ever forces me to cover shorts. And the commission costs are very low

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    4. My broker is interactive broker also

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  5. Well you know it's like the old definition of a bank: a place where they hand you an umbrella when the sun is out and then ask for it back when it starts raining.

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    1. Sounds a little like insurance companies. You're in good hands... until you file a claim.

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  6. J, is it too early to tell if your system would cover at these futures levels? I might run with the 1.5% if we open here.

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    1. It's pretty early, but let me take a look.

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    2. Yup, everything is going long right now. However, I see nothing today that says this won't be a trend day down. I can offer no meaningful advice, but I would hold the trade at least 1 hour, then place a stop a few pennys above the first hour high. That gives the trade an opportunity to run in case of a trend day down, yet protects profits should we make a run at filling the gap this afternoon.

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  7. Fwiw-- I would read about hypothecation and IB-- there were some statements made that IB has used customer funds in the past-- like MF Global. Just an item-- I have no axe to grind either way.

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  8. I have heard hypothecation clauses are becoming standard in broker agreements. Scary stuff.

    Roy

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