Trading Volatility, Ballasted by Gold

[romans holiday]

Yes, definitely unleveraged. It will be interesting to see how long it takes for VXX to come back down....now 28. Also, I wonder if the price might be supported a little above 20 as I imagine a few bears will be lining up to buy......

VXX down to 26. Am hoping for a good bounce in the markets here, which could see VXX down to near 20. At 20, I'd like to put a reasonably sized trade on, and then just sit on it. Though more inclined towards long term investing [disinvesting?... sitting in gold and US dollars] than trading, I am interested in position trading the big volatility when/ if we get it.

 

Looking at the previous correlating spikes in VIX and VXX, VIX went to 47 and VXX went to 36 [this was a great confirmation on how VXX would perform on a sell-off]. I'll look to hold onto this position should we see the big one, which should take VIX near 80, and with the above correlation in mind, VXX to 60 odd. So my target will be to sell VXX at 60.

 

Once sold for US dollars, this should set up for a good opportunity to put straight into another trade. Silver, or a stock like silver wheaton, should be very low at this point in time, and would no doubt go on to recover. Alternatively, may just pile it into gold bullion, and a major gold stock.

 

This will be my last year working in Seoul. The global economy, let alone the national currency, is looking very wobbly. NZ is not much better. I am therefore seriously considering the prospects of prospecting for alluvial gold in the Southern Alps for a year or so.

 

 

 

[nbarter]

VXX down to 26. Am hoping for a good bounce in the markets here, which could see VXX down to near 20. At 20, I'd like to put a reasonably sized trade on, and then just sit on it.

 

I am therefore seriously considering the prospects of prospecting for alluvial gold in the Southern Alps for a year or so.

 

 

I wouldnt bet on it getting to 20, maybe start averaging in?

 

Did a little panning at the beginning of this year in the south island - my first go at panning. Was fun and found a few worthless specs, but would definietly do it again if i was over there. Did it about 3 or 4 times from memory.

[romans holiday]

I wouldnt bet on it getting to 20, maybe start averaging in?

Good point. Being cut of very conservative cloth, buying VXX is about as speculative as it gets for me.... besides trading silver/ dollar... but then I don't really see that as too speculative as I consider these both prime currencies for now. So if I missed out on buying VXX.... again... it wouldn't concern me too much. I expect to make most my gains just sitting on a core position of gold. I may consider buying at 22.

 

The market has continued to surprise, so perhaps we'll see another prolonged bounce? Like yourself, I'm very bearish... the timing though looks very difficult to predict.

 

Did a little panning at the beginning of this year in the south island - my first go at panning. Was fun and found a few worthless specs, but would definietly do it again if i was over there. Did it about 3 or 4 times from memory.

My plan is to sluice, crevass, and dredge a little. The old timers had to find an ounce a week for it to be economical. The way the economy is going at the moment you wouldn't need to find nearly this much. For me though, it will be more about a life-style, self-sufficiency and waiting for the property market to crash.

 

As they say, a bad day panning is better than a good day at work.

[ziknik]

Thought you might be interested in this:

 

What on earth is going on with the Vix?

 

Dedicated Vix watchers at the Daily Options Report and Vix and More blogs are getting a little agitated.

…

October is roughly 3 month’s (and change) away, and the VIX futures are roughly $8 Nov even higher than that.

Pretty clearly Mr. Market expects a volatility pause this summer, followed by a return to Excitement this Fall. That’s normally a safe assumption as summer is the lowest vol. time of year.

What stands out now though are two things. One is the magnitude of the expected volatility pop. 3-4 points I could easily see. But 8 points? That’s some serious Fear.

…

http://ftalphaville.ft.com/blog/2010/07/14...ing-in-october/

 

[romans holiday]

Thought you might be interested in this:

 

 

http://ftalphaville.ft.com/blog/2010/07/14...ing-in-october/

Cheers. I remain just a VIX watcher for now. I'm by temperament an investor not trader, so am not really keen to try trading VXX. If the markets settle, and VXX goes into the low 20s I'd probably buy as a long term position trade. When the earthquake hits, and it spikes, I'd sell. That's about as speculative as I'm going to get in this unpredictable choppy market.

[correlator10]

For UK traders- have you traded VXIS.L? It has a big spread 2% and at the end of the day it had a spread of 4.4%.

[leviathan]

RH

 

Reading your journal I see you are getting interested in VIX again as am I - trading at 22.73 today and VXX at 22.81. The gap between VIX and VXX has now all but closed. VIX long run average is at 19 and I think a purchase around that represents a good entry point. I remain concerned however by the contango of VXX - one year ago VXX was at 63.93 and VIX only at 24.89 - this implies some major leakage via the contango. Neverthless I think a purchase in late summer is v attractive - market seems to have been correcting every three to four months (June 09, October 09, Feb 10, May 10) with a consequent spike in VIX. I'm looking at taking a position when we reach 19 on VIX as both outright investment and as a partial hedge of some long positions. Think the next correction or outright fall on this basis would be late August or September.

 

Interested in any views you or others have here - the VIX spike in May was a considerable profit opportunity - dont want to miss the next one by waiting for VIX to fall to 16 or below as last time

 

Lev

 

 

[romans holiday]

RH

 

Reading your journal I see you are getting interested in VIX again as am I - trading at 22.73 today and VXX at 22.81. The gap between VIX and VXX has now all but closed. VIX long run average is at 19 and I think a purchase around that represents a good entry point. I remain concerned however by the contango of VXX - one year ago VXX was at 63.93 and VIX only at 24.89 - this implies some major leakage via the contango. Neverthless I think a purchase in late summer is v attractive - market seems to have been correcting every three to four months (June 09, October 09, Feb 10, May 10) with a consequent spike in VIX. I'm looking at taking a position when we reach 19 on VIX as both outright investment and as a partial hedge of some long positions. Think the next correction or outright fall on this basis would be late August or September.

 

Interested in any views you or others have here - the VIX spike in May was a considerable profit opportunity - dont want to miss the next one by waiting for VIX to fall to 16 or below as last time

 

Lev

Yes, if VXX hits 20 this will be my big speculative punt... otherwise staying bunkered down in gold and US dollars. 5% in VXX, but this will be a relatively long term trade, and will look to wait for some market-shattering volatility....the big spike of VIX to 80, and VXX to 60 odd. If that target was reached would sell VXX and put the whole lot on a silver or gold stock that would have been smashed.... when this recovers will sell for bullion.... and possibly a top tier gold stock.

[leviathan]

Good plan - I think I favour averaging in from 19 to as low as 15 if we get the chance this time round.

 

 

[littledavesab]

trading volatility

 

RH - I think Wall St. has been reading your thread

 

An interesting mention of this on the http://loznbelly.blogspot.com/ - episode 93 - they make the point that this is getting to be Wall St's favourite new product - and they are flogging these "Black Swan Derivatives" -without offloading the risk and therefore if it blows up these Wall St firms are exposed. Mentioned that only Buffett & Berkshire Hathaway took the risk - seem to remember Buffett underwriting 25 yr returns.

 

--------------------------------

http://www.bloomberg.com/news/2010-07-20/p...lling-fear.html

 

PIMCO

Demand for protection against so-called tail risks, extreme market moves that Wall Street’s financial models fail to detect, is increasing as investors react to events such as the May 6 stock market rout that briefly sent the Dow Jones Industrial Average down almost 1,000 points, or Greece’s sovereign debt crisis, which on June 7 sent the euro to a four-year low against the U.S. dollar

 

+

ELVIS

Deutsche Bank is marketing a tail-risk hedging index that gains in value when investor expectation of stock-market volatility increases, according to material the bank sent to clients. The so-called Equity Long Volatility Investment Strategy, or ELVIS, uses derivatives called variance swaps linked to the S&P 500 that bet on the index’s volatility. Derivatives are contracts whose value is tied to assets including stocks, bonds, commodities and currencies, or events such as changes in interest rates or the weather.

 

[romans holiday]

RH - I think Wall St. has been reading your thread

 

An interesting mention of this on the http://loznbelly.blogspot.com/ - episode 93 - they make the point that this is getting to be Wall St's favourite new product - and they are flogging these "Black Swan Derivatives" -without offloading the risk and therefore if it blows up these Wall St firms are exposed. Mentioned that only Buffett & Berkshire Hathaway took the risk - seem to remember Buffett underwriting 25 yr returns.

 

--------------------------------

http://www.bloomberg.com/news/2010-07-20/p...lling-fear.html

 

PIMCO

Demand for protection against so-called tail risks, extreme market moves that Wall Street’s financial models fail to detect, is increasing as investors react to events such as the May 6 stock market rout that briefly sent the Dow Jones Industrial Average down almost 1,000 points, or Greece’s sovereign debt crisis, which on June 7 sent the euro to a four-year low against the U.S. dollar

 

+

ELVIS

Deutsche Bank is marketing a tail-risk hedging index that gains in value when investor expectation of stock-market volatility increases, according to material the bank sent to clients. The so-called Equity Long Volatility Investment Strategy, or ELVIS, uses derivatives called variance swaps linked to the S&P 500 that bet on the index’s volatility. Derivatives are contracts whose value is tied to assets including stocks, bonds, commodities and currencies, or events such as changes in interest rates or the weather.

Cheers.

 

VXX hovering around 22. Broker's account primed. Will look at pulling the trigger at 20.

[romans holiday]

 

 

A good chance of silver breaking to the down-side of the range it has been in lately. If it gets to around 16.50 odd, I'll look at piling in with some dollar reserves. I feel confident trading silver against US dollars as consider them both strong currencies. If I buy, selling target will be 19 odd.

 

 

 

 

 

Kiwi dollar usually moves together with silver. The long term trend for the kiwi is down. If it heads back down to the trend line here, silver could go into the 16 handle. Unless gold moves down to around 1150, I doubt silver will go much below 17.50.

[drbubb]

I may move the Blog-Journals to another section.

Please comment / here: http://www.greenenergyinvestors.com/index....showtopic=10777

 

If you don't want the move, and a majority with Blogs also do not want it,

I will very happily leave things as is.

 

The idea was to make it easier to get to the Blog-Journals, and to increase visibility

[Member100]

I am waiting from a new signal from VIX to go short again

[romans holiday]

I am waiting from a new signal from VIX to go short again

It got to 21. Now back to 23 odd. Probably being hopeful, but still waiitng for 20. I wouldn't be surprised to see another short rally here.

 

Shorting the 30 year treasury yield over the next few months could be a good trade.... a late starter trying to catch up to the 10 year. Just checked out the 10 year [$TNX].... I was talking about that a few months ago as agood trade, but that's all I do 'cos I'm not much of a trader.

 

Basically, I'm hunkered down in gold and dollars. I don't really see the point of putting on risky trades for 10% or so, when you could get those returns in real terms just by sitting in the right currencies. The one big speculative punt I've settled on is VXX if I get a good entry point. Buying VXX with 5% gives the chance of near doubling your capital if we see the double dip.

[drbubb]

Are you worried about the light volume on the GLD rise?

 

Like Arch Crawford, I think Gold may push up into Friday's option expiry.

But if that comes on light volume and small price rises, the price gain may soon be given back

[romans holiday]

I find gold as priced in GBP quite interesting. As a major currency, I don't think the pound will blow up, but will instead be very unstable as capital moves in and out. In contrast, gold should remain relatively stable against reserve currencies. This would lead to quite a volatile GBP price as we've already seen. The corrections are over 10%.

 

Having already a core overweight position in gold, I may look to put a smaller percentage of that to work trading pounds for gold.. with the aim of course to take profits in accumulating ounces. This could involve selling a bit when it spikes to around 1000 and buying again at around 850 or so.

 

 

 

 

Pound looks like it wants to head south again. No doubt followed once again by a decent bounce.

 

 

[romans holiday]

Are you worried about the light volume on the GLD rise?

 

Like Arch Crawford, I think Gold may push up into Friday's option expiry.

But if that comes on light volume and small price rises, the price gain may soon be given back

Not worried about the light volume. Could some price gains be given back? Sure, but that doesn't affect a core holding. Different of course if you are trading a little gold. I'm thinking pounds might be a good currency for this.

 

If you are worried the price might push up, this probably reflects not having a solid core holding in gold. Then it probably would pay to buy even at a "premium"... if this makes sense

 

I wonder what O' Brien will do here. If he sold all his gold, then surely he'd be buying back in here. The risk otherwise is he'd have to buy higher at a loss.

[drbubb]

I wonder what O' Brien will do here. If he sold all his gold, then surely he'd be buying back in here. The risk otherwise is he'd have to buy higher at a loss.

He said yesterday, that he still has some gold shares - as I do too.

 

There seems to be room for GLD to move to as high as 130, and Gold to $1350.

No guarantee, but it is possible, but if the volume stays so light, I would still not buy it.

 

Have you seen Gold Wheaton / GLW.t ? That's my largest holding

 

[romans holiday]

He said yesterday, that he still has some gold shares - as I do too.

 

There seems to be room for GLD to move to as high as 130, and Gold to $1350.

No guarantee, but it is possible, but if the volume stays so light, I would still not buy it.

 

Have you seen Gold Wheaton / GLW.t ? That's my largest holding

Very volatile. Good price rise there, but you have to wonder how resistent the stock will be in a market crash/ slump. imo gold bullion and gold stocks are in quite a different class in this environment.... as there is a lot more risk involved with stocks than with bullion.

 

I'm thinking of buying Silver Wheaton [and perhaps Gold Wheaton... I'm more familiar with SLW] heavily on a market crash. If I manage to buy VXX shortly at a good price this could turn out to be quite a good trade as would look to exit VXX on a spike and go straight into something like SLW of GLW on their lows.

 

edit.. just looked at the long term of GLW... truly awful to sit on... but looks great to trade.

 

[romans holiday]

Possible trades on the "periphery".

 

pounds----> gold [major currency that slumps then recovers against gold on capital flows, pound to gold on the dip, gold to pound on the spike]

silver------> dollars [both good currencies though contra, dollar to silver on the dip, silver to dollar on the spike]

 

[these two trades also act as a hedge by balancing out gold and dollar positions]

 

 

VXX before a spike at a bargain price, or if this is missed gold/ silver stock [GLW and SLW] on a stock market rout.

[drbubb]

VXX before a spike at a bargain price, or if this is missed gold/ silver stock [GLW and SLW] on a stock market rout.

I'm all over GLW.t. But I sold a few shares on Friday, thanks to the recent run-up, and my desire to have more cash

going into what might be a big down week.

[jerpy]

Possible trades on the "periphery".

 

pounds----> gold [major currency that slumps then recovers against gold on capital flows, pound to gold on the dip, gold to pound on the spike]

silver------> dollars [both good currencies though contra, dollar to silver on the dip, silver to dollar on the spike]

 

[these two trades also act as a hedge by balancing out gold and dollar positions]

 

 

VXX before a spike at a bargain price, or if this is missed gold/ silver stock [GLW and SLW] on a stock market rout.

 

Take it you are still waiting for that silver pullback? Just curious as to your views.

[romans holiday]

Take it you are still waiting for that silver pullback? Just curious as to your views.

Yes, still waiting with some dollar reserves. I see a silver trade as a way of increasing those reserves.

 

Though silver has under-performed gold... as I thought it would... it has stayed stronger than I thought it would.

 

Silver hasn't proved to be a leveraged play on gold as many think [same as gold stocks]. Rather, it is gold's strength which is holding it up in the face of dollar strength.

 

I think to see silver go on a dip [with a good buying opportunity], we'll have to see dollar strength and some gold weakness at the same time. It will be interesting whether this is seen in the next week or so.

 

 

 

 

Gold looks due a small correction here. Silver looking weak. If gold gets down to 1180 odd, this could see silver at 16, where I'd think about piling in with some dollar reserves.

[jerpy]

Though silver has under-performed gold... as I thought it would... it has stayed stronger than I thought it would.

 

Thanks for posting your thoughts, thats the bit that has puzzled me. Just believed there would have been more opportunity to load up by now, gets me wondering all the time about these supposed short positions.

 

Myself i'm relatively under exposed Silver to Gold, but look to correct that as soon as i feel prudent. Other than Goldfingers G/S ratio chart i'm unsure what indicators to take as a lead. So it's interesting to see your dollar view.

 

Looking to reverse truck, but gears keep crunching