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[[The Trade Idea Thesis]]
[[Indicators]]
[[Axioms]]
[[Financial_Dictonary]]
[[The Business Cycle]]
[[Option Strategies]]
[[Technical_analysis]]
[[Greeks]]
# Defining Macro Environement
- Is Economy expanding / contracting
- Is GDP above or below zero
- What is GDP doing after stripping out inflation ? Above/Below zero ?
- What is the prevailling lvls of interest rates (nominal rate - inflation)
- what are credit spread doing ?
- what are private sector expectation for growth
- What is current monetary policy settings - Expension/Contraction
- What is current fical policy settings Expension/Contraction
- What are foward looking Equity market Valuation doing ?
# 11 Major Sector
|----------------------------|-----------------|
| Real Estate | Cyclical |
| Health Care | Value/Defensive |
| Financials | Cyclical |
| Utilities | Value/Defensive |
| Consumer Defensive/Staples | Value/Defensive |
| Consumer Discretionary | Cyclical |
| Communication Services | Cyclical |
| Technology | Growth |
| Materials | Cyclical |
| Energy | Value/Cyclical |
Notional exposure of calls/puts = # of options * 100 * strike price
Sharpe Ratio = annualised returns / annualised std dev of portfolio
declining yield make stock more attractive from a valuation perspective, debt easier to roll over ...
# Relative values trades exemple
Long ratio at 2
10% stp loss on ratio = 0.2
so stp loss at 1.8 on ratio
soft target = 0.2 * 3 = .6 = 2.6
when soft target hit buy short stop A short more stock B
roll up stp loss
ATR for spreads: take data for 10month of stock in spread
work out montly ATR
set stop loss as avg of the 2
For spread both stock can go up or down does not matter
XLU - bond proxy business that do not do well when interest rate are expected to stay flat or go up
Utilities trade at 25-30% beta to the 2yr
if the 2 year goes up in terms of yield and falls in value then the Utilities sector as a whole loses value
and vice versa
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