Wednesday, May 06, 2009
Simple trading method with VIX index
VIX is the symbol for "Chicago Board Options Exchange Volatility Index", its a measure of the implied volatility of S&P 500 index options. The VIX is the square root of the par variance swap rate for a 30 day term initiated today. A high value corresponds to a more volatile market.
A simple trading method according to VIX can be as follows:
SELL 1/3 of holding when VIX cross above its 40 days moving average.
SELL at least 2/3 of holding when current value of VIX exceed the last peak.
BUY when VIX cross below its 40 days moving average.
Continue to BUY until VIX bottom.
Also, the market in Sep 07 after the VIX peak was in a strange critical phase where correlation matrix showed unusal coherence.
Tuesday, February 10, 2009
I begin to like this guy ...
“The financial system is working against recovery, and that’s the dangerous dynamic we need to change,”
“Without credit, economies cannot grow, and right now, critical parts of our financial system are damaged.”
“In our financial system, 40 percent of consumer lending has historically been available because people buy loans, put them together and sell them,”
“Because this vital source of lending has frozen up, no plan will be successful unless it helps restart securitization markets for sound loans made to consumers and businesses -- large and small.”
“Without credit, economies cannot grow, and right now, critical parts of our financial system are damaged.”
“In our financial system, 40 percent of consumer lending has historically been available because people buy loans, put them together and sell them,”
“Because this vital source of lending has frozen up, no plan will be successful unless it helps restart securitization markets for sound loans made to consumers and businesses -- large and small.”
Monday, January 05, 2009
Reflection on 2008
When I look back to my investment in 2008, I learn some lessons.
First of all, even I had reduced much of my investment before Oct 2007, I still got an overall 35% lost in portfolio value off the top.
Indeed, most of the lost was a result from my buying on Feb, Jun and Sep.
Lessons:
1. The market correlations and related critical exponents are good tools to indentify a crash. That saved me from the Oct 07 crash. The mathematical models for complexity worth to explore further.
2. Put options cannot protect my investment on market crash. The change in volatility greatly affected the result. I had used this method when my portfolio was small. But, this turned out to be very inefficient to scale up. I think, direct short HSI may be more effecient on hedging.
3. Portfolio theory and diversification is not practical. It assumes existance of some un-correlated markets. And, that's not valid. That's not a good idea that holding a "diversified" portfolio will be safe at different market situation. When there is no safe place, the only correct move is to sell everything.
4. The buy time was choosen badly. The analysis and report from banks and investment advisors cannot be trusted without verifing the details. It's poor that few so called "economists" can think. In the future, research and analysis channels need to be improved.
5. Gold price got less impact on the crisis. This is correct. But, holding minning funds was a bad idea. The correlation between minning fund and gold price broke in the crash. This error accounted for about 1/3 of my lost.
First of all, even I had reduced much of my investment before Oct 2007, I still got an overall 35% lost in portfolio value off the top.
Indeed, most of the lost was a result from my buying on Feb, Jun and Sep.
Lessons:
1. The market correlations and related critical exponents are good tools to indentify a crash. That saved me from the Oct 07 crash. The mathematical models for complexity worth to explore further.
2. Put options cannot protect my investment on market crash. The change in volatility greatly affected the result. I had used this method when my portfolio was small. But, this turned out to be very inefficient to scale up. I think, direct short HSI may be more effecient on hedging.
3. Portfolio theory and diversification is not practical. It assumes existance of some un-correlated markets. And, that's not valid. That's not a good idea that holding a "diversified" portfolio will be safe at different market situation. When there is no safe place, the only correct move is to sell everything.
4. The buy time was choosen badly. The analysis and report from banks and investment advisors cannot be trusted without verifing the details. It's poor that few so called "economists" can think. In the future, research and analysis channels need to be improved.
5. Gold price got less impact on the crisis. This is correct. But, holding minning funds was a bad idea. The correlation between minning fund and gold price broke in the crash. This error accounted for about 1/3 of my lost.
Friday, September 19, 2008
Crisis
At first, people at the Fed and the Treasury tried to contain the crisis. They have focused on staving off catastrophe one bailout at a time. Now, a more comprehensive approach to solve the crisis may come out. The falling of investment banks and insurance giant showed that the financial system is vulnerable under attack. Something may be set up to manage and wind down trouble assets. If so, I guess the crisis may come to an end in the short term.
When I look back, few investment advises published had foresee the 2008 market movement correct. Some are deadly wrong. From the annual report of AIG 2007, obviously they knew the problem of CDS issued by AIGFP. They have also evaluated the impact on possible down grade. The attack come exactly along this way.
This week, I move back some of my investment to China market.
When I look back, few investment advises published had foresee the 2008 market movement correct. Some are deadly wrong. From the annual report of AIG 2007, obviously they knew the problem of CDS issued by AIGFP. They have also evaluated the impact on possible down grade. The attack come exactly along this way.
This week, I move back some of my investment to China market.
Friday, August 01, 2008
My holding as of Aug 1, 2008
I still believe that the dominant theme for investing over the comming years will be in gold (de-valuing of US dollar) and other commodities. If the global economy resume it's long term growth trend, a sustained growth, then that would drive up prices in all commodities. Minning stocks would benifit from growth in the emerging China and India. If the global economy goes into a recesion, commodities will fall steep.
But, now it looks like a healthy bounce-back rally is occurring...
Friday, June 13, 2008
Preparing to buy
The market correction which started last week continue. The global market looks better than the local market here. Vitnam is crashing. China and India are still the weakest. Taiwan is not as hot as expected...
But, what really went wrong was -- the market alert neither come from my IFA nor my investment consultant in bank. For better investment, this is a problem I need to address.
Recently, I bought a second flat. As I need cash to pay 30% of the price, I need to sell some of my investment. I took profit in those "weak" markets which I already got huge profit from previous years appreciation.
My shopping list:
Minning
New Energy
Technology
Real Asset /Commodity
China
But, what really went wrong was -- the market alert neither come from my IFA nor my investment consultant in bank. For better investment, this is a problem I need to address.
Recently, I bought a second flat. As I need cash to pay 30% of the price, I need to sell some of my investment. I took profit in those "weak" markets which I already got huge profit from previous years appreciation.
My shopping list:
Minning
New Energy
Technology
Real Asset /Commodity
China
