Bounces Happen

Equities as well as cryptos are seeing sustained buying interest, which given the respective corrections over the past two weeks isn’t surprising. Bounces happen, especially after significant sell offs, and the main question in the minds of investors and traders is whether or not it can be sustained. I saw ZeroEdge claiming yesterday that Goldman had announced confirmation of a regime change in equities, and although I would generally agree I’m always a bit suspicious regarding anything that comes out of Goldman’s PR machine.

Thus it actually increased my confidence that at least a temporary reversal in equities was in play. And this would be a favorable time for it as week #7 is historically positive. But if you look at the remainder of the month and early March then at least seasonally speaking there absolutely is the potential for a larger take down.

If you swung by the comment section or if you caught my tweet on Friday then you may as well hold a few SPY calls. The futures weren’t an option for me – way too risky. And although I absolutely despise buying options on a Friday afternoon the formation on the Zero didn’t leave me much choice:

Those bullish divergences, both on the hourly and the 5-min panels, were absolutely text-book and way too juicy to pass up. By the way, if you’re not a sub yet and don’t want to miss out on entries like these moving forward then you hopefully know what to do. And here’s a link to the tutorial/intro page if you’re a naturally born skeptic and need more convincing.

Anyway, stop management is a bit more involved when it comes to calls or spreads. I usually use alerts on my futures charts (not the Spiders) and you have to increasingly account for theta burn of course. Meaning if I get stopped out at ‘break/even’ I’ll of course will have lost premium. As I used a debit spread (of course) at least I won’t be worrying about vega which I’m sure will get squeezed hard should we continue to ascend higher in equities.

By the way if you don’t understand why I would by a debit spread instead of naked calls after a spike in IV then you definitely need to swing by here more often 😉

I mentioned cryptos in my intro and I also should show you a chart of BTC which is fairly representative of what’s going on in that space right now. Basically we’ve had an extended series of LHs and LLs which to up to this moment remains unbroken. And that is an important fact that bodes repeating. Until BTC pushes > 9500 we technically remain in a sell off formation. Once again bounces happen but it’s the follow up after the first leg higher that really matters. Should BTC fail to overcome this threshold and fall < its spike low at exactly 6000 (how cool!) then I’m afraid that we’ll be seeing quite a bit more pain in cryptos as well.

Quick update on our Dollar campaign which miraculously has survived the weekend. Seems like our trail was well placed and the short term SMA is now starting to push above it. Nothing to do here but wait and see – emotionally I’m still waiting for the big shoe to drop 😉

More goodies below the fold, so please grab your decoder ring and meet me below the fold:

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Crypto Tease

After literally weeks of hard work I finally am able to pull large amounts of historical 1-min data from top-tier crypto exchanges like Gdax, Bitfinex, Gemini, Bitstamp and others. See my pertinent blog post from back in January. Anyway, I’m collaborating with a few quants on some internal projects the details of which I am unfortunately unable to disclose. But if you are attracted by the notion of trading crypto currencies this may spike your interest.

This is a backtest of a very simple strategy we put together to test a new crypto trading platform we are busy refining. That’s BTC tested back to 1/1/2015 running against a 1-min series. So a s…load of data and returns seem to be mindbogglingly consistent with only shallow draw downs. What freaks me out about this to some extent is that we literally threw this strategy together in one day by leveraging a few alpha factor concepts we extracted during our IV related research.

If nothing else BTC over the past years has been the proverbial paragon of risky high volatility and I would have not expected that throwing together a few simple alpha factors would produce a P&L curve like this over such an extended time frame. And by the way it does very well on other crypto pairs as well, which isn’t hugely surprising given the high covariance across the entire space. Clearly this is an area I will have to devote quite a bit more time and resources into.

Unfortunately I won’t be able to spill the beans on what makes this system tick. But if there is sufficient interest I may make a strategy like this available as a signal service at some point (email/jabber alerts only). So if you’re interested shoot me an email to admin@ and I put you on the list.