Value of Perfect Information

Name: Hedge Accordingly

Web Site: http://www.hedgeaccording.ly/

Twitter: SellPuts

Bio: My story begins years ago when I traded my first security as a teen, a puny penny stock. From that point on I was hooked. I moved from active trading on my own to joining a propriety trading firm specializing in high frequency scalping techniques. While trading for the New York firm I became increasingly interested in options. Curiosity got the best of me; I was asked to trade on an electronic options trading floor in Chicago IL. I specialized in equity option scalping with a delta neutral hedging strategy. Currently I am trading my own account, both options and equities. While trading through the market's current collapse and subsequent violent upswing, I have learned a great deal about the operation of the financial markets. The basis of my trading strategy utilizes technical analysis to derive entry and exit points by taking into account current macro and micro market sentiment. I am here to share what I have learned with others, my musings including market commentary and technical analysis of selected securities.

Posts by Hedge Accordingly:

Traders Expecting A Sharp Move Off the 1150 Level Are Buying Straddles

Written by Hedge Accordingly
March 17th, 2010 at 7:36 pm

The past few months the markets have been in a very tight trading range testing the S&P 1150 resistance level on lighter than average volume. Because of the significance of the 1150 level dating back to October of 2008, options traders are pricing in a sharp move to the upside or downside from 1150 on the S&P’s (NYSE: SPY).

The method traders are using to capture the move safely is by purchasing straddles, you are both leaning long and short.

Traders are putting on the March 115 SPY straddle for around 1.50. Index option traders are also putting on the 1150 straddle. Given the current low volatility environment the pricing for these spreads is quite attractive.






Commentary | No Comments

S&P500 something has gotta give. Long trap?

Written by Hedge Accordingly
February 24th, 2010 at 2:34 pm

With the Greece uncertanty the S&P500 will be under increased pressue to the downside. In my opinion traders in the US really do not have a reason to buy stocks based on a bailout of Greece. From what i am hearing the bailout might not happen because there is not a EMU bailout clause.

The SPY(daily) chart on the left shows a clear uptrend pierced at the 111.70 level. On a 10 minute chart, there is a clear pennant forming, it is unclear whether it will break to the upside or downside. What we do know is the long trap could be developing, the long wicks of the last few candles indicates a tug a war between the bulls and bears.

Volume is confirming the war, you can see the volume steadily down trending from may 2009 until it spikes mid Jan early Feb 2010. The PPT is hard at work, though i feel we are back in the same position we were last year, nothing can really stop the “correction”. Longs might get a bit of a bounce to close the small gap highlighted in Blue, but a sharp reaction to the downside from that point is probable.



Charts, Commentary | No Comments

A Goldman Sachs chart = a great use of screen real estate

Written by Hedge Accordingly
December 17th, 2009 at 2:22 pm



Hello readers!

Evan here from Hedge Accordingly.  A brief blurb about myself. I’ve had quite the journey while trading through the market’s current collapse and subsequent violent upswing, I have learned a great deal about the operation of the financial markets. The basis of my trading strategy utilizes technical analysis to derive entry and exit points by taking into account current macro and micro market sentiment. I am here to share what I have learned with others, my musings including market commentary and technical analysis of selected securities.

IF the title has you confused, I am referring to your trading station’s monitor(s) screen space. *Remember the more monitors you have the more $ you make* J.k -trader joke. Truthfully though, most day traders have many windows open (order entry/level II charts, executions, browser etc) taking up every available sq. inch with only the most important windows getting a parcel. I only have the most pertinent data windows showing so I do not have to maximise and or dig for buried windows. (I utilize four monitors on my machine in addition to two screens shared with the trader next to me. *shared screens display index spot futures charts along with all our screeners) Trust me, there is nothing worse than digging for an order entry window when your in a pinch. SO why a Golden Slacks chart?

For the last two years or so I’ve been using Goldman’s trend as a leading indicator, in addition to all other real time leading indicators. I have found if Goldman’s relative weakness and or strength is contrary to the overall market trend the market will ultimately follow the golden boy’s. Why is this? My thesis: the smartest money is involved with this stock and the smart money always shows up to the party first and ALWAYS leaves before the party is over. i.e. first ones in and first ones out, buy the dip and sell INTO the rip.

 Supporting facts:

1.The chart above shows a clear reversal in GS’s long term trend with continued selling contrary to the S&P’s.

2.Goldman without a doubt is the strongest out of all the large cap financials

3.The financials have been leading this shit storm, the S&P’s will react to any major financial move

These might not be the most scientific supporting facts, but the fact of the matter is sometimes simpler is better in this market. Smart money/dumb money is a very simple concept in theory,but when applied to trading people miss the ball. Remember smart money leads. Lets take that phrase, apply it to my 1 min GS chart parcel to make some profits. The common most scenario I have seen plays out as follows:

The S&P’ futures are sitting on highs with the $PREM failing to make highs preceding the spike higher signaling a possible reversal. I glance up at my GS parcel, low and behold this thing is quietly selling through key support points as the cash market trades with no reaction. This is a good enough signal for me to start thinking about taking longs off and or get short a heavily weighted S&P component, possibly financial, so i can catch the move down before the sell program commences. I dip a feeler into a short by way of puts looking for a NYSE TICK reading of -1000ish indicating heavy business on the bid, this tells me the sell program is running. I add to the short and let the trade play out, if the trade works i will book the profits as i normally would with any trade, of course tight tops because program trading can really move the markets.

Of course this is not the only way you can use GS as a leading indicator, fool around with it. I guarantee you will find very interest correlations I might not have even discovered yet. The key correlation is, if Goldman is moving up or down without the market following chances are the market will end up moving in that direction.



Charts, Commentary, Markets | No Comments

Watching the paint dry as the futures push through highs

Written by Hedge Accordingly
December 16th, 2009 at 12:13 pm

The common theme the past few weeks has been how low can the volume go and how high the market can go. Everyday i come in an trade i ask myself why i even came in because i expect decent trading only to be given worthless trading. Most of my trades have been small time scalps because nothing is moving more than a few points in either direction before reversing on a good trade. The bad trades you get in an you get a nickel range for 4 hours before a small breakout then collapse. Their is a clear pattern here, the pattern is paint the futures up pre market on some bearish news with a positive spin, this intern causes opening print volatility in the cash market, which in turn will cause heavily weighted components of the S&P’s to gap up.

The post gap trade is usually followed by 15 minutes of decent trading them flat, trade in these few minutes and you did well. If you decide to stick around and trade the rest of the day, be prepared to sit around and fight for every single nickel. The markets should not be like this, the volume is lower than 2006 and 2007 at this time, clearly this tells me real non computer participants are few and far between. Retail is still blown out and will continue this way until something gives in the markets, who knows what will give but if 2010′s trading is like the last few months i don’t think the day trading industry is going to recover. most shops i know are not making money because of the low vol and low volume opportunities. I will argue with anyone, a higher volume higher vol market always makes for better trading. You know what i take that back, high VOL doesn’t really mean better trading, a trending market without all the algo’s pushing stocks through psychological and mechanical stop points can be a profitable one. From the tone of this blog you can probably make inferences about how i am doing.. i will tell you i haven’t made money in 3 weeks. Almost every single trade ends up a loser, im trading less and less everyday but less and less is sometimes to much. I am not the only one thinking like this, looks like all the professional traders think this way because non are supporting bids anymore. RIP US equities market.



Commentary, Exclusive | Comment (1)

Show me the Gold

Written by Hedge Accordingly
December 7th, 2009 at 1:49 pm

So what is the trade? Long.. short? from the looks of the price action on friday it looked like lower. BUT the action as bernake began to speak today is saying otherwise. I have noticed an interesting correlation between ABX and GLD. ABX appears to be the leading indicator of where GOLD spot is gonna go, GLD really lags far behind. As the beard started talking today gold caught a massive bid, this was foreshadowed by ABX not falling at all, staying bid. SO what happened? Well for one the dollar collapsed, the GOLD trade is now crowded… Who knows if they are squeezing the shorts for a quick trade or indeed the trend has changed. I honestly haven’t a clue, the markets are correlated one day the next they are not. The best way i believe to protect capital and keep risk under control is do not go home overly long or short any individual sector… IE do not go out short golds without some sort of longer term hedge on. The easy trading i think is slowly coming to an end, everyone who thinks they are a stock picking genius is going to be shown who indeed is boss. The market cannot keep giving away free money to anyone who shows up to play.



Charts, Commentary, Exclusive | No Comments

Victory for the bulls?

Written by Hedge Accordingly
November 9th, 2009 at 11:35 pm



spy nov 9 2009

I think the most fitting phrase to kick this rant off with is; “Victory for the bulls!” as Bob Pisani would say. I bet Bob & Dennis Kneale had a tea party today working on Dow 25,000 banners. Yeah yeah you know I like to gripe, and most of my readers know I am a day trader which in my case means I am flat at the end of each trading day, this is my “edge” which works with my “system”. That being said the direction of the market really means nothing to me, what I care about is intra day range coupled with price action confirmed by volume. I like seeing healthy mechanical natural buying and selling, even though I do not have any trades currently long or short the market days like today bring me little joy. Why?



Charts, Commentary | No Comments

Spx are we going to break down? Very simple chart.

Written by Hedge Accordingly
October 29th, 2009 at 12:01 am

Very simple chart here. Are we going to break down or are we going to mind this line. If the dollar keep marching higher we are going to break down and go to who knows where. IM sure the market will be orderly but the majority of “smart” money i believe is wrapping up most longs. The chart below is of the S&P500 cash market.

 

 



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Dollar keeping the market at bay?

Written by Hedge Accordingly
October 27th, 2009 at 5:18 pm

 Has the vice started tightening on the UUP shorts? Granted the move today was not huge, the UUP bid most of the day with daily volume being 4,060,000 higher than average of around 1.8 mil. The clear inverse relationship between the UUP and S&P500 is demonstrated by the chart to the left. You see as the UUP(blue) traded up, as equities(red) came under pressure. If you take volume into consideration, you can argue UUP moved FIRST then equities moved inversely. I personally did not watch trading close enough to see this anomaly, but one thing is true, if one moves the other moves opposite.

Over time the relationship can become inverted on a daily chart, I.E. fall of 08′ when traders flocked to the dollar as the “safe trade”. This trade moves like this because the dollar is clearly front and center in traders minds and they know the USD rules the roost. Traders who are in these markets every day are tired of the same grind and are looking for volatility to show its head again, not because traders want the market to fall, they want the market to come to it senses. The USD is clearly the catalyst which can snap this market back into reality.



Charts, Commentary | No Comments

Bets placed on the home builders, foreshadowing?

Written by Hedge Accordingly
October 23rd, 2009 at 9:09 am

Not to sure what to make of these big bullish bets on the front month options in the XHB, but as options traders we use information like this to help foresee the future. Based on the call volume in the XHB 16 strike, TOL 20 strike and LEN 15 strike its looks like there maybe some bullish news out on the us housing situations. The volume today has exceeded the open interest meaning a new position has be opened. Though we are not reading into this to much, it is something to keep on the radar.



Charts, Commentary | Comment (1)

Is the Goldman train nearing the end of the track?

Written by Hedge Accordingly
October 16th, 2009 at 12:25 am

The Chart i posted on GS a few days back shows resistance in play, the trade was  over in my opinion. If you bot Goldman up here i think you could bet getting on the greedy side but its your cash. My point being if you would have bot the dip in Goldman about a month ago around 145 you would would be well positioned to take profits on this breakout. This market has shown me day in and day out buying the dips, the low print of the day seems to be the best trade, you can apply this in the macro level also. Goldman could have another 20 bucks left in it… BUT that means its 60$ away from its all time highs when things were just dandy??? WHAT nothing has changed fundamentally so this means if we get back up to say 250 by December were are gonna go to 300 by march? I don’t believe it. Happy expiration tomorrow, i think things could be a bit more active then the past 3 cycles. Remember play the cheapo OTM calls on the big boys, they could pay off if they rip this thing higher or lower.



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