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megarain
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I am a cynic by nature, and often feel the last day before a qtr end, the markets edge up to window dress returns for hedge funds/trusts.

Day 1 of the new qtr, sees the Dow currently off 700, and the S&P off 80. (Dow 23430, S&P 2560)

I listened to a radio show last week, where even the host, blatently encouraged shorts .. for many reasons, but the major one was the ending
of government buying, which accelerates from June IIRC.

I have opened some lumpy shorts. (Which should be a warning, as I consistantly do my bollox at this .. but, hey, I am a degen)
Last edited by megarain on Mon Apr 02, 2018 8:11 pm, edited 1 time in total.
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marksmeets302
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Same here. I enjoy watching cnbc. During the sell-off end of January the analysts there were confused. No clue why the market went down, and they were very vocal about buying the dip. When the market started sliding again they weren't so sure anymore. If history is any guide, they will soon start being cautious, then find reasons to sell and in the end they can't find a single reason to buy a stock. That will probably be a great buying opportunity :-)

I'm playing this move mostly by increasing positions in stocks that will do well if volatility increases and some short s&p futures.
weemac
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The TV punditry, aka "analysis", is nothing more than filler until the real deal - the adverts; a market worth over $60,000,000,000 on TV alone last year.
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jimibt
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weemac wrote:
Mon Apr 02, 2018 8:46 pm
The TV punditry, aka "analysis", is nothing more than filler until the real deal - the adverts; a market worth over $60,000,000,000 on TV alone last year.
andrew syed, in his book *black box thinking* pursues the cognitive dissonance between these experts perception and the reality. in short, a travelling pundit has more to lose by changing his/her position than a mere mortal that is flexible in thinking. not saying trust your taxi driver, but certainly trust more in wider nature than perceived experts..
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megarain
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I am intrigued by what portion of kelly, people think a trader/gambler should allocate to an index short.

Say a persons life bankroll is 100,000 units.

If he was prepared to lose .. say 2% of that bankroll to a short .. so, 2,000 units.

If the S&P index is 2600 .. how much per point, should the person allocate to the short ? In 5 yrs, the S&P has gone from 1550 to a high of 2900.
weemac
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Depends how much pain you can take in proportion to the reward you aim to achieve, relative to the ATR for the period you wish to participate.
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megarain
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Ok, so how would you allocate :

1. Wimp .. little pain

2. Degen .. maximum pain
weemac
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Until the end of January, the S&P moved 15-20 points a day on average (ATR). Since then it's been moving 30-50 points a day. I'd divide my maximum desired loss by the current ATR i.e. about 42. So £2,000/42 = £4.75 per point. But be very clear - you're perfectly likely to make or lose the entire amount in just one day!

So that's on a one day period; if you trade hour by hour, it'd be a larger amount bet per point. If you trade week by week, then a tiny fraction. But impossible to give solid advice without knowing your risk tolerance, ability to watch the market closely, and your psychological response to accumulating profits or losses.

One thing's for sure though; Kelly staking has nothing to do with anything.
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megarain
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Thx, that interesting.

I agree Kelly doesnt really apply to index bets, or really exchanges. You just cant scale enough.
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marksmeets302
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megarain wrote:
Tue Apr 03, 2018 5:49 pm
Thx, that interesting.

I agree Kelly doesnt really apply to index bets, or really exchanges. You just cant scale enough.
I don't understand... 1 ES future has a nominal value of about $130,000 and a point value of $50. I can buy or sell 50 of them at any time without making a dent in the market. Unless you play even bigger than I already thought that should be enough. If I scale my portfolio to the 100,000 units you mention I would have allocated $4 per index point. I'm a conservative guy though. Plus I have no idea what my edge is in this trade.

Shorts I always play smaller than longs, just because they occur in higher volatility regimes and reversals can be brutal.
weemac
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marksmeets302 wrote:
Tue Apr 03, 2018 6:31 pm
megarain wrote:
Tue Apr 03, 2018 5:49 pm
Plus I have no idea what my edge is in this trade.
Which is why Kelly is useless in these markets.
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megarain
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I dont really want to side-track, but, kelly has no use for me on bet exchange betting.

I just allocate a bank, and pretty much expose all of it .. just relying on experience to manage.

The scale limits, are as Peter previously mentioned .. if a mkt has a turnover of $25m, and I am already doing a chunk of that .. its hard to go much more (at least, without having a significant impact on EV)

//

On index futures, its v likely you are right. I hadn't really thought about it, as I dont use kelly on a day to day basis, just know what its about.

The big thing, is working out how much per unit, to short an index. $4 per index point, for 100k bank, is v similar to what I placed - so, I am in the ball-park.

Which is fine etc.

Thx
weemac
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megarain wrote:
Tue Apr 03, 2018 5:10 pm
I am intrigued by what portion of kelly, people think a trader/gambler should allocate to an index short.
Twice since then you've refuted Kelly. So why did you ask about (pro)portion of Kelly in the first place?

I'm totally confused by all this.

I'm out.
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megarain
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Yeah, sorry the first line was confusing.

I should have said, what portion of a bank, not kelly.
weemac
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2%
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