Saturday, August 15, 2015

Pre-Election Presidential Cycle


New series! Effective trading is about timing and rules -- how you do capitalize on it is key. You can find timing points from charts, timing points from cycles, or by being in the market to capitalize on both long and short position. The rules determine how and when you adjust.

If you follow my hedging activity on AAPL and TWTR, I am in the market both long and short at all times using a statistical method to capture value as the stocks move up and capture value as the stock moves down (hedge). In each case the one part of the position makes money from either the hedge or the stock. If the hedge makes money, that value is transferred into the stock.

The hedge acts to reduce cost basis as the position moves up and down through the acquisition of more stock. The only requirement is that 1) the stocks moves 2) the stock has some ability to move upwards which makes money as the collar is a synthetic vertical spread.

Presidential Cycle


The next trade I will be entering into is a 15 bullish presidential cycle trade that occurs every four years (just before end of year 3 and year 4) during the end of the current presidential term and has a very high (90%) probability of making money.  This is based on a statistical pattern that has high odds -- this is the timing part. I will be placing this trade in a registered account.


Enter Oct 1 2015 (yr 3) a deep in the money call on a major US index (SPY or DIA)

Exit Dec 31 2016 (yr 4)

I am look to trade a longer term ITM Dec 2016 or Jan 2017 DIA or SPY call to avoid volatility (time value) premium. The higher delta will also make the option move more like stock.

No comments :