ayla Account Talk

[ayla]

revised my IFT for today -
changed from G-100% to I-100%. (I was already 50% I)

The VIX is behaving so well that I think it indicates there are still more gains to be had.

Since S fund (and C fund) responds more quickly with the VIX, I feel like the I fund gives me a little bit of pad (not more than a day, probably).

Exciting times, reminds me of what it is like when we have a hurricane and are waiting for landfall. LOL

===

Sponsor - I'll get back to you on the ebbnwood statement I made about his program doing fairly well during the downturn last year. I may have remembered that from something he said/reported rather than any statistics I've maintained. I need to do some searching.

 

[airlift]

Thanks!

 

[ayla]

sponsor -
I went back thru ebbnflow's account talk thread and made a couple of snapshots of when he was reporting that he was doing so well when most of the rest of us were doing pretty badly, i.e. first part of june.

Course he arrived at tsptalk shortly before June 13th which is when the market started a bull run (sort of) so some of it may have been luck (often the case even with the best of traders.)

But thanks for asking your question because I learned a lot by reviewing his thread. I think the key was the fact that he was playing the F fund so heavily when he wasn't in the I fund. He gives a good description of his strategy. If you search his account thread during July and August of last year, it is all there.

I couldn't find the exact place where he said that his program seemed to do best when the market was generally down. (It is there somewhere.) Again, maybe this was the heavy hand of the F fund showing in his gains.

Don't want to discount his work. It just seems to substantiate for me that one first should evaluate what kind of market is going on (i.e. bull, bear, trend, trading range, eco events, etc.) and then decide what strategy.

Still on a steep learning curve or else my returns would be better...hopefully eventually some day I will get this figured out...

7-28-2006

You're welcome, Retire. I know what you mean, we all have to deal with our own risk/pain tolerance. Anyways, the TSP Tracker had me at +5.28% for the month of June (I started posting at 06/07/06). This month I'm only down -.12% (two cents worth), so I could be back in the black today if the I Fund cooperates. :nuts:

The ebb tracker is what I named the system I've been developing since last year to help me time the market better. I had great results backtesting last year's data using the ebb tracker, but since I was still tweaking the system at the time, I couldn't say for sure if any of the results were just self-fulfilling prophecy or not. :blink:

I had to try it out this year for real (not on paper or simulated) before I can be certain it's doing the job it's supposed to do, and so far it hasn't disappointed (+19.40% YTD). A lot of technical analysts are predicting little change or gain the rest of the year for equities with high volatility thrown in between. Watch those choppy waters, good luck and have fun investing.

8-31-2006

EBB,
Thanks for the reply. I would say that you turned yourself into the TSPtalk site celebrity in a matter of just a few hours. Because your discussion with Wheels in one of the thread regarding your tracking system and how you apply it to IFT and along with your record.

What amazed me is that the explosive returns record showed on your June, July and August tracker proved that it is real. It seems that you only allocate your asset in either 100% F or 100% I. It takes a lot of confident to do that. There are few members here would do 100% in one of the G, F, C, S and I fund. It already indicated that they are confident enough about their allocations. Namor, SS, and Birch (we all know Birch won’t move until C hits $17 anyway.) are in this group.

On the other hand, for the rest of the members, I did not mean the mix funds would indicate the lack of confident. It just simply means “diversify”.

Keep up with the good work and sure we are all watching you (please no pressure) . Thanks again.

 

[ayla]

You looked into how this number is calculated in some detail, I believe. Is it, first of all, an instantaneous calculation or some sort of running average? If it is a running average it is hard to imagine a sharp spike. If it is not, then could you speculate about what could cause it to happen - if it is for real? Some kinda program activity? Hedge funds?

Sorry Pilgrim, I should have responded earlier. (The VIX is way back under control, amazing at the change isn't it?)

My knowledge of the VIX stems only from the fact that I have spent a good while observing the VIX chart in tandem with the TSP funds. Your question has stimulated me to jump in and again try to understand more about how it is calculated.

The short paragraph below is one of the more succinct descriptions of how the VIX is calcluated. A "weighted average" is mentioned but not a "moving average" but could be similar.

I wish I would/could purchase a "PUT" and then I think I would not have such a block about understanding them. They seem to be similar to "shorting" and I do understand that.

I went looking for a CNN page that not too long ago listed the put calls that were being made on a large scale. That page is no longer operative. I haven't been able to find a replacement for it but I bet there is one. I'll post if I find one.

from: http://www.safehaven.com/article-6520.htm

What is the VIX? This is an index of implied volatility of the Chicago Board Options on the S&P 500 stock index, The exchange calculates the implied volatility of eight at-the-money or near-the-money strikes (both puts and calls) with a weighted average time to maturity of 30 days.

 

[FUTURESTRADER]

A Put is a position below the current price. You buy it as insurance against the i.e., SPX going lower. You sell a put to collect the insurance premium, and betting the SPX won't go lower. A Call is above the currernt price. One can buy or sell for likewise reasons. Buying puts and calls can be thought of as buying insurance. Selling puts and calls is like selling insurance. The chart may help. I love selling options.
http://www2.barchart.com/optqte.asp?sym=SPY0&mode=I&code=BSTK

 

[ayla]

Thanks futuretrader -

I like the insurance analogy (might have been said before but I only now have caught it.)

Still on the subject of the VIX, I found this very "easy to understand" article dated June 2003 but still relevant, IMO:

from: http://www.forbes.com/2003/06/18/cz_lm_0618soapbox.html

Date: 6/18/2003 (old but still good explanation, at least easy to understand)

Adviser Soapbox
Investors: Don't Fear The Rising VIX
Lawrence McMillan, The Option Strategist, 06.18.03, 11:10 AM ET

my SUMMARY of the article:
...interpretations of volatility as a contrary indicator --when $VIX spikes up to a peak during a period of severely bearish action, then a "buy" signal is at hand. If you consider how this comes about, you will see that it has a contrarian basis. The spike peak in $VIX is caused by panicky "put" buyers paying up for protection and--once they have purchased that protection at top dollar--the market turns and rises in true contrarian fashion.

...what does a low $VIX mean? --
-- some less astute analysts say: that a low $VIX precedes a declining market
-- more astute analysts say: when $VIX bottoms out and begins to rise, then the "sell" signal should be triggered. (still not correct)

...What is true [in the opinion of the author of this article] is that a bottom on the $VIX chart precedes a market explosion... If you think of this as a contrarian, you will see that it must be true. What does a low $VIX mean? It means that sellers of options are aggressive, that buyers of options are timid and therefore options are "cheap." In fact, these option traders don't expect the market to do much in the forthcoming days or weeks--that's why they let the air out of the options, making $VIX very low.

A contrarian knows what happens when a consensus is reached: the opposite! Well, what is the opposite of "...don't expect the market to do much?" It's a market explosion, of course. And the fact is that market explosions can occur in either direction. In the last few years [prior to 2003], since we've been in a bear market, those explosions have come on the downside. But back in the 1990s, during the bull market, such explosions often came on the upside.

 

[fabijo]

And the fact is that market explosions can occur in either direction. In the last few years [prior to 2003], since we've been in a bear market, those explosions have come on the downside. But back in the 1990s, during the bull market, such explosions often came on the upside.

I am anticipating the upside, just because I like bulls more than bears.

 

[ayla]

I wouldn't use VIX as a guage to IFT this AM, until a real number can be straightened out, there's no way that yahoo reading can be accurate.

fedgolfer, after searching the web for any evidence of this extreme VIX number reported this morning, I will agree with you that the yahoo reading had to be a mistake. Glad I changed my IFT before the bell.

I was able to find a Yahoo page that reports the most active Options with Unusually high volume at http://biz.yahoo.com/opt/stat2.html . I hope to take a few snapshots so I can study and see if there is a way to predict/understand the VIX by looking at these.

There is also an "Options News" report and I didn't see any mention of the VIX 67% temporary peak this morning.

And I just checked the historical data for the VIX and it shows the high for today at 10.94. No sign of the 17 that I saw this morning which nearly gave me a heart attack when I saw it.

No wonder Yahoo is down today, LOL. Though perhaps this was one of those "one in 1 billion (or is it trillion) bit" errors that computers claim can happen. More likely a communication glitch. Can only speculate. Don't think anyone is going to own up. Oh well.

 

[FUTURESTRADER]

It was wrong on all the quote boards. Must of been an error coming out of CBOE

 

[ayla]

I=100%
G=100%

Struggled with my decision to go to G. Really wanted to go 50% S but am trying something new, LOL. Hope to buy in to S at the next low rather than today's high (or apparent high at this point).

Also, like to be diversified in what I see as a volatile market right now. (The more conservative mode of diversifying is also something kinda new for me.)

 

[MADDOG]

i'm confused on your account dispersement

 

[ayla]

i'm confused on your account dispersement

Guess I'm pretty confused too. Apologies!
I=50%
G=50%

 

[ayla]

S=50%
I=50%

I'm thinking there won't be a pullback at least for a little while (couple days) because the VIX %k fast stochastic is at zero (according to data from my own spreadsheet) and pullbacks correlating with the VIX, at least since I looked starting at Apr 15, 2005 (4 of them - Apr, Oct, Jan, May) have consistently correlated with a 100% value in the k stochastic for the VIX. Will take at least a couple days for that to happen and probably longer since the VIX is so far below its 200 SMA.

There HAS been a precedent (seldom but still there) for the VIX %k fast stochastic to jump from 0 to 100 in two days but that was when the VIX wasn't so low. I'm hoping the recent low VIX values will make a difference and keep things from moving too quickly for now. Crossing my fingers --

As a contrarian, I can also find where the S fund had numerous down days when the VIX hit 0. But usually it has taken no more than two days for the S fund to take a little rise that makes it worth it or at least wouldn't make me seriously regret taking the position. Sometimes not regretting something here is as important as being happy about a nice gain, LOL.

Bottom line: I don't see this as a very short term play but hoping to get a few pennies at least rather than staying in the G.

 

[ayla]

$64,000 question - how REALLY tired is the market? How quick will it recover?

FYI - I gathered some data for some (fairly recent) days where VIX increase was over 10% (like today).

VIX increase 12.658% 27-Dec-05 - S fund gracefully recovered next day
VIX increase 21.53% 20-Jan-06 - S fund recovers next day
VIX increase 13.6% May 12 06 - S fund doesn't really recover until
after June 13 (though a few intermittent good days follow,
not nearly enough, VERY painful for some of us)
VIX increase 14.63% 27-Nov-06 - takes S fund 5 days (or so) to recover :
VIX increase 11.82% 7-Dec-06 - takes S fund 5 days (or so) to recover
but looks rather painful (I reviewed very superficially)
VIX increase 13.95% 25-Jan-06 - (this is today)

 

[ayla]

Too late to edit the post so this is a correction or clarification. The June 13th date below is not a recovery of the S fund back to its previous levels but the point at which the market quit dropping.

$64,000 question - how REALLY tired is the market? How quick will it recover?

FYI - I gathered some data for some (fairly recent) days where VIX increase was over 10% (like today).

VIX increase 12.658% 27-Dec-05 - S fund gracefully recovered next day
VIX increase 21.53% 20-Jan-06 - S fund recovers next day
VIX increase 13.6% May 12 06 - S fund doesn't really recover until
after June 13 (though a few intermittent good days follow,
not nearly enough, VERY painful for some of us)
VIX increase 14.63% 27-Nov-06 - takes S fund 5 days (or so) to recover :
VIX increase 11.82% 7-Dec-06 - takes S fund 5 days (or so) to recover
but looks rather painful (I reviewed very superficially)
VIX increase 13.95% 25-Jan-06 - (this is today)

 

[ayla]

G=100%

I was thinking I might change my mind at the last minute regarding selling my position in the I fund. Not gonna happen. No doubt about my selling Sfund position.

I am concerned about the possibility of another -FV on the I fund today since the dollar is rising at an alarming rate, now up to +.15 and seems to be climbing. Who knows what the afternoon will bring - crossing my fingers.

Cutting losses.

 

[ayla]

Following Trader Fred -

With the S fund looking better than the others and the fact that I want to go with multiple funds because of too much uncertainties, I liked Fred's allocation.

Not sure it will be for any kind of long term. My only change might have been to put some part in the F fund. May do that later.

C25
S40
I35

 

[ayla]

Thought this was interesting (maybe wishful thinking):

"...three out of the past four days have seen changes in the VIX of 13% or more…and this has only happened two other times in the last 15 years. You probably know those other two instances well: February 27 – March 2, 2007 and June 12 – 16, 2006. Each of these instances fell just prior to an important bottom.

Does this mean a bottom is just around the corner? Hardly…but I crunched some more numbers just to be on the safe side. It turns out that these three days out of four volatility clusters are generally associated with intermediate market bottoms and not market topping action. So while this action may look toppy to some, historically it is much more bullish than bearish."

from: http://vixandmore.blogspot.com/2007/06/three-out-of-four-unlucky-or-more.html

 

[airlift]

Interesting data Ayla. Thanks.

 

[ayla]

OEX put/call ratio is .66

This is VERY low and supposed to mean we are at or near a bottom. (no guarantees)

I checked data back to last year and only twice (Apr 5, 2007 and Aug 29, 2007) has it been this low and both times, it was in fact at the beginning of a fairly nice upward trend. Hard for me to believe at this point...crossing fingers