Swing Trade Update:
I have been getting quite a few emails this morning regarding these swing trades. Most are asking about my trade in the Spy in the amount of $100,000.
To put things in perspective let me try to explain swing trade risk in poker terms.
Lets say your play 100-200 Holdem. A typical 8 hr session you can see swings of +5000 to -5000 on a normal day. Thats 25 big bets on the upside and 25 big bets on the downside.
This 50 big bet swing from top to bottom exists in most games and can be adjust depending on the game your playing and the variance for that game. Thats a 10,000 swing from top to bottom during a typical 8 hour period. Of course their are sessions that fall outside this range but the bulk of your sessions will fall into this category.
If you playing 20-40 Omaha 8 its 40 big bets top to bottom because of the decrease in variance between omaha 8 and hold em.
So a 1600 swing top to bottom with a typical gain for the day and loss being between 10 and 20 big bets. Thats 400 to 800 dollars.
Now if you put on a swing trade with 100,000 a 1% move is 1,000. Essentially far from the volatility for 100-200 Holdem. And a little more then a 20-40 omaha 8 game. Typically these swing trades gain or loss fall into 1-3% gain or loss typically. Now their are outliers like in poker and you have to account for these in managing you money.
So my thoughts are these swing trades are just a bit more volatile then playing in a 20-40 Omaha 8 game. However the Outliers are much bigger as these swing trades have no stops but are mean reversion trades.
Is the risk worth it. Considering you can not get 1% a year in a money market the opportunity at 1 to 3% over 2 to 5 days looks appealing to me.
Also these Poker numbers are based solely on my many hours at the poker tables as opposed to any scientific reasearch”:)
I bought 540 Spy at 187.40 at the close Yesterday. This morning if you happen to be following these you most likely can get in at the same or a better price on the open.
RickJ
