As Stocks Reach New Highs, Investors Abandon Hedges

[mathjak107]

yes , so as a long term investor why would you want to mitigate temporary short term dips betting on the opposite way , when doing that cuts your long term gains permanently ?

to a long term investor what happens short term is irrelevant so it makes little sense to worry about the short term at the expense of cutting gains permanently in the long term .

[CaptainNJ]

Originally Posted by mathjak107

yes , so as a long term investor why would you want to mitigate temporary short term dips betting on the opposite way , when doing that cuts your long term gains permanently ?

to a long term investor what happens short term is irrelevant so it makes little sense to worry about the short term at the expense of cutting gains permanently in the long term .

im confused. i dont perceive the upro as mitigating my short term dips. i see it as extending my dips and extending my gains. it acts just like my itot (understanding that itot isnt the s&p) only x3.

i think the biggest risk is some kind of flash crash where i could lose a tremendous amount or everything in a single day. which would suck.

[mathjak107]

oooh i thought upro was betting against the market . got it .

[CaptainNJ]

Originally Posted by mathjak107

oooh i thought upro was betting against the market . got it .

gotcha.

at the end of 2016, i opened up a position in UPRO, basically made it about 10% of my investments. its outperformed other investments so now it is a little above 15%. it doesnt seem to be generally recommend to long term invest in UPRO but i couldnt resist the temptation.

[Lowexpectations]

Originally Posted by Jobster

Dude WTF?

When did I say we had an inverted yield curve. You're actin like my girl, always have to be right, even if you have to make things up to be right.

Just stop. I gotta deal with that at home all the time as it is.

You literally posted about an inverted curve in response to one of my posts. Wtf are you talking about ?

[lchoro]

Originally Posted by Jobster

https://www.wsj.com/articles/as-stoc...ges-1515421800

Refer to 50 cent and VIX elephant. The two fund managers apparently have been rolling out massive hedges using the VIX on a monthly basis for a year or more and have yet to roll out the soon-to-be-expiring VIX 25 call positions out to the next month. It's been chronicled for some time.

There is also another report of some large assets being forced into stocks and possibly bonds due to new regulations. That's why the market activity has no real back and forth between buyers and sellers (or even less than in the recent past).

[Jobster]

Originally Posted by lchoro

Refer to 50 cent and VIX elephant. The two fund managers apparently have been rolling out massive hedges using the VIX on a monthly basis for a year or more and have yet to roll out the soon-to-be-expiring VIX 25 call positions out to the next month. It's been chronicled for some time.

There is also another report of some large assets being forced into stocks and possibly bonds due to new regulations. That's why the market activity has no real back and forth between buyers and sellers (or even less than in the recent past).

Really?

Those large assets might be crypto. Do you think?

I expect regulations. There will absolutely be regulations in my mind because crypto can potentially take liquidity out of the stock market. The way to mitigate that is to enforce regulations, so these projects can be "fairly" evaluated.

I hate to speculate, but now that you say a report of large assets, it does make me wonder.

I wonder what the short term ramifications of this have on the crypto market at large. I would like to know the sentiment on Wall Street. It appears there is low volume which gives me the impression at least for the moment that liquidity is tapped out. Any excess liquidity, at least in the US and perhaps other developed countries like NK would need to come from what is likely already budgeted into their expenses. For example, they will likely have to take what they will invest into crypto out of the market, which is where it is "supposed" to go.

You're pretty thorough in your responses and I like to read what you say, so I would appreciate your thoughts on this. There are a lot of reasons that lead me to believe that there is a significant hedging position that is developing, but it could also be because more institutional investors have gotten into the market.

That still doesn't explain the rising market price and decreasing aggregate volume. It makes me think that something is amiss, just not sure what. Also, liquidity injections could come in from anywhere. As you stated, mentality like that in the stock market would have led to consistent losses, as the stock market climbs often on exceedingly low volume, but low volatility, which is also at odds with conventional wisdom that says an illiquid market is more subject to volatility shocks, (i.e. flash crashes, etc). The difference that I know about is the stock market has some protection in the form of circuit breakers, but I believe the crypto market doesn't have that form of protection, meaning it could crash to very low levels without sufficient demand if the liquidity is not there.

If the consumers are tapped out on liquidity, unless the demand is from institutional investors, or governments I suppose like central banks, there is no where to go but down, when the machines get turned off. It is also not likely in my opinion that the crypto market has the same level of protection that the broader market gets because I seriously doubt that the central banks will bail it out.

That's why I would like to get some insight about the sentiment on Wall Street. I imagine the older institutional guys hate this. From a fundamental perspective, it really doesn't make any sense. In the real world, you can't just write an idea on a piece of paper with some objectives and expect to be evaluated at over $100M or even $1B. But you know, that's my personal opinion and unfortunately, I've noticed that rationality doesn't make you money.