The market is never wrong, or the price is the price.
I have not been doing too much other than a little additional research into my longer term trading ideas lately. My RRSP account that I am going to use for these longer term trades is just online now, I need to wait while it gets linked to my main trading platform so I can use any of my accounts just by selecting a tab. Very handy.
Last night I was reviewing the state of the market in general and I noticed how the TSX was weakening. While everyone was going on about the rally and how it may indicate the end of the recessions (HUH?) the charts are pretty obviously not agreeing, the charts represent everyone who has a stake in actually putting their money on the line based on the market. declining volume on increasing price looks like it's time to get short to me...so a limit order on HSD (Horizons Beta Pro S&P 500 Bear ETF) for $37 was my target. I cannot short in my registered accounts so this is the next best thing.
I was spending some time updating my trading software at lunch and spending some time online with the broker to clear up a few issues so I checked into the HSD chart... the low today was $36.70...so I would be in at $37 give or take a cent. If I had been watching it during the day I may have gotten in a bit lower. Either way I would stop this at $36 as if it breaks $36 I was wrong on the trade.
Ideally I might wait until today was done and gauge the entry for tomorrow seeing as the range is pretty narrow. For curiosity I will go with $37 and see what happens.
Jeff.
Showing posts with label HSU/HSD. Show all posts
Showing posts with label HSU/HSD. Show all posts
Monday, March 16, 2009
Saturday, February 14, 2009
The ETF angle for medium term trading
I see a ton of interest in ETFs lately and specifically oil related ETFs, Horizons BetaPro NYMEX Crude Oil Bull and Bear Plus ETFs, HOU and HOD respectively. The particular ETF or index has not really interested me unless they are in a certain price range, have ample intraday volatility, enough liquidity and have an index that I can track in real time...this all for day trading purposes. So in this regard I really don't care too much which one I am using.
Having said that this particular interest caught my attention and leads me to check into ETFs a little closer.
Link to my post about ETFs from my daytrading blog.
Another link with more particulars and other links to Horizons BetaPro ETFs.
I took a table from the Horizons site, exported it into a spreadsheet and ran a few numbers to get a feel for how the ETFs seem to behave. I figured out some ratios to see a few relationships. Now these may not mean much as a single day snapshot so I may have to track them for a bit but they are interesting none the less.
RELATIVE VOLUME (Relative to the outstanding shares)
To get an idea of the interest in a particular fund I divide the volume for the day by the outstanding shares. I figure that the closer to 1 this number is the higher the trading interest, this is relevant more to compare the bear vs the bull of the same ETF than comparing anything between the various ETFs, although higher interest ratios can lead to at least better liquidity. Interestingly the bear crude oil ETF, HOD, was ahead as it traded more than the number of shares in circulation by a ratio of 1.57:1.
Top five in relative volume:
1.57 - Crude Oil Bear (HOD)
0.48 - Natural Gas Bear (HND)
0.43 - Crude Oil Bull (HOU)
0.31 - Global Gold Bear (HGD)
0.18 - S&P 500 series Bear (HSD)
I'm not sure if this really means anything but the rankings were interesting to note.
PERCENTAGE CHANGE CORRELATION
This shows that the inverse funds track well together...when one goes up the other goes down a corresponding percentage. I think that this is a very important factor in trading these funds as a bear that wildly varies in the inverse relationship from the bull creates an unpredictable result when trying to trade them based on the index that they are supposed to be following...they cannot be tracking well and with less correlation, the worse they are at that.
I used the percentage price change of the last day between the bear and bull of the same fund. I divide the increase of one by the decrease of the other then also calculate the decrease by the increase. If they are tracking well I would expect both numbers to be close to 1. They were not all, so to make the results easier to see quickly I just use the difference between the two calculations. The closer to zero this number is the closer the overall correlation.
The top five in percentage change correlation:
0.02 - TSX 60 series (HXU/HXD)
0.07 - Global Gold (HGU/HGD)
0.08 - S&P 500 series (HSU/HSD)
0.13 - Financial series (HFU/HFD)
0.29 - Crude Oil (HOU/HOD)
MEAN VARIANCE
The last number that I noted was the Mean Variance or how far away from the mean of the two funds, bear and bull, the current prices were as a percentage of the mean. This sort of falls into the category of Reversion to the Mean as a method of determining the probability of a trade.
I think, but have not thought long on this, that the mean might represent the underlying index if it were represented as a number relating to the two derivative funds and charted over time. In theory I would expect that the funds would track equally on either side of this number...but they won't in practise I am sure. So it may serve as a snapshot indication of the current state of the price only. I would like to see a large variance to consider a larger likely price change to return to the mean...which should happen at some point.
The top five in wide mean variance:
88% - Natural Gas (HNU/HND)
80% - Financials (HFU/HFD)
76% - Crude Oil (HOU/HOD)
70% - S&P 500 (HSU/HSD)
69% - NASDAQ 100 (HQU/HQD)
So, after playing with these numbers it is interesting to see who has the best showing in the top five lists, I suppose that I could have easily guessed this answer without doing any of these calculations. Having said that, it suggests that perhaps my spreadsheet may be useful in the future when it is not quite so "cut and dried".
Crude Oil. Both the bear and bull funds made the high relative volume list and placed in the change correlation and wide mean variance lists as well.
I was surprised to see the S&P 500 show on all three lists as well. I think I may have a closer look at these fund offerings to see if they match my other normal criteria.
Do note that these are not recommendations for trading any of these funds even though I will probably check them out closer and perhaps even do some trading on them myself...afterall, that is the only real way to prove an idea one way or the other.
Jeff.
Having said that this particular interest caught my attention and leads me to check into ETFs a little closer.
Link to my post about ETFs from my daytrading blog.
Another link with more particulars and other links to Horizons BetaPro ETFs.
I took a table from the Horizons site, exported it into a spreadsheet and ran a few numbers to get a feel for how the ETFs seem to behave. I figured out some ratios to see a few relationships. Now these may not mean much as a single day snapshot so I may have to track them for a bit but they are interesting none the less.
RELATIVE VOLUME (Relative to the outstanding shares)
To get an idea of the interest in a particular fund I divide the volume for the day by the outstanding shares. I figure that the closer to 1 this number is the higher the trading interest, this is relevant more to compare the bear vs the bull of the same ETF than comparing anything between the various ETFs, although higher interest ratios can lead to at least better liquidity. Interestingly the bear crude oil ETF, HOD, was ahead as it traded more than the number of shares in circulation by a ratio of 1.57:1.
Top five in relative volume:
1.57 - Crude Oil Bear (HOD)
0.48 - Natural Gas Bear (HND)
0.43 - Crude Oil Bull (HOU)
0.31 - Global Gold Bear (HGD)
0.18 - S&P 500 series Bear (HSD)
I'm not sure if this really means anything but the rankings were interesting to note.
PERCENTAGE CHANGE CORRELATION
This shows that the inverse funds track well together...when one goes up the other goes down a corresponding percentage. I think that this is a very important factor in trading these funds as a bear that wildly varies in the inverse relationship from the bull creates an unpredictable result when trying to trade them based on the index that they are supposed to be following...they cannot be tracking well and with less correlation, the worse they are at that.
I used the percentage price change of the last day between the bear and bull of the same fund. I divide the increase of one by the decrease of the other then also calculate the decrease by the increase. If they are tracking well I would expect both numbers to be close to 1. They were not all, so to make the results easier to see quickly I just use the difference between the two calculations. The closer to zero this number is the closer the overall correlation.
The top five in percentage change correlation:
0.02 - TSX 60 series (HXU/HXD)
0.07 - Global Gold (HGU/HGD)
0.08 - S&P 500 series (HSU/HSD)
0.13 - Financial series (HFU/HFD)
0.29 - Crude Oil (HOU/HOD)
MEAN VARIANCE
The last number that I noted was the Mean Variance or how far away from the mean of the two funds, bear and bull, the current prices were as a percentage of the mean. This sort of falls into the category of Reversion to the Mean as a method of determining the probability of a trade.
I think, but have not thought long on this, that the mean might represent the underlying index if it were represented as a number relating to the two derivative funds and charted over time. In theory I would expect that the funds would track equally on either side of this number...but they won't in practise I am sure. So it may serve as a snapshot indication of the current state of the price only. I would like to see a large variance to consider a larger likely price change to return to the mean...which should happen at some point.
The top five in wide mean variance:
88% - Natural Gas (HNU/HND)
80% - Financials (HFU/HFD)
76% - Crude Oil (HOU/HOD)
70% - S&P 500 (HSU/HSD)
69% - NASDAQ 100 (HQU/HQD)
So, after playing with these numbers it is interesting to see who has the best showing in the top five lists, I suppose that I could have easily guessed this answer without doing any of these calculations. Having said that, it suggests that perhaps my spreadsheet may be useful in the future when it is not quite so "cut and dried".
Crude Oil. Both the bear and bull funds made the high relative volume list and placed in the change correlation and wide mean variance lists as well.
I was surprised to see the S&P 500 show on all three lists as well. I think I may have a closer look at these fund offerings to see if they match my other normal criteria.
Do note that these are not recommendations for trading any of these funds even though I will probably check them out closer and perhaps even do some trading on them myself...afterall, that is the only real way to prove an idea one way or the other.
Jeff.
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