Mad Hedge Technology Letter
September 6, 2019
Fiat Lux
Featured Trade:
(THE PRODUCT OF NO REGULATION)
(FB), (MATCH)
No government interaction means the duopoly of digital ads continues as is and investors cannot be short Facebook unless massively hedged on a short-term trade.
CEO of Facebook Mark Zuckerberg and his data leak-optimizing tech company is at it again with plans to roll out an online dating feature on the Facebook platform.
The new business is coined “Facebook Dating” which is the new façade in which Facebook will gouge your personal data in every shape and form possible so Mark Zuckerberg can add to his plethora of gaudy mansions that dot Hawaii, Palo Alto and Lake Tahoe.
It’s nuts that most people still subscribe to Facebook’s unfair terms, but this takes it up a few notches higher by gifting the company access to the most personal of personal content that a person holds dear to his heart.
Facebook, as usual, has the marketing spinners putting out the misleading reasons to join such as starting “meaningful relationships” which shows that Facebook has shrugged off any type of personal data scrutiny to double down on this new data business.
As it stands, their cryptocurrency business looks as if the momentum has been hijacked for the moment as regulatory issues could stand in the way of that, but dating online is the lower hanging fruit.
Instagram users will be able to integrate posts seamlessly into their “Facebook Dating” profile and Facebook will roll out a new feature called a “Secret Crush” list which allows users to add people to this ridiculous list.
This is Facebook’s master plan for integrating Instagram before the anti-trust regulators deem the company anti-competitive.
Some of the risk involved is the alienation of a younger Instagram audience by forcing Facebook integration down their throats.
This will unhinge a few of the Instagram diehards but on the flip side, it could cause more engagement by an older Facebook seeking their partner on a younger Instagram world, meaning more ad dollars.
On the business side of things, Facebook has every incentive to try this and even lusting to get into many other short-term engagement tricks and gimmicks by moving into marginal industries.
It is no secret that quite possibly, the best place to get opioids is on Facebook’s platforms.
Until the government does something meaningful, Facebook will run wild trying to create these types of engagement cesspool businesses out of thin air.
The imminent collateral damage is Match Group, Inc. (MTCH) cratering over 6% now that a FANG is a direct competitor.
I wouldn’t want to be in their offices today.
“Our goal is not to build a platform; it's to be across all of them.” – Said CEO of Facebook Mark Zuckerberg
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to a six-month time frame, Mad Day Trader, provided by Bill Davis, will exploit money-making opportunities over a brief ten minute to three-day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points. Read more
Global Market Comments
September 5, 2019
Fiat Lux
SPECIAL VOLATILITY ISSUE
Featured Trade:
(SHOPPING FOR FIRE INSURANCE IN A HURRICANE),
(VIX), (VXX), (XIV),
(THE ABCs OF THE VIX),
(VIX), (VXX), (SVXY),
I am one of those cheapskates who buy Christmas ornaments by the bucketload from Costco in January for ten cents on the dollar because my 11-month theoretical return on capital comes close to 1,000%.
I also like buying flood insurance in the middle of the summer drought when the forecast in California is for endless days of sunshine. That is what we had at the end of July when the (VIX) was plumbing the depths of $12.
Get this one right, and the profits you can realize are spectacular.
It gets better.
If the bottom in volatility exactly coincides with the peak in the stock market that it measures, volatility could be headed back up to the 30% handle, and maybe more.
I double dare you to look at the charts below and tell me this isn’t happening.
Watch carefully for other confirming trends to affirm this trade is unfolding. Those would include a strong dollar, and a weak Japanese yen, Euro, and rising fixed income instruments of any kind.
Notice that every one of these is happening this week!
Reversion to the mean, anyone?
You may know of this from the many clueless talking heads, beginners, and newbies who call (VIX) the “Fear Index”.
For those of you who have a Ph.D. in higher mathematics from MIT, the (VIX) is simply a weighted blend of prices for a range of option contracts on the S&P 500 index (SPX).
The formula uses a kernel-smoothed estimator that takes as inputs the current market prices for all out-of-the-money calls and puts for the front-month and second-month expirations.
The (VIX) is the square root of the par variance swap rate for a 30-day term initiated today. To get into the pricing of the individual options, please go look up your handy dandy and ever-useful Black-Scholes equation.
You will recall that this is the equation that derives from the Brownian motion of heat transference in metals. Got all that?
For the rest of you who do not possess a Ph.D. in higher mathematics from MIT, and maybe scored a 450 on your math SAT test, or who don’t know what an SAT test is, this is what you need to know.
When the market goes up, the (VIX) goes down. When the market goes down, the (VIX) goes up. Period. End of story. Class dismissed.
The (VIX) is expressed in terms of the annualized monthly movement in the S&P 500 (SPX) which, with the (VIX) today at $10, is at $72.54.
So for example, a (VIX) of $10 means that the market expects the index to move 2.89%, or $72.54 S&P 500 points, over the next 30 days.
You get this by calculating $10/3.46 = 2.89%, where the square root of 12 months is 3.46.
The volatility index doesn’t really care which way the stock index moves. If the S&P 500 moves more than the projected 2.89% in ANY direction, you make a profit on your long (VIX) positions.
I am going into this detail because I always get a million questions whenever I raise this subject with volatility-deprived investors.
It gets better.
Futures contracts began trading on the (VIX) in 2004 and options on the futures since 2006.
Since then, these instruments have provided a vital means through which hedge funds control risk in their portfolios, thus providing the “hedge” in hedge fund.
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more