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Stock Futures Were Halted Sunday Night After 5% Drop
- deleted 7y ago[deleted]
- aplummer 7y agoTime in the market not timing the market. - here for future reference
- tempsy 7y agoI have been holding S&P puts as a hedge since the S&P was at 3330, and my portfolio value is at the same level as it was near early Feb highs because of them even though my stock holdings are down. The idea that you should just sit back and be ok with a 20% haircut isn’t something that I will just “take” if I can help it.
- markus_zhang 7y agoIt's a smart move. What's price of the put BTW? Did you feel that people were concerned about an immediate fall that Put was expensive at that moment?
- tempsy 7y agoI’ve bought and sold at different strikes and late March/April expirations for last 2 weeks. At end of Friday I entered $270p for 4/17 at around $6 or so.
- farnsworth 7y agoI bought S&P puts at the wrong time so many times that I just gave up, didn't trust my gut in early Feb, assumed the market would find some strange way to keep going up. Oops.
- gfodor 7y agoWhat’s the point? Instead of spending money on stocks and puts against the same stocks (which costs money), why not just allocate less to stocks in the first place? The reasons I could imagine is if the stock is illiquid (401k, lockup, etc)
- markus_zhang 7y agoOP might not want to lose his positions I guess.
- tempsy 7y agoI’ve sold some stock earlier this month but not everything. I don’t want to sell some that I’ve been holding for a long time for tax reasons.
- bickfordb 7y agoTaxes on reallocating
- nostromo 7y agoCongrats on winning the lottery. Long term yours is a losing strategy.
- remote_phone 7y agoMe too. I bought 10 contracts on SPY puts 5 days before the drop, expiring January. My first target is the Dec 2018 lows but I expect a 50% drop before the end of the year. I love how people are self righteous about the timing but I have been wildly profitable over the last 20 years picking my spots like this.
- empath75 7y agoI agree with that but do you know you’re going to take a 20% hair cut? What if you get out of the market after it drops 6% at the bell tomorrow and then it goes up 1% the day after and 3% the day after that? Do you panic buy back in? What happens if someone finds out that a cheap readily available drug cures it and this whole thing is over in three weeks? I’m extremely pessimistic about the market right now, but I’m more pessimistic that if I traded that I wouldn’t lose more money. I’ve had a big chunk of my 401k sitting on the sidelines for months now. I’m going to wait to see how this virus thing shakes out then use it to buy back in after it looks like the worst is over. Until then, there’s way too much uncertainty to try and trade this. I’m not retiring for twenty years. Whatever happens it should bounce back in 2-3 years or so.
- tempsy 7y agoWell of course I can’t predict the future but we kept hitting all time highs even well into the coronavirus outbreak in early Feb and it didn’t make sense to me. I didn’t think the rally had any more legs to it and bought puts to hedge. As the market kept going down I kept or trimmed the options. The point of using options is that I’m still holding a lot of my stock, so if it bounces back up then it’s just my options that lose value.
- dmoy 7y agoThe market is (or at least has been, cue zombie apocalypse or Japan) almost always hitting or near all time highs. Literally over 5% of days are all time highs. A full third of days are within 5% of the as-of-yet all time high.
- everybodyknows 7y agoRay Dalio gave an interview a couple of days ago in which he predicted insolvency for some sellers of just such far-out-of-the-money puts. Any ideas who these might be, beside hedge funds? In particular, anyone systemically important e.g. shadow banks ...
- deleted 7y ago[deleted]
- hourislate 7y ago>The idea that you should just sit back and be ok with a 20% haircut isn’t something that I will just “take” if I can help it. You don't have to be an active trader to preserve your capital. I've been invested for years but around the 2nd week of Feb, I went 100% cash. This time I saw train and got off the tracks. My plan is to average in slowly over time as the market stabilizes and the news gets better.
- twiceaday 7y agoYou are waving around a winning lottery ticket as evidence of your strategy being better. What is your strategy? First of all, was this put even good? How much of your portfolio did you cover and how much as a fraction did it cost? But much more importantly, how many times have you hedged your portfolio in the last eleven years? Hedges cost money. Market goes up long term. You will lose money long-term by hedging. That's the steady state of your strategy. That's the obvious reason why people don't hedge. I'm puzzled as to why you didn't acknowledge this. Instead, you offer an outlier where hedging performed better. Seems deeply disingenuous.
- manigandham 7y agoYou don't have to do it constantly, and it would only lower your gains, not cause you to lose money unless you're over insuring. All-time highs, inflated money supply, dropping interest rates, trade wars, overbought stocks, overloaded repo markets, bond yield inflection, and more signs over the last few months are a pretty clear signal to engage in hedging.
- all_blue_chucks 7y agoThat analysis is true according to precedent. But we are experiencing an unprecedented event. That said, eventually we will have a vaccine, anti-viral, or effective test&quarantine system; and the time to buy is BEFORE we have this under control.
- everybodyknows 7y agoSARS was a close relative of Covid-19. No vaccine was developed: https://en.m.wikipedia.org/wiki/Severe_acute_respiratory_syndrome https://en.m.wikipedia.org/wiki/Severe_acute_respiratory_syn...
- all_blue_chucks 7y agoAbsolutely true. But a vaccine is not the only possible endgame, and there is no question that unprecedented resources will be used for this one.
- manigandham 7y agoSome basic timing is not all that hard and can easily double your gains. All-time highs after 10 year bull run + coronavirus pandemic is a good time to at least buy some puts or move into cash holdings.
- throwaway373438 7y agoBuying at a low point is lucrative, sure, but how will you know when we're at a low point? Should you have bought or sold Friday? Should you buy or sell this coming Monday? Answering these questions accurately is in fact hard.
- manigandham 7y agoWhy are you looking for a low? The market was at a high and what you should've been looking for was a downturn. Timing days is impossible. Timing a trend over months is what I'm talking about, and anytime in the last 2 months was a good time to allocate 1-5% on making money or protecting your investments from a market drop. At this point, if your investments have lost value then sell some covered calls to make income while you stay out of the market. We have an entire summer of disrupted global trade coming, don't buy in until that's over.
- throwaway373438 7y agoWhether looking for a low or a high the underlying challenge is identical.
- koonsolo 7y ago> Some basic timing is not all that hard and can easily double your gains. If it was that easy everyone would do it, or at least the "simple basic timing"-fund with twice the gain would be more popular than any etf. But probably more realistic you are just deluding yourself.
- manigandham 7y ago1) Plenty of funds have protected losses and even made gains with this market move. Buying puts as insurance, especially as volatility climbs, is standard operating procedure. 2) Hedge funds aren't open to the public and don't care about popularity. Their mandate is to limit volatility, not to maximize gains. That's why they might not match indexes in bull markets but outearn them in turbulent times. 3) There is an inflection point with capital where it gets much harder to make more because of changes in liquidity, transparency, and price action resulting from your moves. Independent traders can make 100% gains from large moves, a large fund could never do that unless it was an absolute perfect scenario. 4) I'm surprised that so many people find it hard to believe that months of constant negative news after 10 years of perfect bull run and frothy all-time highs does not signal a hint of a downturn. What more of a sign do you need? Nuclear war? 5) Ray Dalio did it in November 2019, and even made it clear that it was standard hedging: https://markets.businessinsider.com/news/stocks/ray-dalio-bridgewater-associates-1-billion-bet-stock-market-loss-2019-11-1028711471 https://markets.businessinsider.com/news/stocks/ray-dalio-br...
- skybrian 7y agoThis is true, but even long-term investors effectively do a bit of market timing when they buy, sell or rebalance. It's sometimes worth thinking about timing when there is a move you already want to make for better reasons.
- ISL 7y agoValue investors don't time the market, though it can seem like timing. To the extent to which one can assess a personal 'intrinsic value' to a company, one can buy when it is substantially undervalued and sell when it is substantially overvalued. One can see this in Berkshire's cash hoard. Expect to see it deployed in the year to come, when valuations may become more in-line with historical norms.
- the-dude 7y agoNikkei down 6% at the moment.
- quickthrowman 7y agoAll 4 of the major US index futures are at limit down: /ES, /NQ, /RTY, /YM (S&P 500, Nasdaq 100, Russell 2000, Dow 30)
- gfodor 7y agoMy hot take is that the virus isn’t affecting future cash flows enough to warrant a crash, but as is typical, it sure as heck is a big enough catalyst for “risk off” to take hold and most pent-up mispricings to finally normalize, which according to some would be a huge pullback or crash.
- remote_phone 7y agoThe US is 80% services based which is why we were immune from the China trade war. China has a lot more to lose than the US because they don’t import from the US as much as they export. But services are going to dry up very very badly. Which will disproportionately affect the US, especially with how many minimum wage jobs there are.
- partiallypro 7y agoOnly 2% of the US workforce has a minimum wage job.
- Sebguer 7y agoOnly 2% of the US workforce has a FEDERAL minimum wage job. Many states and cities have higher minimum wages than that, and something like 40% make less than $15.
- dforrestwilson 7y agoAt this point it’s about lack of trust (which is what markets are premised on). https://www.epsilontheory.com/the-mozilo-market/ https://www.epsilontheory.com/the-mozilo-market/ As this thing eats its way through other countries and their economies slowdown the cash flow outlook will change won’t it?
- dcftoapv 7y agoYour hot take is wrong. Cash flows are absolutely going to be impacted here. Initially, the thought was that this was only going to be a supply-side shock, but people are planning to completely hunker down, not booking flights, not traveling to work, taking time off. This is going to be a large, if transitory, problem. Buy a little bit of the dip every day, and get ready to eat some losses in Q2. Summer is coming.
- mullingitover 7y agoThe president couldn't be bothered to interrupt his golf game this weekend as the crisis unfolded, except to tweet a clueless reference to Nero fiddling while Rome burned. That is some unimaginably bad optics.
- seibelj 7y agoThe entire world has collectively decided that recessions are unacceptable, so all central banks will print as much money as necessary to ensure no pain is ever experienced by anyone except prudent savers. Watch the printing presses get ramped up, I assume everyone in the USA will be getting a few thousand bucks in the mail soon.
- thoughtstheseus 7y agoBring in the helicopter money.
- nostromo 7y agoIf we can avoid recessions, we should. If we can create wealth without inflation, we should.
- dgudkov 7y agoIf you're not sure if you can, probably you can't. At this point nothing indicates that we've learned how to reliably avoid recessions. Quantitative easing and negative rates don't look like the Holy Grail, quite the opposite.
- Jommi 7y agoAbsolutely disagree with this sentiment. Avoiding recessions pushes for a change in the rules of the game allowing unhealthy practices to go on unpunished in the market. This is incredibly unhealthy in the long run.
- hi5eyes 7y agopeaking at the repo market and watching the inadequate pumps is concerning when the slow down really happens
- OscarCunningham 7y agoAre you saying that you think central banks will overshoot their inflation targets? Or that they'll hit them but that you don't think they should have those targets?
- partiallypro 7y agoI think this is all very overblown, and think within 5 years most people (obviously not those directly effected) won't even remember this happening. Similar to the Swine flu of 2009. Global growth will have a 1-2Q hiccup and then we'll likely have a rubber band recovery. But markets are in panic mode, and a lot of governments are showing their ineptitude, which is causing even more panic.
- enchiridion 7y agoI disagree. One of two things are going to happen. 1. Significant quarantines in areas which have never seen them. or 2. Mass infection and death. Both will be remembered.
- orblivion 7y ago3. Heroic effort that puts a stop to this without major disruption, following by insufferable people telling us "see it was never a big deal in the first place." I'm not sure which is the worst option.
- enchiridion 7y ago1 and 2, by far.
- jacobolus 7y agoConsider that career expert epidemiologists are predicting billions infected and millions if not tens of millions of deaths worldwide, unless something dramatically changes to deflect the current course or some of their assumptions turn out to be substantially wrong. That’s more infected and 1–2 orders of magnitude more deaths than the 2009 swine flu.
- nostromo 7y agoBut who is dying matters when looking at economic impact. Median age of death in China is 75. Median age is 81 in Italy. This is around the expected life span of these countries. Obviously a human life cut short is always worth mourning, but from an economic perspective, dying pensioners could actually be a stimulus.
- MaupitiBlue 7y agoThere needs to be a discussion about how China is going to compensate the world for covid19. Given the thousands of lives lost and billions of lives disrupted, it seems unfair and unwise to let the source of the loss escape shouldering the cost.
- mc3 7y agoThat's a real stones in glasshouses argument.
- Alex_P13 7y agooh
- jrockway 7y agoI don't play the stock market (I invest monthly and hold), but doesn't all this kind of make you want to buy? Eventually everyone will get Coronavirus and 0.2% of us will be dead. Then it will be back to making things again.
- TAForObvReasons 7y agoA certain CNBC correspondent suggested as much: > But maybe we’d be just better off if we gave it to everybody, and then in a month it would be over because the mortality rate of this probably isn’t going to be any different if we did it that way than the long-term picture, but the difference is we’re wreaking havoc on global and domestic economies https://www.marketwatch.com/story/cnbcs-rick-santelli-suggests-giving-everyone-coronavirus-to-spare-the-economy-2020-03-05 https://www.marketwatch.com/story/cnbcs-rick-santelli-sugges...
- rogerkirkness 7y agoUnfortunately the current rates are based on people (mostly) having access to forced respiration devices. 1/5 people who get Covid require external oxygen...
- mygo 7y agoThis is absolutely false and yet another reason why journalists shouldn’t play epidemiology. Mitigating the rate of spread leads to less deaths overall. If everyone got it at the same time, there wouldn’t be enough healthcare system capacity to handle it. This isn’t a new concept, it’s well-known within epidemiology. Cities with early interventions in the 1918 flu epidemic had 50% lower peak death rates. If everyone got it at once, many more people would die than if the same number of people got it over a longer period of time. The following is my speculation, but if we woke up tomorrow and everyone suddenly had the coronavirus, then the economy would be in much bigger trouble than it would be with a slower rate of infection.
- Analemma_ 7y agoThe issue, at least in the United States, is that corporate debt is sky-high right now: [0]. If the recovery doesn't happen soon enough before those businesses default on their bonds, the bondholders lose a bunch of money and then we might be looking at a liquidity crisis. [0]: https://www.wsj.com/articles/corporate-debt-fully-joins-the-market-turbulence-11583507055 https://www.wsj.com/articles/corporate-debt-fully-joins-the-...
- aazaa 7y agoThis happens against a backdrop of unprecedented manipulation of the financial markets since 2008. The signs are everywhere: - persistent negative-yielding long-term sovereign debt in Europe - Bank of Japan owns 80% of the Japanese ETF market - a Federal Reserve unable to contain the exploding repo market - price-to-earnings multiple at historic highs, even accounting for declines - stock buybacks galore field by ultra-accommodative central bank policies - all eyes on the Fed to see what kind of shock-and-awe they can deliver - a US administration doing everything in its power to undermine the independence of the Fed and bring on negative interest rates The GFC never ended. It was never resolved. It was simply rolled over, like opening a second credit card account to paper over a hole in a personal budget. Panic is a strong word. Market panics are very rare. Nevertheless, it would not be surprising to see a full-blown stock market panic this week.
- drenginian 7y agoI can’t see why this wouldn’t be the biggest crash for 50 years. All the other ones were largely human caused and largely controlled by sentiment, and did not cause everyone around the world to avoid contact with everyone else. This will last until a vaccine is developed which might take 12-18 months and in the meantime many many businesses will die around the world. The domino effects will be huge. Remember that lots of people and companies are up to their eyeballs in debt, what if that starts to run out of control with bad debt everywhere cause businesses and people are bankrupt? This is very long term and very damaging to all economies and there’s not really much governments can do to change people’s behaviour. This one is caused by sentiment, but that sentiment is driven by a virus which is out of human control. Unlike for example a war, which can be controlled by politicians. Thar’s a big one blowin in, batten down the hatches.
- drenginian 7y agoFunny that people are downvoting rather than arguing a case why not. Maybe these are inconvenient truths?
- alexandercrohde 7y agoWell, out of kindness here's why I downvoted it -- 1. Rambly/poetic 2. Doesn't really cite any sources or provide new information
- drenginian 7y agoAre you saying HN is all about people providing facts and referencing sources and not opinions?
- ncmncm 7y agoForecasts are for testing a vaccine in six weeks, rollout in 3-4 months. But billions of people will suffer before this blows over.
- taurath 7y ago
- cletus 7y agoSo late last year after about 3 attempted rallies, around one of those local peaks I decided enough is enough and I basically liquidated everything so now I'm 100% cash. This was all before the coronavirus. My rationale for this was simply that we were in the longest bull market in modern history, we were likely closer to the top than the bottom and because of certain FIRE tendencies [1] I decided my time horizon had shrunk to less than 5 years, at which point I decided it was more prudent to get out of equities. For the last several years I wondered what triggered the eventual correction. By "correction" I mean there'll eventually be a reversion to mean that will, for a time, cause the market to be oversold. Traditionally this is a good time to buy but it can be hard to get anywhere near the local bottom (this is where the term "dead cat bounce" originates). I didn't think it would be anything like 2000. We have some tech giants around $1T market caps now but they are money generating machines the likes of which probably hasn't been seen since the era of Standard Oil and the rail barons (whereas 2000 was purely speculative). It didn't seem like real estate would be the trigger either. I thought it might be the possibility of a trade war with China but, on further inspection, it seems China may well be more vulnerable to that than the US. Still, China has a way of thinking long term that's simply nonexistent in US politics. Certainly when I heard about this new virus, I didn't think it would be it. AFter all, we'd had SARS. But SARS was in some ways too effective and it basically burned out really quickly so never threatened a pandemic. But this? The problem here isn't the disease. After all, for most people, it'll likely just be a bad flu. The problem is the changing behaviour it will cause because there seems to be such a long period of being contagious while asymptomatic while being highly contagious. Some airlines are down 40%+ this year. Some cruise lines are even worse off than that. With travel being impacted, so are hotels, restaurants, tourism, etc. Any large public gatherings are likely to be curtailed (either officially or just effectively as people stay away). As soon as I saw there were cases in California where the source couldn't be identified I thought "well that's game over for containment". The same with the Italian cases. Oil prices have plummeted due to lower demand so all oil-dependent economies are now at risk of recession. The Fed's attempt last week to jump start the economy with a surprise 0.5% rate cut basically did nothing and there's only so low rates can go. So best case I think we're in for a bad 6 months, maybe as much as 18-24 months. Personally I'm disappointed I didn't end up shorting the market in the last week, I honestly don't really know why I didn't. But it could be worse. It'll be interesting to see how the anti-vaxxers spin this as it unfolds. What I do know is that it's way too early to go bargain hunting on the stockmarket. [1]: https://www.daveramsey.com/blog/what-is-the-fire-movement https://www.daveramsey.com/blog/what-is-the-fire-movement
- deleted 7y ago[deleted]