The Ultimate Leverage Investment Thread
 

Introduction

I know I started something similar with the unofficial 2+2 portfolio, but the thread got lost after I didnt update it for a few weeks when i had exams and i lost my login and password details for yahoo finance after i deleted my cookies or something like that.

sooooo....basically as im sure a lot of you have read, a lot of people have some good research on certain stocks.

what i'm hoping is that everyone puts down their stock pick(s). Also put stop loss and at what price to sell if it rises (a limit sell?).

I understand this could be viewed as freeloading, in that someone like me can't contribute much whereas others could. But I hope we could all gain from picking up ideas from others who have researched. Also if anyone who contributes wants poker advice or accountancy advice (in 3 years time) i'll try to help.

Designing the Leveraged Portfolio

Basically, I'd like to come up with a portfolio with beta-adjusted weighting (if that is correct).

I think having say 40% in long term investments (long term trends in forex, markets, commodities) and 60% in short term stocks (stock picks from 1 week to 6 months say).

Thus say 10% for a forex, 2 commodities and a market
and 5% each for 12 stock picks.

Ideal stock picks will be those which have limited exposure to a market fall. So market falling won't kill 60%. Shorting stocks are also fine (in fact good to balance).

I'm going to start off with $20k to invest once this is up and running.

So each stock I'll put in $1k and each long term instrument $2k.

If someone says they think a 10% stop loss on their stock is correct then i'd leverage at 10 times. If stop loss at 33% then 3 times leveraging.

Hope this all makes sense.

I'm going to suggest that for 2 of the long terms, from a lot of people on here for:

long gold

and from Barron:

long USD/JPY


what to do
so if you have a stock suggestion/tip please put:

1. stock symbol
2. stop loss
3. sell limit

also please if you do give a stock tip please be willing to post an update should the position change.

or if you have a long term trend change such as interest rate, forex, commodities, markets please put that down as well.

many thanks for your time. as i say i know this comes across as me trying to freeload, but ill keep everything updated, and hopefully it will be interesting for all.

Re: The Ultimate Leverage Investment Thread
 

Can you even leverage 10x on stocks? What about margin requirements?

I'm long wrls on my own for 6 months or so. Near term catalyst is reporting a crappy portion of the segment as discontinuing operations highlighting the value of the remaining segment. 6 month because there is a huge push for their product through February '08 (maybe longer) due to FCC ruling. Not bullish long term because their main competitors are actually currently partners and the partnerships won't remain long term.

I don't have a stop loss. I'd sell or hold based on the guidance provided next quarter and the stocks reaction. They should guide to a sequential increase in revenue Q4. Depending on the reaction I'm either selling after the quarter or holding through Q4.

I would sell at 9.00 if it gets there before the earnings release.

Krishan

Re: The Ultimate Leverage Investment Thread
 

[ QUOTE ]
and 5% each for 12 stock picks......If someone says they think a 10% stop loss on their stock is correct then i'd leverage at 10 times. If stop loss at 33% then 3 times leveraging.


[/ QUOTE ]

I have some disposable suggestions regarding risk:

It looks like you would lose your entire position should your stop-loss be hit. Since you are betting 5% of your portfolio on each stock, then that means you're risking 5% on each trade.

I think this is a bit too risky and you might be better off toning down your bet-sizes (by a factor of 5, to be honest). Also your portfolio heat looks to be 100%. I think you'd be better off with 20% - especially since I believe you're just starting out.

Also, what vehicle are you using to trade? I suspect you're using spreadbetting. Bear in mind you should factor in the spread when assessing initial risk, and also that spreadbetting is an artificial market. If a 2+2er makes a recommendation with accompanying limit buy/sell orders, then you need to understand how much the corresponding market is trading above the underlying market.

I did a little study on this a while back, and some markets can be off by a few %! However, they do tend to trade above the underlying throughout the day. (I contacted CMC, Capital Spreads, Finspreads amongst others to ask why without receiving satifactory explainations from any of them)

Limit orders on spreadbetting often suffer from (sometimes significant) unfavourable slippage on both sides of your round-trip. Using guaranteed stop-losses will cost you a few pips, but may be worth considering.

Final point - financing. With UK overnight LIBOR around 5.8% these days, this can be a significant expense for positions held longer than the short term. It's sometimes worth having shorter-term targets for prices. Spreadbetting isn't really suitable for holding more than 5 months or so.

Good luck [img]/images/graemlins/smile.gif[/img]

Re: The Ultimate Leverage Investment Thread
 

just to be clear:

[ QUOTE ]
and from Barron:

long USD/JPY


[/ QUOTE ]

that is suppposed to be long JPY/USD i.e. betting that the japanese yen will rise relative to the USD.

anyways, interesting thread...a few thoughts.

what do you mean by "beta adjusted weighting"?

do currencies/commodities have betas? if so i haven't seen them. if not, then the beta weighting won't work in that part of the portfolio since those two are hugely volatile and are not easy to get without a lot of leverage (except gold of course).

also 12 stock picks @ 5% each with "limited market risk" are gunna be hard to find. further, many stocks i see quoted on here would eat up more than 5% worth of vol in risk space relative to the entire portfolio.

overall though, your general idea is good since currencies, commodities and stocks aren't highly correlated, the alpha portfolio would have a good structure.

further, if you really wanted to isolate your bets, you'd pick those 12 stocks with "limited market exposure" and short some % of the risk you allocated to those 12 picks in the S&P 500 futures market (so if the market falls, you don't lose much money via your longs in those stocks but gain money via the short of the futures market of the S&P500)

just some thoughts,
Barron

Re: The Ultimate Leverage Investment Thread
 

thanks for the replies.

[ QUOTE ]
Can you even leverage 10x on stocks? What about margin requirements?

[/ QUOTE ]

im basing this on using a spreadbetting account. i have a guarenteed stop loss account, which i have to deposit the total i can lose. i am assuming that the larger stop loss we want for a stock, the lesser we want to leverage, as the more volatile the stock will be so relative we want that to have a lesser leverage than those of lesser volatility.

thanks for the recommendation of wrls. unfortunately on my spreadbetting account it doesn't have trade wrls (it trades a huge load of US stocks but for some reason, i guess size of stock, they don't offer it). nonetheless i'll track this stock in a yahoo portfolio and it will be included in that.

[ QUOTE ]
you're risking 5% on each trade.

I think this is a bit too risky and you might be better off toning down your bet-sizes

[/ QUOTE ]

the main reason i put 5% was becuase of the minimum amount to trade with per stock. given stop loss and appropriate leveraging, i think the minimum is $1k per stock. i dont really want to gamble more than $20k and that works out at 5% each. also i don't know if more than 12 stock recommendations will be generated by this thread. if we can get up to 24 stock recommendations then ill try and do $500 per trade.

although i guess it could be set at 2.5% per trade and if we dont have enough then the rest of the money can sit in a savings account waiting for more recommendations.

[ QUOTE ]
Also your portfolio heat looks to be 100%. I think you'd be better off with 20% - especially since I believe you're just starting out.

[/ QUOTE ]

thanks for the link, i tried to read over the article, was interesting, but dont think i fully understood it. fwiw this is more of taking 10% of your portfolio and using it as 'take a shot' at a high leverage portfolio, so realistically it's this leverage portfolio is only 10% of your total portfolio (thats what ill be doing fwiw).

[ QUOTE ]
Also, what vehicle are you using to trade? I suspect you're using spreadbetting. Bear in mind you should factor in the spread when assessing initial risk, and also that spreadbetting is an artificial market. If a 2+2er makes a recommendation with accompanying limit buy/sell orders, then you need to understand how much the corresponding market is trading above the underlying market.

[/ QUOTE ]

yep totally agree, problem with the small stocks is the spreads are very wide.

[ QUOTE ]
Using guaranteed stop-losses will cost you a few pips, but may be worth considering.

[/ QUOTE ]

yep my account has guarenteed stop loss at cost of a small extra spread. last thing i want is to wake up one morning and overnight a stock has gone busto and cost me tens of thousands.

i still think there must be a way to use this. say you have a big announcement which will lead to share ending +30% or -30%. if you put a guarenteed stop loss at -10% say, then you either are +30% or -10% i.e. ev of 10% profit.

[ QUOTE ]
Spreadbetting isn't really suitable for holding more than 5 months or so.

[/ QUOTE ]

i understand the concept, but if shouldnt it be more based on whether long term the position will make you more by leveraging than the libor cost+opp cost of tying up money?

[ QUOTE ]
that is suppposed to be long JPY/USD

[/ QUOTE ]

sorry yep, got confused as in my account im currently shorting USD/JPY (that is same as long jpy/usd i assume?)

[ QUOTE ]
what do you mean by "beta adjusted weighting"?

[/ QUOTE ]

thanks for your explanation, i see the dilemma. maybe leveraging based on the % distance of the stop loss? - would that be an automatic way of meaning the more volatile (= bigger % stop loss) are less leveraged than less volatile positions.

[ QUOTE ]
also 12 stock picks @ 5% each with "limited market risk" are gunna be hard to find. further, many stocks i see quoted on here would eat up more than 5% worth of vol in risk space relative to the entire portfolio.

[/ QUOTE ]

yeah i guess 'limited market risk' was more an ideal than a reality. maybe aiming for 2-4 week higher volatile short term stocks mixed in with some 2-6 month longer term lower volatile stocks could be a way to do it.

[ QUOTE ]
overall though, your general idea is good since currencies, commodities and stocks aren't highly correlated, the alpha portfolio would have a good structure.

[/ QUOTE ]

cool good to hear.

[ QUOTE ]
short some % of the risk you allocated to those 12 picks in the S&P 500 futures market (so if the market falls, you don't lose much money via your longs in those stocks but gain money via the short of the futures market of the S&P500)

[/ QUOTE ]

ideally there will be a few stocks to short so that will act as our hedge rather than via shorting the index, if this cant be done then i agree shorting index would be wise.

thanks for all your valuable thoughts.

as i mentioned above this isn't a way of putting all your wealth into this, rather use this as say 10% of your wealth into this high risk portfolio, that's what ill be doing, and if it is going well after a few months then maybe shift it to 20-25%.

thanks again.

Re: The Ultimate Leverage Investment Thread
 

[ QUOTE ]
Spreadbetting isn't really suitable for holding more than 5 months or so.


--------------------------------------------------------------------------------



i understand the concept, but if shouldnt it be more based on whether long term the position will make you more by leveraging than the libor cost+opp cost of tying up money?


[/ QUOTE ]

A $20k account fully leveraged 10x will attract an overnight financing of approx $35-40 per day on long positions, or will pay you interest of around $22 per day on short positions.

If you have a mix of long/short positions, then the cost of financing will be somewhat offset. It's also worth having 2 SB accounts. Firstly if one platform goes down (happens more often than you think) and you desperately want to buy/sell - you have a second option. Secondly, some brokers charge/pay LIBOR +/- 2% for long/short positions while others have different structures.

At the very least, you can go with the expensive finance broker for shorts and the cheap finance broker for longs. It will help cut down the juice.

Also, many brokers have (had?) "sign-up bonuses". Make sure you whore them all [img]/images/graemlins/cool.gif[/img]

Re: The Ultimate Leverage Investment Thread
 

[ QUOTE ]
i still think there must be a way to use this. say you have a big announcement which will lead to share ending +30% or -30%. if you put a guarenteed stop loss at -10% say, then you either are +30% or -10% i.e. ev of 10% profit.

[/ QUOTE ]

How is this guaranteed? Guarantees are never free.

Re: The Ultimate Leverage Investment Thread
 

[ QUOTE ]
[ QUOTE ]
i still think there must be a way to use this. say you have a big announcement which will lead to share ending +30% or -30%. if you put a guarenteed stop loss at -10% say, then you either are +30% or -10% i.e. ev of 10% profit.

[/ QUOTE ]

How is this guaranteed? Guarantees are never free.

[/ QUOTE ]

It's not and his assumption is absurd. There is no way you can determine that an announcement will give a 50-50 shot at either going up 30% or down 30%.

Re: The Ultimate Leverage Investment Thread
 

kimchi, good idea, ill definitely look around a number of different spreadbet providers and try and get some free cash as well.

it is guaranteed, the price you pay is a larger spread. if you have stock X at $1.67 and stop loss at $1.50. if bad news overnight and it opens at $.40 you sold it at $1.50.

sure you cant detemerine an announcemtn will give a 50:50 shot, but take northern rock the past couple of weeks. it finally stabilised at 170p or so, any guide bid was 150p or so. now given that it could have easily risen over good news but likely biggest drop was down to 150p, then it looked a great spreadbet guarenteed stop loss investment.

Re: The Ultimate Leverage Investment Thread
 

[ QUOTE ]
it is guaranteed, the price you pay is initely look around a number of different spreadbet providers and try and get some free cash as well. a larger spread. if you have stock X at $1.67 and stop loss at $1.50. if bad news overnight and it opens at $.40 you sold it at $1.50.


[/ QUOTE ]

huh? if i hold something at X with a stop loss of L*X, and the market opens at O where O<L*X, doesn't the order just get filled at the first possible moment below L*X?

meaning that if the market collapsed quickly (ie. in a big jump like in 1987), you aren't "guaranteed" to get L*X as you ask b/c nobody would bid it.

am i wrong? if so, please explain how the guarantee works. is there a buyer who will always bid at L*X? if so, is there a cost to this type of "insurance"?

thanks,
Barron

Re: The Ultimate Leverage Investment Thread
 

the guarentee is simply a guarantee - you say what your stop loss is, no matter how fast it drops or how low it opens at, you have sold it at the stop loss you specified. the cost is extra spread (i have this type of account, everytime i place a trade and say the spread is +/-0.4, it'll then say 'guarenteed stop losses an extra +/-0.15; i'd need to check the proportion extra it charges).

http://www.igindex.co.uk/content/sit...anagement.html

[ QUOTE ]
You can choose to open your position as a Controlled Risk bet. This means that you specify a level at which you want your bet to be closed, should the market move against you. We then guarantee your position will be closed at this level, even if the price gaps suddenly.

There is an extra charge for this protection, in the form of a Controlled Risk premium, which is added to your opening price. Your position is closed at our standard 'buy' or 'sell' price.

[/ QUOTE ]

i am sure they must be a way to exploit this. the reason why most serious investors won't use this type of account is that you have to have the money you can lose in your account, whereas with the non-guarenteed stop loss they don't have this requirement.

Re: The Ultimate Leverage Investment Thread
 

[ QUOTE ]
am i wrong? if so, please explain how the guarantee works. is there a buyer who will always bid at L*X? if so, is there a cost to this type of "insurance"?

[/ QUOTE ]

I found a reference to this and it really is a guarantee (an implied put basically) unlike a normal stop loss. I don't understand the payment mechanism however. The web site I looked at said "3 points" was standard but I don't quite understand that. OP here seems to be saying you pay a larger spread but I don't completely understand that either (i.e. what this works out to as a percentage of the possible loss in the stock's price).

In any event, I assume the implicit cost of this guarantee must be comparable to buying a put since it's effectively doing the exact same thing if I understand correctly.

Re: The Ultimate Leverage Investment Thread
 

[ QUOTE ]
the guarentee is simply a guarantee - you say what your stop loss is, no matter how fast it drops or how low it opens at, you have sold it at the stop loss you specified. the cost is extra spread (i have this type of account, everytime i place a trade and say the spread is +/-0.4, it'll then say 'guarenteed stop losses an extra +/-0.15; i'd need to check the proportion extra it charges).

http://www.igindex.co.uk/content/sit...anagement.html

[ QUOTE ]
You can choose to open your position as a Controlled Risk bet. This means that you specify a level at which you want your bet to be closed, should the market move against you. We then guarantee your position will be closed at this level, even if the price gaps suddenly.

There is an extra charge for this protection, in the form of a Controlled Risk premium, which is added to your opening price. Your position is closed at our standard 'buy' or 'sell' price.

[/ QUOTE ]

i am sure they must be a way to exploit this. the reason why most serious investors won't use this type of account is that you have to have the money you can lose in your account, whereas with the non-guarenteed stop loss they don't have this requirement.



[/ QUOTE ]

so you bought a put...ok that at least makes sense.

Barron

Re: The Ultimate Leverage Investment Thread
 

[ QUOTE ]
[ QUOTE ]
the guarentee is simply a guarantee - you say what your stop loss is, no matter how fast it drops or how low it opens at, you have sold it at the stop loss you specified. the cost is extra spread (i have this type of account, everytime i place a trade and say the spread is +/-0.4, it'll then say 'guarenteed stop losses an extra +/-0.15; i'd need to check the proportion extra it charges).

http://www.igindex.co.uk/content/sit...anagement.html

[ QUOTE ]
You can choose to open your position as a Controlled Risk bet. This means that you specify a level at which you want your bet to be closed, should the market move against you. We then guarantee your position will be closed at this level, even if the price gaps suddenly.

There is an extra charge for this protection, in the form of a Controlled Risk premium, which is added to your opening price. Your position is closed at our standard 'buy' or 'sell' price.

[/ QUOTE ]

i am sure they must be a way to exploit this. the reason why most serious investors won't use this type of account is that you have to have the money you can lose in your account, whereas with the non-guarenteed stop loss they don't have this requirement.



[/ QUOTE ]

so you bought a put...ok that at least makes sense.

Barron

[/ QUOTE ]

Spreadbetting is a fictional market created by the broker, hence the prices don't exactly mirror the underlying market prices as I mentioned earlier. SB brokers are basically bookies so when you win, the broker loses. They have a slightly seedy reputation because of this and have a vested interest in you busting out and not just churning your account like CFD/futures broker.

The slippage is therefore sometimes unbearable. This is why SB is not suitable for daytrading and the financing makes them unsuitable for longer term trading/investing. If you hold a position for a few weeks or a couple of months, then they are probably a decent vehicle for smaller accounts to trade.

There are commission and tax free (because it's classed as a bet - betting/gambling is tax free in The UK) - but they make most of their money from spreads and financing (assuming you don't immediately bust out)

I don't think spreadbetting is available in The US.

Re: The Ultimate Leverage Investment Thread
 

thanks kimchi for giving a good explanation of spreadbetting as i think a lot of people can't do it due to country restrictions so aren't familar with it.

it's gone well with what little i've done so far, long gold has been great, wish i had long oil as i'd be thinking of doing for ages now, and yen is coming back against the dollar.

i think i will put a 20% stop loss on a chinese tracker fund, leveraging at 5 times.

i have a choice of 2823 A50 China Tracker or 2801 MSCI China tracker (from memory MSCI is morgan stanley china index, that is all i know). any advice on which one?

plan would hold till a couple of weeks before olympics. yes i know a lot of people have this idea and i am very late to the boat, but i think it would be a good idea nonetheless.

currently i have +£30 per $1 swing in gold
+£100 on every $1 increase vs £ but that is just a hedge on dollar holdings i have
+£100 on every 1 yen decrease vs $.

I'm going to triple the yen holdings, so i'd have £3k in total with going busto if it hits 123 yen to $1.

I'm going to put £3k into the china tracker, so for every 1% swing would be £200.

I'm also going to put £1k into northern rock, £20 per 1p swing in share price, so effective stop loss at around 160p.

so to summarise:

£3k in gold. 13% downswing = busto
£3k in china tracker 20% downswing = busto
£3k in yen vs dollar 9% downswing = busto (obv shorting dollar)
£1k in northern rock 25% downswing = busto

thoughts appreciated please.

edit: return is in line with the stop loss, i.e. 25% stop loss = 4 times leverage, 10% stop loss = 10 times leverage etc.
gold 3+ year long investment
china till olympics
yen/dollar till i read otherwise
northern rock long term but likely will settle after a few months and ill look elsewhere.

thoughts much appreciated.

so far up 13.75%, all tax free as well [img]/images/graemlins/smile.gif[/img]

Re: The Ultimate Leverage Investment Thread
 

omfg only just checked the hong kong index, about 17th august it was a bit over 20,000 or so now it's a bit over 29,000, around a 45% increase in 2 month. fuckkk, wish i had decided to go for this 2 months ago.

Re: The Ultimate Leverage Investment Thread
 

[ QUOTE ]
£3k in yen vs dollar 9% downswing = busto (obv shorting dollar)


[/ QUOTE ]

I don't hate it because the dollar is going to get hammered more than it has... but the yen scares me :x

Re: The Ultimate Leverage Investment Thread
 

which currency would you prefer? i can split it between a 2 or 3, but all shorting the dollar i think.

Re: The Ultimate Leverage Investment Thread
 

Actually, I'm not sure the approach I'd use, but I'd short the Pound

Re: The Ultimate Leverage Investment Thread
 

cool thanks for reply.

another ffs moment, i consider long indian 50, i go see chart and within last 2 weeks are slow rises in past year it has just shot up 25%. ffs.

im definitely going to carry on looking into this kind of investing, i think it's the best for me.

Re: The Ultimate Leverage Investment Thread
 

Heh, Yen up and Pound down. wuddya gonna do ;p

Re: The Ultimate Leverage Investment Thread
 

[ QUOTE ]
which currency would you prefer? i can split it between a 2 or 3, but all shorting the dollar i think.

[/ QUOTE ]
When retail investors are inquiring about the best way to set up highly leveraged portfolios to take advantage of the falling dollar on Internet message boards, I'd submit it's a pretty clear signal to go long USD. (Nothing at all personal ... I've seen this question asked / topic explored in dozens of places in just the past few weeks.)

And I wouldn't be at all surprised to see a dramatic short-term upside move in USD/EUR and USD/GBP from these levels in the next couple of weeks ...

Mook

Re: The Ultimate Leverage Investment Thread
 

[ QUOTE ]
[ QUOTE ]
which currency would you prefer? i can split it between a 2 or 3, but all shorting the dollar i think.

[/ QUOTE ]
When retail investors are inquiring about the best way to set up highly leveraged portfolios to take advantage of the falling dollar on Internet message boards, I'd submit it's a pretty clear signal to go long USD. (Nothing at all personal ... I've seen this question asked / topic explored in dozens of places in just the past few weeks.)

And I wouldn't be at all surprised to see a dramatic short-term upside move in USD/EUR and USD/GBP from these levels in the next couple of weeks ...

Mook

[/ QUOTE ]

I think it should be stunted enough though that John's stop losses shouldn't get hit (if in fact a spike comes for the dollar, which it already looks like it is today). We're close enough to the Fed's meeting that this portfolio's success over the next 30 days will probably be determined by Bernanke.

Re: The Ultimate Leverage Investment Thread
 

thanks for the replies. pretty painful day with gold's drop, but rather than selling i increased my position from $60 to $200 per $1 swing at 750p. my current stop loss in now 700p but is very flexible.

as for USD, what i am desperate to do is not to have to worry about short term swings affecting my position (i know gold today but i've was always been planning to put more on and the drop seemed like a good long term buying position).

my problem is that i want stop losses to be large enough that my position can handly short term swings, but not too large that i am tying up money unnecessarily.

also i dont want stop losses that are too far away that i'd abandon the position before the stop loss hits.

i had my best ever weekend poker wise (+$12k) so im on a bit of a finance high at the moment, up to $185k or so now (i had about 10% of that this time last year) so im now feeling like i want to get my finances decided.

i will always keep $100k in savings, which leaves the other $85k to invest with.

thanks for all your thoughts, much appreciated.

Re: The Ultimate Leverage Investment Thread
 

Errrr... how'd you earn 1000%? Primarily poker?

Re: The Ultimate Leverage Investment Thread
 

[ QUOTE ]
Actually, I'm not sure the approach I'd use, but I'd short the Pound

[/ QUOTE ]

Cant think of anything more over valued than the pound.

Re: The Ultimate Leverage Investment Thread
 

[ QUOTE ]
[ QUOTE ]
Actually, I'm not sure the approach I'd use, but I'd short the Pound

[/ QUOTE ]

Cant think of anything more over valued than the pound.

[/ QUOTE ]

An unexpected rate cut or two will take care of things over there (hurting the pound). Not sure how long it's going to be though. Yen/Pound or Yuan/Pound would probably be a good thing to trade.

Re: The Ultimate Leverage Investment Thread
 

crushin, yep all through poker.

rate cuts are very likely imo in the UK (where im from). poor people with mortgages need it, economy needs it, and inflation is bang on the target at the moment so seems likely next month or in 2 months time.

bearing that in mind, then ill go for yuan/pound as sticking with yen/dollar as well.

any thoughts on wheat?

Re: The Ultimate Leverage Investment Thread
 

[ QUOTE ]
crushin, yep all through poker.

rate cuts are very likely imo in the UK (where im from). poor people with mortgages need it, economy needs it, and inflation is bang on the target at the moment so seems likely next month or in 2 months time.

bearing that in mind, then ill go for yuan/pound as sticking with yen/dollar as well.

any thoughts on wheat?

[/ QUOTE ]

heh, don't get me started on wheat; I help set the margins for that and deal with it on a daily basis. ;p

One thing I will say is that there are a lot of different way to trade it (ie rolling from one month to the other or just going long the back months or spreading crop years, etc.). So I'd take some time to really consider all the different ways of playing long or short wheat and the implications of each.

Re: The Ultimate Leverage Investment Thread
 

i really feel like a newbie (not surprising i guess given i am) when it comes to this. basically i think this time in 8-9 months or so wheat will be much higher than the 5% ill get from the bank, and given the risk it is worth it.

on my spreadbetting account i have the wheat london may 08 spread at 167.75 : 168.25

i was planning to do a bit of research, see what stop loss would give me roughly a 20% or less risk or ruin, and then leveraging my amount i was willing to bet.

what level would you recommend a stop loss? do you think it will go up?

part of me is tempted to start a new thread, but i think this is going well.

basically with the $85k i was thinking:
$10k gold
$3k oil
$3k wheat
$7k forex position A (yuan/pound)
$7k forex position B (yen/dollar)
$7k index position A (china)
$7k index position B (india)
$5k stock position A (northern rock)
$5k stock position B (?)
$5k stock position C (?)

so $16k in 3 commodities, $14k in 2 forex positions, $14k in 2 index positions, $15k in 3 stock positions. total of $59k in positions.

am i mad for doing this.

fwiw $100k would be in savings, the other $30k or so staking players, loans to friends+bankroll.

also to begin with i wouldn't put all this money down in my spreadbetting account simply becuase i dont have it right now.

i know people have lost vast sums trading, maybe this is stupid, but with a long term investing approach with conservative stop losses, it should work well.

as ever thanks for your thoughts, hugely appreciated.

Re: The Ultimate Leverage Investment Thread
 

It may not be a bad idea to lump B & C together into some kind of broader index. If you don't see any good trades then there's really no reason to force yourself into two new positions. Maybe pick a sector or 2(pharm or tech or health care, whatever) and use that rather than individual stocks.

Also, with regard to your wheat bet, can I ask why May? It is the tail-end of a crop year so what exactly do you think will happen? Definitely don't take this as me saying not to go with May '08 wheat, I'm just wondering why you chose it.

The new crops are still very low priced (below $6.50 or 130.00 in your price terms I think). I doubt any farmer in all of Australia will be planting wheat next year because of how badly they all got clobbered (obv a little exaggeration). But then that might spur farmers everywhere else (Europe and USA) to plant a lot of wheat to take advantage of a shorter supply. That in turn may spark a shortage in soybeans or corn because not as many farmers will plant it next year compared to this year.

I think commodities are really interesting because it really is a game of supply/demand as well as the crazy variable of weather.

Perhaps Mr. Baseball can chime in here ;p

Re: The Ultimate Leverage Investment Thread
 

thanks a lot for the reply. yep thats a good idea combining B and C into and index or one or two sectors. i just find reading into commodities, indexes and forex so much more interesting than individual stocks. i feel it's a much broader spectrum your reading about which i find more interesting.
im going to buy a few commodity trading books and do some reading, it's very interesting. as ive mentioned before i have a good friend who is a commodity trader (i am stilll waiting for him to reply about his take on copper amongst other things) so he can help meet as well - hopefully ill be living with him from jan onwards.

as for why May, solely becuase only time offered on my spreadbetting account, i assume that once a longer contract becomes available i'd sell the May one and buy a summer contract or something like that.

ive got to go to bed now - boo - and 2+2 is banned at work, but ill be back on this time tomorrow so sorry that i cant post anything till then.

thanks again.

Re: The Ultimate Leverage Investment Thread
 

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thanks for the replies. pretty painful day with gold's drop, but rather than selling i increased my position from $60 to $200 per $1 swing at 750p. my current stop loss in now 700p but is very flexible.


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What made you decide to incease your position in gold by over 300%? Was this trade already going in the right direction?

Also, bear in mind that a 'flexible' stop-loss isn't a stop-loss. If your stop is hit, take the loss. If the trade looks promising again the next day, look for another entry.

Re: The Ultimate Leverage Investment Thread
 

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$7k forex position B (yen/dollar)

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Rather than investing directly in a foreign currency I prefer to invest in a company in said country with the vast majority of revenues in said country's currency. IF I can find a company that appears to be reasonably valued. I like the Yen vs. the USD (or GBP) right now and I think NTT is a better play on than buying yen directly.

Re: The Ultimate Leverage Investment Thread
 

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rate cuts are very likely imo in the UK (where im from). poor people with mortgages need it, economy needs it, and inflation is bang on the target at the moment so seems likely next month or in 2 months time.

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The BoE has no responsibility for poor people with mortgages. It is only concern is with inflation. As all the inflationary pressures are on the up side dont count on a cut in the next two months, indeed a cut is not priced into swap markets.

The reason the pound is about to drop is that the whole UK miracle economy is a fraud. As soon as the imminent house price crash sets in due to the massively increased criteria banks are asking for for mortgages, this will be revealed.

To be clear the UK is not in a housing bubble, it is in a credit bubble (1.6£ trillion public debt) and has the highest level of indebtedness in the developed world. HPI has been a direct result of the record debt as there is more money chasing fewer houses. Now that the credit crunch has set in to the UK economy the conditions for HPI do not exist and a housing crash is imminent in the next 6-12 months.

Basically when examined there are no fundamentals to the British economy. Yes indexes are good, but that is all down to the credit bubble. Once that bubble pops bye bye sterling.

Good peice on British Economy.

Re: The Ultimate Leverage Investment Thread
 

Just bought (or put in the order to buy) some Jan 09 puts on crox. Its my first time trading options. Did I make a mistake by entering market order? I find etrade generally gets good market prices. Also what percent of your portfolio does it make sense to allocate per options position? Seems like 5% should be the max, right? Or does that decrease with longer dated options because your hypothesis is more likely to be correct and thus youll finish ITM more often (even if you dont get back your full contract buying price)

Re: The Ultimate Leverage Investment Thread
 

[ QUOTE ]
[ QUOTE ]
rate cuts are very likely imo in the UK (where im from). poor people with mortgages need it, economy needs it, and inflation is bang on the target at the moment so seems likely next month or in 2 months time.

[/ QUOTE ]

The BoE has no responsibility for poor people with mortgages. It is only concern is with inflation. As all the inflationary pressures are on the up side dont count on a cut in the next two months, indeed a cut is not priced into swap markets.

[/ QUOTE ]

that may be 2 months out but take a look at the UK yeild curve. it is absolutely inverted with a big quick drop to 4.75% in the next 1-1.5 yrs. it stays negatively sloped out for the next 25 yrs (as of oct 22).

i'm thinking of a good trade idea here since the real yield curve is steepening (negatively) to a price of .25bps in 25years. that means there is an absolutely insane demand for UK IL bonds.

check it out here:

BoE Yield Curve

so basically, while the swap market may not be pricing in a cut in the next 2 months, the yield curve is pricing in some insane easing with some interesting outcomes (and thus some good trade ideas for me [img]/images/graemlins/smile.gif[/img] )

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The reason the pound is about to drop is that the whole UK miracle economy is a fraud. As soon as the imminent house price crash sets in due to the massively increased criteria banks are asking for for mortgages, this will be revealed.

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that is definitely priced in...perhaps too much for too long (will the UK economy really be in such a state in 25 years that there will be 3.75% short rates with 3.5% inflation? that is what is priced in at this point.

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To be clear the UK is not in a housing bubble, it is in a credit bubble (1.6£ trillion public debt) and has the highest level of indebtedness in the developed world. HPI has been a direct result of the record debt as there is more money chasing fewer houses. Now that the credit crunch has set in to the UK economy the conditions for HPI do not exist and a housing crash is imminent in the next 6-12 months.

Basically when examined there are no fundamentals to the British economy. Yes indexes are good, but that is all down to the credit bubble. Once that bubble pops bye bye sterling.

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is there a place i can see the forward sterling curve (i.e. the futures currency price in 3/6/9/12/15 months?) i'll look for it but if you know of one let me know.

Good peice on British Economy.

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thanks for the link, this will provide some very good fodder for trade ideas.

Barron

Re: The Ultimate Leverage Investment Thread
 

http://img512.imageshack.us/img512/9354/poundja1.png

Re: The Ultimate Leverage Investment Thread
 

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http://img512.imageshack.us/img512/9354/poundja1.png

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OMG, wtf, are those serious...i have to go get an MRI for my foot but i'll back out the implied UK rates given US rates at certain levels for those prices but at first glance they look way off.

be back later.

Barron

EDIT: i just realized why the late maturity contracts are so high, b/c they are being pulled up by the short maturities via arbitrage. i'll dig more into this later but thanks a ton crushin for the post (is this available online instead of just through your image shack?)

Re: The Ultimate Leverage Investment Thread
 

Ya, www.cme.com

and go to delayed quotes