[john kane]

thanks for the replies.

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

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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.

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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

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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.

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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.

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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).

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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.

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

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

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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.

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

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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?

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that is suppposed to be long JPY/USD

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

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what do you mean by "beta adjusted weighting"?

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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.

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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.

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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.

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

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cool good to hear.

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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)

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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.