Margin Account Definition and Example

The comedy how I lost all my money in two hours

I'm trading for 11 months with pretty good success.
I never traded metals and forex before, just stocks. Today when gold started to consolidate at the last hour, I decided to scalp short it with a large amount, so I opened 100 lots. I haven't realised, in forex 100 (lots) doesn't mean "100 pcs", because I used to stocks and I went full retard without knowledge.
Seconds later, I realised it means 10 million dollars (1 lot = 100.000, and I had 500x leverage).
It moved up a bit and immediately I was down £4000. I scared as fuck and rather than closing the position quickly I hoped maybe I could close break even.
The market closed, and I waited for the Asian session. The gold popped like never before, and I lost all my life savings (£55000) in less than two hours. (including the 1-hour break between sessions).
If I count that I lost all my earnings as well, I lost around £85000.
Here is the margin call
https://imgur.com/a/XY5m4ZA
https://imgur.com/a/VSgmCSs
https://imgur.com/pRWl5g9
IC Markets closed my position partially in every 1-2 minutes until I shut it myself at £35.
You know the rest of the story. I'm depressed, crying and shouting with myself.
Yes, I know I was stupid, thanks. I just wanted to share this with you.



Edit: WOW THANK YOU, GUYS! I haven't expected this, but you help me.
Many of you asked the same questions, I answer it here:
- I live in Europe, and we usually trade CFD's, not futures.
- Currency in GBP.
- As you can see, this account made on IC Markets. They not just allowing you a 500x leverage, it's the default.
- You can ask me why I went against the market. Because gold is way oversold? Because I expected institutions would sell their shares before gold is hitting £2000, leaving retails hanging there. Also, as I said, I wanted to scalp, not riding the gold all the way down. If I had a loss of £100, I would close the position immediately. But when I saw the £4000, my heart is stopped, and my brain just freezes.
- I went for a revenge trade with my last £2k, and I don't have to say what happened. I uninstalled the app, and I give up trading for a while.
- Again, in the past months, I was cautious, I lost a significant sum in March, but I managed to recover. Made consistent gains, always with SL. This is just an example of how easy is to fuck up everything you did.
- I didn't come here for some shiny digital medals. I can't tell about my losses to anyone who I know in real life. I would make a fool of myself.
- Anyone who attacking me that it is a scam. Well, think what you want. I feel terrible and the last thing is to answer all the messages saying "You fucking karma whore". I don't give a shit about karma.

submitted by fail0verflowf9 to wallstreetbets [link] [comments]

The dollar standard and how the Fed itself created the perfect setup for a stock market crash

Disclaimer: This is neither financial nor trading advice and everyone should trade based on their own risk tolerance. Please leverage yourself accordingly. When you're done, ask yourself: "Am I jacked to the tits?". If the answer is "yes", you're good to go.
We're probably experiencing the wildest markets in our lifetime. After doing some research and listening to opinions by several people, I wanted to share my own view on what happened in the market and what could happen in the future. There's no guarantee that the future plays out as I describe it or otherwise I'd become very rich.
If you just want tickers and strikes...I don't know if this is going to help you. But anyways, scroll way down to the end. My current position is TLT 171c 8/21, opened on Friday 7/31 when TLT was at 170.50.
This is a post trying to describe what it means that we've entered the "dollar standard" decades ago after leaving the gold standard. Furthermore I'll try to explain how the "dollar standard" is the biggest reason behind the 2008 and 2020 financial crisis, stock market crashes and how the Coronavirus pandemic was probably the best catalyst for the global dollar system to blow up.

Tackling the Dollar problem

Throughout the month of July we've seen the "death of the Dollar". At least that's what WSB thinks. It's easy to think that especially since it gets reiterated in most media outlets. I will take the contrarian view. This is a short-term "downturn" in the Dollar and very soon the Dollar will rise a lot against the Euro - supported by the Federal Reserve itself.US dollar Index (DXY)If you zoom out to the 3Y chart you'll see what everyone is being hysterical about. The dollar is dying! It was that low in 2018! This is the end! The Fed has done too much money printing! Zimbabwe and Weimar are coming to the US.
There is more to it though. The DXY is dominated by two currency rates and the most important one by far is EURUSD.EURUSD makes up 57.6% of the DXY
And we've seen EURUSD rise from 1.14 to 1.18 since July 21st, 2020. Why that date? On that date the European Commission (basically the "government" of the EU) announced that there was an agreement for the historical rescue package for the EU. That showed the markets that the EU seems to be strong and resilient, it seemed to be united (we're not really united, trust me as an European) and therefore there are more chances in the EU, the Euro and more chances taking risks in the EU.Meanwhile the US continued to struggle with the Coronavirus and some states like California went back to restricting public life. The US economy looked weaker and therefore the Euro rose a lot against the USD.
From a technical point of view the DXY failed to break the 97.5 resistance in June three times - DXY bulls became exhausted and sellers gained control resulting in a pretty big selloff in the DXY.

Why the DXY is pretty useless

Considering that EURUSD is the dominant force in the DXY I have to say it's pretty useless as a measurement of the US dollar. Why? Well, the economy is a global economy. Global trade is not dominated by trade between the EU and the USA. There are a lot of big exporting nations besides Germany, many of them in Asia. We know about China, Japan, South Korea etc. Depending on the business sector there are a lot of big exporters in so-called "emerging markets". For example, Brazil and India are two of the biggest exporters of beef.
Now, what does that mean? It means that we need to look at the US dollar from a broader perspective. Thankfully, the Fed itself provides a more accurate Dollar index. It's called the "Trade Weighted U.S. Dollar Index: Broad, Goods and Services".
When you look at that index you will see that it didn't really collapse like the DXY. In fact, it still is as high as it was on March 10, 2020! You know, only two weeks before the stock market bottomed out. How can that be explained?

Global trade, emerging markets and global dollar shortage

Emerging markets are found in countries which have been shifting away from their traditional way of living towards being an industrial nation. Of course, Americans and most of the Europeans don't know how life was 300 years ago.China already completed that transition. Countries like Brazil and India are on its way. The MSCI Emerging Market Index lists 26 countries. Even South Korea is included.
However there is a big problem for Emerging Markets: the Coronavirus and US Imports.The good thing about import and export data is that you can't fake it. Those numbers speak the truth. You can see that imports into the US haven't recovered to pre-Corona levels yet. It will be interesting to see the July data coming out on August 5th.Also you can look at exports from Emerging Market economies. Let's take South Korean exports YoY. You can see that South Korean exports are still heavily depressed compared to a year ago. Global trade hasn't really recovered.For July the data still has to be updated that's why you see a "0.0%" change right now.Less US imports mean less US dollars going into foreign countries including Emerging Markets.Those currency pairs are pretty unimpressed by the rising Euro. Let's look at a few examples. Use the 1Y chart to see what I mean.
Indian Rupee to USDBrazilian Real to USDSouth Korean Won to USD
What do you see if you look at the 1Y chart of those currency pairs? There's no recovery to pre-COVID levels. And this is pretty bad for the global financial system. Why? According to the Bank of International Settlements there is $12.6 trillion of dollar-denominated debt outside of the United States. Now the Coronavirus comes into play where economies around the world are struggling to go back to their previous levels while the currencies of Emerging Markets continue to be WEAK against the US dollar.
This is very bad. We've already seen the IMF receiving requests for emergency loans from 80 countries on March 23th. What are we going to see? We know Argentina has defaulted on their debt more than once and make jokes about it. But what happens if we see 5 Argentinas? 10? 20? Even 80?
Add to that that global travel is still depressed, especially for US citizens going anywhere. US citizens traveling to other countries is also a situation in which the precious US dollars would enter Emerging Market economies. But it's not happening right now and it won't happen unless we actually get a miracle treatment or the virus simply disappears.
This is where the treasury market comes into play. But before that, let's quickly look at what QE (rising Fed balance sheet) does to the USD.
Take a look at the Trade-Weighted US dollar Index. Look at it at max timeframe - you'll see what happened in 2008. The dollar went up (shocker).Now let's look at the Fed balance sheet at max timeframe. You will see: as soon as the Fed starts the QE engine, the USD goes UP, not down! September 2008 (Fed first buys MBS), March 2009, March 2020. Is it just a coincidence? No, as I'll explain below. They're correlated and probably even in causation.Oh and in all of those scenarios the stock market crashed...compared to February 2020, the Fed balance sheet grew by ONE TRILLION until March 25th, but the stock market had just finished crashing...can you please prove to me that QE makes stock prices go up? I think I've just proven the opposite correlation.

Bonds, bills, Gold and "inflation"

People laugh at bond bulls or at people buying bonds due to the dropping yields. "Haha you're stupid you're buying an asset which matures in 10 years and yields 5.3% STONKS go up way more!".Let me stop you right there.
Why do you buy stocks? Will you hold those stocks until you die so that you regain your initial investment through dividends? No. You buy them because you expect them to go up based on fundamental analysis, news like earnings or other things. Then you sell them when you see your price target reached. The assets appreciated.Why do you buy options? You don't want to hold them until expiration unless they're -90% (what happens most of the time in WSB). You wait until the underlying asset does what you expect it does and then you sell the options to collect the premium. Again, the assets appreciated.
It's the exact same thing with treasury securities. The people who've been buying bonds for the past years or even decades didn't want to wait until they mature. Those people want to sell the bonds as they appreciate. Bond prices have an inverse relationship with their yields which is logical when you think about it. Someone who desperately wants and needs the bonds for various reasons will accept to pay a higher price (supply and demand, ya know) and therefore accept a lower yield.
By the way, both JP Morgan and Goldmans Sachs posted an unexpected profit this quarter, why? They made a killing trading bonds.
US treasury securities are the most liquid asset in the world and they're also the safest asset you can hold. After all, if the US default on their debt you know that the world is doomed. So if US treasuries become worthless anything else has already become worthless.
Now why is there so much demand for the safest and most liquid asset in the world? That demand isn't new but it's caused by the situation the global economy is in. Trade and travel are down and probably won't recover anytime soon, emerging markets are struggling both with the virus and their dollar-denominated debt and central banks around the world struggle to find solutions for the problems in the financial markets.
How do we now that the markets aren't trusting central banks? Well, bonds tell us that and actually Gold tells us the same!
TLT chartGold spot price chart
TLT is an ETF which reflects the price of US treasuries with 20 or more years left until maturity. Basically the inverse of the 30 year treasury yield.
As you can see from the 5Y chart bonds haven't been doing much from 2016 to mid-2019. Then the repo crisis of September 2019took place and TLT actually rallied in August 2019 before the repo crisis finally occurred!So the bond market signaled that something is wrong in the financial markets and that "something" manifested itself in the repo crisis.
After the repo market crisis ended (the Fed didn't really do much to help it, before you ask), bonds again were quiet for three months and started rallying in January (!) while most of the world was sitting on their asses and downplaying the Coronavirus threat.
But wait, how does Gold come into play? The Gold chart basically follows the same pattern as the TLT chart. Doing basically nothing from 2016 to mid-2019. From June until August Gold rose a staggering 200 dollars and then again stayed flat until December 2019. After that, Gold had another rally until March when it finally collapsed.
Many people think rising Gold prices are a sign of inflation. But where is the inflation? We saw PCE price indices on Friday July 31st and they're at roughly 1%. We've seen CPIs from European countries and the EU itself. France and the EU (July 31st) as a whole had a very slight uptick in CPI while Germany (July 30th), Italy (July 31st) and Spain (July 30th) saw deflationary prints.There is no inflation, nowhere in the world. I'm sorry to burst that bubble.
Yet, Gold prices still go up even when the Dollar rallies through the DXY (sadly I have to measure it that way now since the trade-weighted index isn't updated daily) and we know that there is no inflation from a monetary perspective. In fact, Fed chairman JPow, apparently the final boss for all bears, said on Wednesday July 29th that the Coronavirus pandemic is a deflationary disinflationary event. Someone correct me there, thank you. But deflationary forces are still in place even if JPow wouldn't admit it.
To conclude this rather long section: Both bonds and Gold are indicators for an upcoming financial crisis. Bond prices should fall and yields should go up to signal an economic recovery. But the opposite is happening. in that regard heavily rising Gold prices are a very bad signal for the future. Both bonds and Gold are screaming: "The central banks haven't solved the problems".
By the way, Gold is also a very liquid asset if you want quick cash, that's why we saw it sell off in March because people needed dollars thanks to repo problems and margin calls.When the deflationary shock happens and another liquidity event occurs there will be another big price drop in precious metals and that's the dip which you could use to load up on metals by the way.

Dismantling the money printer

But the Fed! The M2 money stock is SHOOTING THROUGH THE ROOF! The printers are real!By the way, velocity of M2 was updated on July 30th and saw another sharp decline. If you take a closer look at the M2 stock you see three parts absolutely skyrocketing: savings, demand deposits and institutional money funds. Inflationary? No.
So, the printers aren't real. I'm sorry.Quantitative easing (QE) is the biggest part of the Fed's operations to help the economy get back on its feet. What is QE?Upon doing QE the Fed "purchases" treasury and mortgage-backed securities from the commercial banks. The Fed forces the commercial banks to hand over those securities and in return the commercial banks reserve additional bank reserves at an account in the Federal Reserve.
This may sound very confusing to everyone so let's make it simple by an analogy.I want to borrow a camera from you, I need it for my road trip. You agree but only if I give you some kind of security - for example 100 bucks as collateral.You keep the 100 bucks safe in your house and wait for me to return safely. You just wait and wait. You can't do anything else in this situation. Maybe my road trip takes a year. Maybe I come back earlier. But as long as I have your camera, the 100 bucks need to stay with you.
In this analogy, I am the Fed. You = commercial banks. Camera = treasuries/MBS. 100 bucks = additional bank reserves held at the Fed.

Revisiting 2008 briefly: the true money printers

The true money printers are the commercial banks, not the central banks. The commercial banks give out loans and demand interest payments. Through those interest payments they create money out of thin air! At the end they'll have more money than before giving out the loan.
That additional money can be used to give out more loans, buy more treasury/MBS Securities or gain more money through investing and trading.
Before the global financial crisis commercial banks were really loose with their policy. You know, the whole "Big Short" story, housing bubble, NINJA loans and so on. The reckless handling of money by the commercial banks led to actual money printing and inflation, until the music suddenly stopped. Bear Stearns went tits up. Lehman went tits up.
The banks learned from those years and completely changed, forever. They became very strict with their lending resulting in the Fed and the ECB not being able to raise their rates. By keeping the Fed funds rate low the Federal Reserve wants to encourage commercial banks to give out loans to stimulate the economy. But commercial banks are not playing along. They even accept negative rates in Europe rather than taking risks in the actual economy.
The GFC of 2008 completely changed the financial landscape and the central banks have struggled to understand that. The system wasn't working anymore because the main players (the commercial banks) stopped playing with each other. That's also the reason why we see repeated problems in the repo market.

How QE actually decreases liquidity before it's effective

The funny thing about QE is that it achieves the complete opposite of what it's supposed to achieve before actually leading to an economic recovery.
What does that mean? Let's go back to my analogy with the camera.
Before I take away your camera, you can do several things with it. If you need cash, you can sell it or go to a pawn shop. You can even lend your camera to someone for a daily fee and collect money through that.But then I come along and just take away your camera for a road trip for 100 bucks in collateral.
What can you do with those 100 bucks? Basically nothing. You can't buy something else with those. You can't lend the money to someone else. It's basically dead capital. You can just look at it and wait until I come back.
And this is what is happening with QE.
Commercial banks buy treasuries and MBS due to many reasons, of course they're legally obliged to hold some treasuries, but they also need them to make business.When a commercial bank has a treasury security, they can do the following things with it:- Sell it to get cash- Give out loans against the treasury security- Lend the security to a short seller who wants to short bonds
Now the commercial banks received a cash reserve account at the Fed in exchange for their treasury security. What can they do with that?- Give out loans against the reserve account
That's it. The bank had to give away a very liquid and flexible asset and received an illiquid asset for it. Well done, Fed.
The goal of the Fed is to encourage lending and borrowing through suppressing yields via QE. But it's not happening and we can see that in the H.8 data (assets and liabilities of the commercial banks).There is no recovery to be seen in the credit sector while the commercial banks continue to collect treasury securities and MBS. On one hand, they need to sell a portion of them to the Fed on the other hand they profit off those securities by trading them - remember JPM's earnings.
So we see that while the Fed is actually decreasing liquidity in the markets by collecting all the treasuries it has collected in the past, interest rates are still too high. People are scared, and commercial banks don't want to give out loans. This means that as the economic recovery is stalling (another whopping 1.4M jobless claims on Thursday July 30th) the Fed needs to suppress interest rates even more. That means: more QE. that means: the liquidity dries up even more, thanks to the Fed.
We heard JPow saying on Wednesday that the Fed will keep their minimum of 120 billion QE per month, but, and this is important, they can increase that amount anytime they see an emergency.And that's exactly what he will do. He will ramp up the QE machine again, removing more bond supply from the market and therefore decreasing the liquidity in financial markets even more. That's his Hail Mary play to force Americans back to taking on debt again.All of that while the government is taking on record debt due to "stimulus" (which is apparently only going to Apple, Amazon and Robinhood). Who pays for the government debt? The taxpayers. The wealthy people. The people who create jobs and opportunities. But in the future they have to pay more taxes to pay down the government debt (or at least pay for the interest). This means that they can't create opportunities right now due to the government going insane with their debt - and of course, there's still the Coronavirus.

"Without the Fed, yields would skyrocket"

This is wrong. The Fed has been keeping their basic level QE of 120 billion per month for months now. But ignoring the fake breakout in the beginning of June (thanks to reopening hopes), yields have been on a steady decline.
Let's take a look at the Fed's balance sheet.
The Fed has thankfully stayed away from purchasing more treasury bills (short term treasury securities). Bills are important for the repo market as collateral. They're the best collateral you can have and the Fed has already done enough damage by buying those treasury bills in March, destroying even more liquidity than usual.
More interesting is the point "notes and bonds, nominal". The Fed added 13.691 billion worth of US treasury notes and bonds to their balance sheet. Luckily for us, the US Department of Treasury releases the results of treasury auctions when they occur. On July 28th there was an auction for the 7 year treasury note. You can find the results under "Note -> Term: 7-year -> Auction Date 07/28/2020 -> Competitive Results PDF". Or here's a link.
What do we see? Indirect bidders, which are foreigners by the way, took 28 billion out of the total 44 billion. That's roughly 64% of the entire auction. Primary dealers are the ones which sell the securities to the commercial banks. Direct bidders are domestic buyers of treasuries.
The conclusion is: There's insane demand for US treasury notes and bonds by foreigners. Those US treasuries are basically equivalent to US dollars. Now dollar bears should ask themselves this question: If the dollar is close to a collapse and the world wants to get rid fo the US dollar, why do foreigners (i.e. foreign central banks) continue to take 60-70% of every bond auction? They do it because they desperately need dollars and hope to drive prices up, supported by the Federal Reserve itself, in an attempt to have the dollar reserves when the next liquidity event occurs.
So foreigners are buying way more treasuries than the Fed does. Final conclusion: the bond market has adjusted to the Fed being a player long time ago. It isn't the first time the Fed has messed around in the bond market.

How market participants are positioned

We know that commercial banks made good money trading bonds and stocks in the past quarter. Besides big tech the stock market is being stagnant, plain and simple. All the stimulus, stimulus#2, vaccinetalksgoingwell.exe, public appearances by Trump, Powell and their friends, the "money printing" (which isn't money printing) by the Fed couldn't push SPY back to ATH which is 339.08 btw.
Who can we look at? Several people but let's take Bill Ackman. The one who made a killing with Credit Default Swaps in March and then went LONG (he said it live on TV). Well, there's an update about him:Bill Ackman saying he's effectively 100% longHe says that around the 2 minute mark.
Of course, we shouldn't just believe what he says. After all he is a hedge fund manager and wants to make money. But we have to assume that he's long at a significant percentage - it doesn't even make sense to get rid of positions like Hilton when they haven't even recovered yet.
Then again, there are sources to get a peek into the positions of hedge funds, let's take Hedgopia.We see: Hedge funds are starting to go long on the 10 year bond. They are very short the 30 year bond. They are very long the Euro, very short on VIX futures and short on the Dollar.

Endgame

This is the perfect setup for a market meltdown. If hedge funds are really positioned like Ackman and Hedgopia describes, the situation could unwind after a liquidity event:The Fed increases QE to bring down the 30 year yield because the economy isn't recovering yet. We've already seen the correlation of QE and USD and QE and bond prices.That causes a giant short squeeze of hedge funds who are very short the 30 year bond. They need to cover their short positions. But Ackman said they're basically 100% long the stock market and nothing else. So what do they do? They need to sell stocks. Quickly. And what happens when there is a rapid sell-off in stocks? People start to hedge via put options. The VIX rises. But wait, hedge funds are short VIX futures, long Euro and short DXY. To cover their short positions on VIX futures, they need to go long there. VIX continues to go up and the prices of options go suborbital (as far as I can see).Also they need to get rid of Euro futures and cover their short DXY positions. That causes the USD to go up even more.
And the Fed will sit there and do their things again: more QE, infinity QE^2, dollar swap lines, repo operations, TARP and whatever. The Fed will be helpless against the forces of the market and have to watch the stock market burn down and they won't even realize that they created the circumstances for it to happen - by their programs to "help the economy" and their talking on TV. Do you remember JPow on 60minutes talking about how they flooded the world with dollars and print it digitally? He wanted us poor people to believe that the Fed is causing hyperinflation and we should take on debt and invest into the stock market. After all, the Fed has it covered.
But the Fed hasn't got it covered. And Powell knows it. That's why he's being a bear in the FOMC statements. He knows what's going on. But he can't do anything about it except what's apparently proven to be correct - QE, QE and more QE.

A final note about "stock market is not the economy"

It's true. The stock market doesn't reflect the current state of the economy. The current economy is in complete shambles.
But a wise man told me that the stock market is the reflection of the first and second derivatives of the economy. That means: velocity and acceleration of the economy. In retrospect this makes sense.
The economy was basically halted all around the world in March. Of course it's easy to have an insane acceleration of the economy when the economy is at 0 and the stock market reflected that. The peak of that accelerating economy ("max velocity" if you want to look at it like that) was in the beginning of June. All countries were reopening, vaccine hopes, JPow injecting confidence into the markets. Since then, SPY is stagnant, IWM/RUT, which is probably the most accurate reflection of the actual economy, has slightly gone down and people have bid up tech stocks in absolute panic mode.
Even JPow admitted it. The economic recovery has slowed down and if we look at economic data, the recovery has already stopped completely. The economy is rolling over as we can see in the continued high initial unemployment claims. Another fact to factor into the stock market.

TLDR and positions or ban?

TLDR: global economy bad and dollar shortage. economy not recovering, JPow back to doing QE Infinity. QE Infinity will cause the final squeeze in both the bond and stock market and will force the unwinding of the whole system.
Positions: idk. I'll throw in TLT 190c 12/18, SPY 220p 12/18, UUP 26c 12/18.That UUP call had 12.5k volume on Friday 7/31 btw.

Edit about positions and hedge funds

My current positions. You can laugh at my ZEN calls I completely failed with those.I personally will be entering one of the positions mentioned in the end - or similar ones. My personal opinion is that the SPY puts are the weakest try because you have to pay a lot of premium.
Also I forgot talking about why hedge funds are shorting the 30 year bond. Someone asked me in the comments and here's my reply:
"If you look at treasury yields and stock prices they're pretty much positively correlated. Yields go up, then stocks go up. Yields go down (like in March), then stocks go down.
What hedge funds are doing is extremely risky but then again, "hedge funds" is just a name and the hedgies are known for doing extremely risky stuff. They're shorting the 30 year bond because they needs 30y yields to go UP to validate their long positions in the equity market. 30y yields going up means that people are welcoming risk again, taking on debt, spending in the economy.
Milton Friedman labeled this the "interest rate fallacy". People usually think that low interest rates mean "easy money" but it's the opposite. Low interest rates mean that money is really tight and hard to get. Rising interest rates on the other hand signal an economic recovery, an increase in economic activity.
So hedge funds try to fight the Fed - the Fed is buying the 30 year bonds! - to try to validate their stock market positions. They also short VIX futures to do the same thing. Equity bulls don't want to see VIX higher than 15. They're also short the dollar because it would also validate their position: if the economic recovery happens and the global US dollar cycle gets restored then it will be easy to get dollars and the USD will continue to go down.
Then again, they're also fighting against the Fed in this situation because QE and the USD are correlated in my opinion.
Another Redditor told me that people who shorted Japanese government bonds completely blew up because the Japanese central bank bought the bonds and the "widow maker trade" was born:https://www.investopedia.com/terms/w/widow-maker.asp"

Edit #2

Since I've mentioned him a lot in the comments, I recommend you check out Steven van Metre's YouTube channel. Especially the bottom passages of my post are based on the knowledge I received from watching his videos. Even if didn't agree with him on the fundamental issues (there are some things like Gold which I view differently than him) I took it as an inspiration to dig deeper. I think he's a great person and even if you're bullish on stocks you can learn something from Steven!

submitted by 1terrortoast to wallstreetbets [link] [comments]

Former investment bank FX trader: some thoughts

Former investment bank FX trader: some thoughts
Hi guys,
I have been using reddit for years in my personal life (not trading!) and wanted to give something back in an area where i am an expert.
I worked at an investment bank for seven years and joined them as a graduate FX trader so have lots of professional experience, by which i mean I was trained and paid by a big institution to trade on their behalf. This is very different to being a full-time home trader, although that is not to discredit those guys, who can accumulate a good amount of experience/wisdom through self learning.
When I get time I'm going to write a mid-length posts on each topic for you guys along the lines of how i was trained. I guess there would be 15-20 topics in total so about 50-60 posts. Feel free to comment or ask questions.
The first topic is Risk Management and we'll cover it in three parts
Part I
  • Why it matters
  • Position sizing
  • Kelly
  • Using stops sensibly
  • Picking a clear level

Why it matters

The first rule of making money through trading is to ensure you do not lose money. Look at any serious hedge fund’s website and they’ll talk about their first priority being “preservation of investor capital.”
You have to keep it before you grow it.
Strangely, if you look at retail trading websites, for every one article on risk management there are probably fifty on trade selection. This is completely the wrong way around.
The great news is that this stuff is pretty simple and process-driven. Anyone can learn and follow best practices.
Seriously, avoiding mistakes is one of the most important things: there's not some holy grail system for finding winning trades, rather a routine and fairly boring set of processes that ensure that you are profitable, despite having plenty of losing trades alongside the winners.

Capital and position sizing

The first thing you have to know is how much capital you are working with. Let’s say you have $100,000 deposited. This is your maximum trading capital. Your trading capital is not the leveraged amount. It is the amount of money you have deposited and can withdraw or lose.
Position sizing is what ensures that a losing streak does not take you out of the market.
A rule of thumb is that one should risk no more than 2% of one’s account balance on an individual trade and no more than 8% of one’s account balance on a specific theme. We’ll look at why that’s a rule of thumb later. For now let’s just accept those numbers and look at examples.
So we have $100,000 in our account. And we wish to buy EURUSD. We should therefore not be risking more than 2% which $2,000.
We look at a technical chart and decide to leave a stop below the monthly low, which is 55 pips below market. We’ll come back to this in a bit. So what should our position size be?
We go to the calculator page, select Position Size and enter our details. There are many such calculators online - just google "Pip calculator".

https://preview.redd.it/y38zb666e5h51.jpg?width=1200&format=pjpg&auto=webp&s=26e4fe569dc5c1f43ce4c746230c49b138691d14
So the appropriate size is a buy position of 363,636 EURUSD. If it reaches our stop level we know we’ll lose precisely $2,000 or 2% of our capital.
You should be using this calculator (or something similar) on every single trade so that you know your risk.
Now imagine that we have similar bets on EURJPY and EURGBP, which have also broken above moving averages. Clearly this EUR-momentum is a theme. If it works all three bets are likely to pay off. But if it goes wrong we are likely to lose on all three at once. We are going to look at this concept of correlation in more detail later.
The total amount of risk in our portfolio - if all of the trades on this EUR-momentum theme were to hit their stops - should not exceed $8,000 or 8% of total capital. This allows us to go big on themes we like without going bust when the theme does not work.
As we’ll see later, many traders only win on 40-60% of trades. So you have to accept losing trades will be common and ensure you size trades so they cannot ruin you.
Similarly, like poker players, we should risk more on trades we feel confident about and less on trades that seem less compelling. However, this should always be subject to overall position sizing constraints.
For example before you put on each trade you might rate the strength of your conviction in the trade and allocate a position size accordingly:

https://preview.redd.it/q2ea6rgae5h51.png?width=1200&format=png&auto=webp&s=4332cb8d0bbbc3d8db972c1f28e8189105393e5b
To keep yourself disciplined you should try to ensure that no more than one in twenty trades are graded exceptional and allocated 5% of account balance risk. It really should be a rare moment when all the stars align for you.
Notice that the nice thing about dealing in percentages is that it scales. Say you start out with $100,000 but end the year up 50% at $150,000. Now a 1% bet will risk $1,500 rather than $1,000. That makes sense as your capital has grown.
It is extremely common for retail accounts to blow-up by making only 4-5 losing trades because they are leveraged at 50:1 and have taken on far too large a position, relative to their account balance.
Consider that GBPUSD tends to move 1% each day. If you have an account balance of $10k then it would be crazy to take a position of $500k (50:1 leveraged). A 1% move on $500k is $5k.
Two perfectly regular down days in a row — or a single day’s move of 2% — and you will receive a margin call from the broker, have the account closed out, and have lost all your money.
Do not let this happen to you. Use position sizing discipline to protect yourself.

Kelly Criterion

If you’re wondering - why “about 2%” per trade? - that’s a fair question. Why not 0.5% or 10% or any other number?
The Kelly Criterion is a formula that was adapted for use in casinos. If you know the odds of winning and the expected pay-off, it tells you how much you should bet in each round.
This is harder than it sounds. Let’s say you could bet on a weighted coin flip, where it lands on heads 60% of the time and tails 40% of the time. The payout is $2 per $1 bet.
Well, absolutely you should bet. The odds are in your favour. But if you have, say, $100 it is less obvious how much you should bet to avoid ruin.
Say you bet $50, the odds that it could land on tails twice in a row are 16%. You could easily be out after the first two flips.
Equally, betting $1 is not going to maximise your advantage. The odds are 60/40 in your favour so only betting $1 is likely too conservative. The Kelly Criterion is a formula that produces the long-run optimal bet size, given the odds.
Applying the formula to forex trading looks like this:
Position size % = Winning trade % - ( (1- Winning trade %) / Risk-reward ratio
If you have recorded hundreds of trades in your journal - see next chapter - you can calculate what this outputs for you specifically.
If you don't have hundreds of trades then let’s assume some realistic defaults of Winning trade % being 30% and Risk-reward ratio being 3. The 3 implies your TP is 3x the distance of your stop from entry e.g. 300 pips take profit and 100 pips stop loss.
So that’s 0.3 - (1 - 0.3) / 3 = 6.6%.
Hold on a second. 6.6% of your account probably feels like a LOT to risk per trade.This is the main observation people have on Kelly: whilst it may optimise the long-run results it doesn’t take into account the pain of drawdowns. It is better thought of as the rational maximum limit. You needn’t go right up to the limit!
With a 30% winning trade ratio, the odds of you losing on four trades in a row is nearly one in four. That would result in a drawdown of nearly a quarter of your starting account balance. Could you really stomach that and put on the fifth trade, cool as ice? Most of us could not.
Accordingly people tend to reduce the bet size. For example, let’s say you know you would feel emotionally affected by losing 25% of your account.
Well, the simplest way is to divide the Kelly output by four. You have effectively hidden 75% of your account balance from Kelly and it is now optimised to avoid a total wipeout of just the 25% it can see.
This gives 6.6% / 4 = 1.65%. Of course different trading approaches and different risk appetites will provide different optimal bet sizes but as a rule of thumb something between 1-2% is appropriate for the style and risk appetite of most retail traders.
Incidentally be very wary of systems or traders who claim high winning trade % like 80%. Invariably these don’t pass a basic sense-check:
  • How many live trades have you done? Often they’ll have done only a handful of real trades and the rest are simulated backtests, which are overfitted. The model will soon die.
  • What is your risk-reward ratio on each trade? If you have a take profit $3 away and a stop loss $100 away, of course most trades will be winners. You will not be making money, however! In general most traders should trade smaller position sizes and less frequently than they do. If you are going to bias one way or the other, far better to start off too small.

How to use stop losses sensibly

Stop losses have a bad reputation amongst the retail community but are absolutely essential to risk management. No serious discretionary trader can operate without them.
A stop loss is a resting order, left with the broker, to automatically close your position if it reaches a certain price. For a recap on the various order types visit this chapter.
The valid concern with stop losses is that disreputable brokers look for a concentration of stops and then, when the market is close, whipsaw the price through the stop levels so that the clients ‘stop out’ and sell to the broker at a low rate before the market naturally comes back higher. This is referred to as ‘stop hunting’.
This would be extremely immoral behaviour and the way to guard against it is to use a highly reputable top-tier broker in a well regulated region such as the UK.
Why are stop losses so important? Well, there is no other way to manage risk with certainty.
You should always have a pre-determined stop loss before you put on a trade. Not having one is a recipe for disaster: you will find yourself emotionally attached to the trade as it goes against you and it will be extremely hard to cut the loss. This is a well known behavioural bias that we’ll explore in a later chapter.
Learning to take a loss and move on rationally is a key lesson for new traders.
A common mistake is to think of the market as a personal nemesis. The market, of course, is totally impersonal; it doesn’t care whether you make money or not.
Bruce Kovner, founder of the hedge fund Caxton Associates
There is an old saying amongst bank traders which is “losers average losers”.
It is tempting, having bought EURUSD and seeing it go lower, to buy more. Your average price will improve if you keep buying as it goes lower. If it was cheap before it must be a bargain now, right? Wrong.
Where does that end? Always have a pre-determined cut-off point which limits your risk. A level where you know the reason for the trade was proved ‘wrong’ ... and stick to it strictly. If you trade using discretion, use stops.

Picking a clear level

Where you leave your stop loss is key.
Typically traders will leave them at big technical levels such as recent highs or lows. For example if EURUSD is trading at 1.1250 and the recent month’s low is 1.1205 then leaving it just below at 1.1200 seems sensible.

If you were going long, just below the double bottom support zone seems like a sensible area to leave a stop
You want to give it a bit of breathing room as we know support zones often get challenged before the price rallies. This is because lots of traders identify the same zones. You won’t be the only one selling around 1.1200.
The “weak hands” who leave their sell stop order at exactly the level are likely to get taken out as the market tests the support. Those who leave it ten or fifteen pips below the level have more breathing room and will survive a quick test of the level before a resumed run-up.
Your timeframe and trading style clearly play a part. Here’s a candlestick chart (one candle is one day) for GBPUSD.

https://preview.redd.it/moyngdy4f5h51.png?width=1200&format=png&auto=webp&s=91af88da00dd3a09e202880d8029b0ddf04fb802
If you are putting on a trend-following trade you expect to hold for weeks then you need to have a stop loss that can withstand the daily noise. Look at the downtrend on the chart. There were plenty of days in which the price rallied 60 pips or more during the wider downtrend.
So having a really tight stop of, say, 25 pips that gets chopped up in noisy short-term moves is not going to work for this kind of trade. You need to use a wider stop and take a smaller position size, determined by the stop level.
There are several tools you can use to help you estimate what is a safe distance and we’ll look at those in the next section.
There are of course exceptions. For example, if you are doing range-break style trading you might have a really tight stop, set just below the previous range high.

https://preview.redd.it/ygy0tko7f5h51.png?width=1200&format=png&auto=webp&s=34af49da61c911befdc0db26af66f6c313556c81
Clearly then where you set stops will depend on your trading style as well as your holding horizons and the volatility of each instrument.
Here are some guidelines that can help:
  1. Use technical analysis to pick important levels (support, resistance, previous high/lows, moving averages etc.) as these provide clear exit and entry points on a trade.
  2. Ensure that the stop gives your trade enough room to breathe and reflects your timeframe and typical volatility of each pair. See next section.
  3. Always pick your stop level first. Then use a calculator to determine the appropriate lot size for the position, based on the % of your account balance you wish to risk on the trade.
So far we have talked about price-based stops. There is another sort which is more of a fundamental stop, used alongside - not instead of - price stops. If either breaks you’re out.
For example if you stop understanding why a product is going up or down and your fundamental thesis has been confirmed wrong, get out. For example, if you are long because you think the central bank is turning hawkish and AUDUSD is going to play catch up with rates … then you hear dovish noises from the central bank and the bond yields retrace lower and back in line with the currency - close your AUDUSD position. You already know your thesis was wrong. No need to give away more money to the market.

Coming up in part II

EDIT: part II here
Letting stops breathe
When to change a stop
Entering and exiting winning positions
Risk:reward ratios
Risk-adjusted returns

Coming up in part III

Squeezes and other risks
Market positioning
Bet correlation
Crap trades, timeouts and monthly limits

***
Disclaimer:This content is not investment advice and you should not place any reliance on it. The views expressed are the author's own and should not be attributed to any other person, including their employer.
submitted by getmrmarket to Forex [link] [comments]

Cheap Meat

Not sure if this is allowed, but fuck it, we're hurting and desperate times create desperate people who do desperate things.
TL;DR: Local butcher shop with cheap prices. Trying to keep afloat and keep folks fed. Address at bottom.
Sup ya'll, it's your favorite local meat boy (for those that don’t get it, here's my first post: original NYC meat boy post).
Despite COVID cases in NYC having dropped a fair amount, a lot of businesses that have opened up aren't doing so hot, and still some are not going to open up ever again. While there's unemployment insurance for individuals, there really isn't much for small local businesses. I also know that the pandemic boost for UI is about to run out end of month, so if you're sweating about how you're going to eat, I got you.
Most of America's economy began to feel the effects of The Rona around March of this year, but businesses located in Chinatown were fucked as early as January. America's reporting on COVID centered around China being the bad guy, which trends to loop all Asian Americans as "others" and "not really American." Chinese businesses tanked and hate crimes shot up. People within the community began their own self-imposed quarantine due to increased fear of being caught slacking by some racist fuckstick. Then came the formal lock down in March, which really flipped us over, bent us over the couch for good leverage, and fucked us deep and hard. At the time of 14JUNE2020, less than half of Chinatown's restaurants are open, and less than a third of total businesses are open (Bloomberg article supporting claim). Most funds meant as relief for small businesses got snagged by large corporations. And now all the SMEs are floundering. As of now, the end of July, still less than a third of Chinatown businesses have opened up, especially since most of them couldn't apply for any assistance due to language barriers.
So again, here I am peddling my wares. I also have $9.75 left from someone that wanted to pay it forward earlier in the year for what it’s worth.
We’re a small local meat shop. A butcher shop. A boutique culinary protein throwback to simpler times. Whatever the fuck you want to call it. We sell meat. You get the idea. Our prices are real fucking low. Lower than your self esteem. Lower than what your parents think of you. And that’s a good thing. Cause you like cheap things, you cheap fuck. Save all the money you can. While I can’t guarantee that we’re the cheapest you’ve ever seen, I can guarantee that we’ll be top five in cheapest prices in NYC.
What do you want? Cause more likely than not, we got that shit.
POULTRY. We got all kinds of birds. Chicken, silkies, qual, squab, duck, goose, stewing hens. Fuck you want? Still debating on whether drums or mid’s are better with your friends? Fuck around and cop a pound of each for under $5 per person: mid-wings are $3.89 a pound, drums are back to $.69/lb. Want more meat? Fine. A whole ass chicken leg and thigh, $.89/lb. You fuck with feet? It’s 2020, more power to you my guy. Chicken feet stands at $1.69/lb, duck feet at $1.49/lb. You into titties? Of course you're into titties: chicken breast coming in hot at $4.95 for a 2.2lb net weight bag. Into retirees and GILFs? All you Jack Black: Stewing Hens are two for $5.95. Haven’t gotten neck and head in a hot minute cause of COVID, or your Tinder and Hinge profile is just that basura? Say less: duck heads and necks at $1.39/lb. Into spawn kill? My guy: we got a dozen eggs for $2.95, 30 pack for $6.50. Duck eggs, six for $3.95.
PORK. My man, let me tell you something. You fuck with pork chops? Even if you don't, for $2.39/lb, you fuck with pork chops. We got tenderloins for $3.19/lb. Bones for stock? $.99/lb. Let me guess, you miss eating authentic char siu over rice with the sauce from Chinatown. At $2.69/lb for char siu meat, you can afford to fuck up three times and still come out ahead instead of buying it from a restaurant. Since it's getting hot, you're going to want to throw BBQs, right? Hopefully they're socially distanced, everyone is responsible and wearing a mask, and all you motherfuckers got COVID tested prior. Got you some ribs for $2.89 a pound. You want some of them dim sum ribs? Them itty bitty, little tiny cuts of ribs? Small just like your feelings when your ex left you? $3.59 a pound. You been going through a rough time and need an ear to listen to you. $3.39/lb for pig ears buddy, say more. If you been fucking with feet and chicken and duck feet don't cut it, do it like J. Cole "so big it's like a foot is in yo' mouth" cause I got pre-cut pig trotters for $1.49 a pound. Oh, you deadass want the whole foot in your mouth? Weird, but we're being open-minded here: whole uncut pig trotters at $1.79/lb.
BEEF. Let me guess: you haven't gotten enough foul language from this post and need a better tongue lashing? You filthy, sick, sorry, piece of shit. Beef tongues will run you $6.99 a pound. Or you want to boss up, but instead of being bad and boujee, you've been sad and boujee cause of COVID. Well, fear not, cause with femur bones at $1.95/lb, you can split them right down the fucking middle to get to that sweet, sweet, succulent marrow and feel like you're out brunching, spending $80 you don't have for a meal you can't afford to flex on hoes you couldn't really give less of a shit about. What's that? Pig trotters don't cut it? You trying to deepthroat the shit? I mean, do mama proud I guess. I got beef trotters/feet at $1.89 a pound. I mean, with skills like that, why you even buying from me? You belong on the yacht of some old rich man. But do you. Oh what's that? Your girl says your stroke game shit and you falling short of getting up in her guts? No fix for that, sorry, but you can cop honeycomb tripe or stomach at $3.39 a pound and know for a fact you can absolutely beat the ever living fuck out of these guts. You trying to fuck with flank steaks? $7.45 my guy. New York Strip? $8.99. T-Bone? $7.99. My bone? Ten camels. Where my Jamaicans at? Waa gwaan? I know oxtail is AT LEAST $6.75/lb where you’re at. We have them on deck for $5.99/lb.
Or maybe you’re a rapper. You’re on SoundCloud pushing music and living out your mama’s crib. No shame, it’s rough out here King. Want to know how to really blow up? What did Eminem call himself in 8 Mile? That’s right, B-Rabbit. And you know what I got? Rabbit for $4.69 a pound. You are what you eat man. I’m not saying that eating rabbit will immediately blow your rap career the fuck up and give you the lyrical genius of Eminem, but I’m not saying it won’t either. For less than $5 a pound, you really gonna chance it? What if the other rappers cop it and you don’t and they blow up? Don’t get left behind my guy. You a King and King’s gotta do what they don’t want to do sometimes for the betterment of the folks. And the folks want to hear your music.
Or maybe rabbit not your thing. You right, it’s too lean and lacks fat. Eat too much rabbit and nothing else and you’ll starve your body of fat. So how about goat? You want to be the GOAT, don’t you? Reddit’s even got a badge for it. If you want to be the Goat, guess what you gotta do? That’s fucking right, you are what you eat and here I am, your fucking pusher man for goat.
You're fancy and trying to be boujee. Let me guess: lamb? Say less, I got you that bonjour hon hon hon rack of of lamb chops. Want a quarter of lamb? Got that too. All you gotta do is ask.
I'm not going to really keep going down the list. You get the idea. I work at a fucking meat shop, I'm going to sell meat. I sell wholesale to restaurants and retail to walk-in folks. It's a pretty simple fucking concept. Is our meat fresh? As fresh as, if not more so, than any large chain due to constant turn over on wholesale side.
Why are our prices so low? Because we're a small mom-and-pop brick and mortar shop. We're located in Chinatown. Ever heard of FUBU? Same concept: we're built by Chinese immigrants, for Chinese immigrants. Unfortunately, the Chinese population in NYC is one of, if not THE poorest communities we have. Raising prices will price out the community and jack the reason why we're even here: to feed the community. This also means that our margins are fucked, but we're making it work. Yes, we look janky asf. I know, we're not "modern" and our aesthetic looks like some tossed together shit from the 60's. Shit, our band saw is from the 80's. But we're clean, we're sanitary, we pass all health standards and inspections, and we're doing our fucking best. We're literally the definition of "no frills." To hear some say it, we'd be considered ghetto. I prefer the term resourceful, so fuck you.
Because we're local and serve local, we only accept cash, EBT, SNAP, and debit. We don't do credit. Venmo is @FourSevenDivisionStreetTrading. PSA as the last one: if you think you can roll up to squeeze us, find out if you're a better shot than I am. Not my job to judge your life choices, but I will send you to someone who will.
I'm the only person here that is fluent in English, so unless you're feeling real brave about pointing at shit and figuring it out, you speak a dialect, know how to read Chinese, or know what cut you're looking for, come on Tuesday and Thursday afternoons (02:00pm - 06:30pm) since that's when I'm directly on the floor. If you're a restaurant and you're looking to keep overhead low, PM me, I'll work something out with you.
Our location is: 47 Division Street Ground Floor New York, NY 10002 B/D to Grand Street, F to East Broadway
Our hours are: Monday - Saturday 0800am - 0630pm
23JUL2020 0323AM Edit: Added beef and lamb, added venmo acc, schedule and times.
25JUL2020 0015AM Edit: Changed schedule to add in Saturday.
submitted by SleepyLi to nyc [link] [comments]

Cornering Silver Market

Cornering Silver Market
Would you like to entertain yourself with a story about one of the greatest schemes in the history and, maybe, learn a few plays? This story is about three brave autistic brothers, who almost cornered the entire commodity and how one (not so brave, but shrewd) bank did it without anyone noticing. As in any good fable – there’s a moral and a strategy that you could draw from it.
The year is 1971. Nixon temporarily abolishes gold standard. And every temporary government program is never reversed, as you know. Trading price of gold went sky high: from 270s to 800s in two years or so. Enter Hunt brothers, sons of H. L. Hunt, oil tycoon, one of, if not the, richest man in the world at that time. Hunt family was, what one might describe as, right-wing libertarian and anti-globalist. They believed that Keynesian economics and the US shift to the left in the 60s will lead to the debasement of the US dollar and monetary collapse. Thus, return to the gold or silver standard was the way, as they thought. Allegedly, Hunts also had a feud with Rothschild family and other financial speculators, and were resentful towards the US government for doing nothing to protect their oil assets in Libya, confiscated by Gaddafi. So they started their move against America, alpha-silver bug style.
In 1973 Hunts began buying all the silver they could. And, instead of just speculating futures contracts, they actually took delivery. Initial price was $1.5/oz. Silver was shipped to Switzerland in secretive and costly operations and stored in vaults (brothers feared confiscations – remember, private citizens were still prohibited from owning gold in the US).
The following events are quite vivid and include the efforts to create a cartel similar to OPEC, talks with Iran and Saudi monarchs, pump and dump publicity and large scale purchases of miners. But we will spare the details, except one: Hunts even tried to corner the soy market at the same time. Reminds you how WSB slv gang quickly switched to corn gang. But the soy scheme didn't fly and they focused on silver only. Their efforts pumped the price to almost $50/oz by early 1980. At some point Hunts controlled around 230 million oz of silver and the majority of what was traded.

Hunt brothers laughing at your pump&dump effort

Of course, when you are such a smart ass, you become a target. Chicago exchange officials became very concerned citizens by 1979. They started issuing numerous regulations limiting the amount of market share one can accumulate in one hands. As all American concerned citizens, they had financial incentive to do so: Hunts managed to prove that Chicago exchange board members had short positions against silver. Finally, CFTC (Commodity Futures Trading Commission) issued a ruling that basically forced Hunts to liquidate part of their portfolio by February 1980. This sent silver prices down dramatically and brothers started to get margin calls which they could not cover. And so their story ended with bankruptcies and heavy fines for the family. Shortly after, Reagan and Volcker raised interest rates and silver price never recovered to $50/oz ever since.
We skip to the year 2008. Global financial crisis is in full swing. Bear Stearns is royally fucked, as due to all bears. Before the music was over, they mastered paper speculation of futures contracts like no one else. Bear Stearns accumulated world biggest naked short position on silver. What could go wrong? Stonks go up, silver goes down. Until it reversed and silver skyrocketed from $11 to $21. This became one of the margin calls to screw Bear Stearns. JP Morgan is asked by the FED and co. to buy out BS and to save the entire market. Since BS's shorts are now deeply down - JPM gets the whole bank with pennies on a dollar.
But the problem is that JPM themselves have massive naked short position on silver. Combined with BS it will exceed anything permitted by the CFTC. Since Obama administration was in a rush, they push CFTC to grant JPM basically a carte blanche to accumulate any position over the limit for a period of time. Period of time comes due and turns out that JPM not only didn’t trim the shorts significantly – they even bought more shorts at some point. Even with all the fines, it went very much their way, because in 2009 silver dropped. So they pocketed hundreds of millions of dollars.
But come 2011 and silver spiked again, dramatically. JPM, now bleeding cash on shorts, could close short positions, like any of us would do, right? Nope, fuckyall says JPM and starts hedging short futures positions with… physical silver. 'But wouldn’t that be even more control over the commodity?' - you might ask. See, nothing in the rules of CFTC says you can’t do that, because to help cronies speculate with paper futures contracts, made of thin air, CFTC basically started treating physical silver and futures as two different instruments (it’s, actually, even more complicated than that: google difference between physical, eligible, registered and so on).
In the next 9 years JPM becomes the world biggest holder of both short contracts and physical silver. The later they 'loaned' to SLV trust, of which they are custodian. This way upkeep of physical silver, which otherwise would be a liability for hedging, becomes an asset, because we, retards, who own SLV pay the maintenance. People are often confused here, because SLV is issued by Black Rock, not JPM. Well, there is a difference between being an operator of a financial instrument and being a custodian providing backing. Now, to confuse you even more – JPM is one of the major holders of Black Rock itself with 1.6% or sth like that.
By estimates of Theodore Butler, JPM acquired 900 million oz of physical silver since 2011. That’s 4 times more than what Hunts owned. Just shows you, that banks can get a pass with something that even the richest individuals can not. And you have to give it to JPM - their play was very clever. Instead of risking it all on a margin call, they make money on every turn.
As of 2020, JPM still holds both shitton of physical silver and short COMEX contracts. You can call this the most epic straddle of all time. With such mass they can swing prices in any directions and profit from this on any given day. Latest example you’ve seen on the August 11th.
Why am I bothering your poor gambling soul with this wall of text, you might ask? Market makers manipulate the market as they please, what’s new about that? Well, here we come to the conclusions and a strategy. How can a small retard replicate what the big boys are doing?
Conclusions:
  1. There will not be a linear up or down with silver and the swings might be dramatic. The reason being not only the sentiment of investors, but the ease of manipulation that is eligible to big players.
  2. If we believe that speculation will throw the price of silver in all directions – it is unwise to go only long or short on silver, especially on a short term;
What shall we do?
a) Only long expiration dates and calls; no weekly expiration, not even monthly. Ideally – at least half year options;
b) Go long on certain silver stocks. Maybe I’ll do a write up on good silver stocks to buy;
c) Sell covered calls on long positions;
d) Buy 1-3 month puts on your long positions as a hedge;
Now, day trade with those positions: on red days sell your puts and buy back covered calls. On green days – reload puts and sell calls. Repeat until lambo.
P. S.: I gathered these facts from the open sources, since these events were of interest to me. Some facts are intentionally oversimplified, google for more details, there are good reads. And feel free to correct me if you know contradictory facts.
P. P. S.: JPM, plz don’t whack me.
submitted by negovany to wallstreetbets [link] [comments]

Hershey: The quintessential Buy-And-Hold stock

Intro
When it comes to building a portfolio of SWAN (sleep well at night) stocks for the long term, HSY is a layup. In the world of stock investing, HSY is an ideal stock for beginners and seasoned investors alike because of its relatively simple business model and its ability to generate consistent returns. The business itself is very straightforward. HSY owns some very recognizable brands such as Reese's and KitKat (HSY owns the rights to KitKat in the US). On average they manage to sell more candy than the year before and with it also raise prices at a rate higher than inflation. As the bulk of their profits are earned in the US, their income statements (reported in USD) are an accurate reflection of what they actually earned. Compare that to other excellent companies like CL, KO etc which are a little harder to evaluate as they earn most of their profits overseas and you have to factor in currency fluctuations to get the real picture (their annual reports usually do a good job of it though). As Peter Lynch said, "Invest in what you know" and it's safe to say most Americans have consumed a Hershey's product at some point in their lives. Heck, you can even use the excuse of "market research" to buy some Reese's peanut butter cups the next time you go to the store.
$$$
Morningstar does a great job putting together the financials. Check with your local library to see if you can get access to Morningstar or Value Line. It's very useful to anyone looking to research individual stocks. While paying for a subscription yourself can cost several hundreds of dollars annually, most public libraries in the US give you access to one or both of those services for free. I'll try to sum up the key metrics shared in the link above (anyone can view that page even without a subscription)
Over the last 10 years
Net sales growth of ~4% (What's even more impressive is that most of it was achieved with volume increases and pricing power alone. Acquisitions had little to do with it)
EPS growth 8-10%
Div yield 2-3% (The payout ratio stays around 50% which means you also see dividend growth that's 8-10%)
They buy back roughly 1% of outstanding shares each year.
Just like that you get 11-13% CAGR (excluding PE compression/expansion). ROIC consistently in the high teens to 20+ (consumer staples usually average in the mid teens)
Operating margin has increased from 17.4% to 21% (PEP for example was around 15% last year)
To check the quality of the balance sheet, we look at the interest coverage ratio and Net Debt w.r.t Operating Profits. With capital light businesses like HSY, their ability to grow profits/free cash flow is a better indicator of financial strength than shareholder equity.
Interest coverage ratio (Interest expense/EBIT) ~ 10 (A double digit value for a consumer staples company is considered very safe)
Net Debt/EBIT ~ 2.5 (Anything less than 3 for a consumer staples company is considered very safe)

Stock Performance
HSY has historically fluctuated between a PE of 30 (overpriced) to a PE of 20 (a bargain). Every once in a blue moon the PE dips below 20 and the div yield approaches 3% at which point it becomes a screaming bargain. Barring a total economic collapse or horrendous mismanagement, it's very unlikely you'll see HSY trading at a PE of 15. I would say a PE of 23-25 is a fair price for a wonderful company.
As with any investment, the price you pay affects future returns. To get the real picture of returns generated by HSY, one needs to look at a full business cycle as consumer staples generally tend to outperform during a recession.
The absolute worst time to buy HSY in the last 15 years would have been in early 2005 when the PE was over 30 and the dividend yield was below 1.5%. A $10,000 investment with dividends reinvested in April 2005 would result in a present value of $34,863 with a CAGR of 8.49% (underperformed the SPY which returned $37,404 at 8.98%).
Buying it at its lows in early 2008 when the PE was under 20 and the dividend yield was over 3%, A $10,000 investment with dividends reinvested in January 2008 would result in a present value of $50,619 with a CAGR of 13.76% (outperformed the SPY which returned $28,659 at 8.73%).
Realistically speaking, for an investor who DCAs into this stock, their returns would've been somewhere between 8.5% - 13.8%. HSY is not a stock that you can expect 20%+ CAGR from, but with some luck compounding at 11-12% can build significant wealth (and potentially even outperform SPY).
Risks
As far as stocks go, HSY has to be one of the safest investments out there. The company is very conservatively run as the Hershey Trust owns roughly 40% of the company (but over 80% voting rights) and uses the dividends to fund a school for underprivileged children. The dividend is sacrosanct and HSY management is less likely to jeopardize the dividend in search of growth. Consumer staples as a business also face less disruption than other industries. Profits are consistent and the business requires fairly little reinvestment. Candy, alcohol and tobacco are centuries old and consumer tastes change fairly slowly which gives companies plenty of time to adapt. MSFT would go out of business if they were still selling the same OS they made in the 90s. HSY on the other hand is more or less still selling the same candy it was 30-40 years ago. That being said, past performance is no guarantee of future results. So let's address some realistic risks
- Ruining the quality of the product due to cost cuts in search of short term profits. Irene Rosenfeld at Mondelez did this to the Cadbury Creme Egg, which didn't bode well for the stock. A big part of the reason why I'm willing to pay a premium for a Reese's Peanut Butter Cup (over some generic brand candy) is because of the taste. HSY would lose their hard earned market share and goodwill in search of short term gains.
- Compromising the balance sheet for a bad acquisition. KHC is a good example of this. The 3G method involves slashing costs and levering up the balance sheet to acquire more businesses. Of course, if the acquisition doesn't pan out the stock gets punished accordingly. HSY has tried to build their international presence through acquisitions and it hasn't panned out well so far. Lately they've started diversifying into savory snacks. However, these tend to be pretty small in nature.
- A sugar tax to combat obesity. I don't think it'll hurt the underlying business too much, but HSY might start trading at a lower earnings multiple.
- E-commerce might affect HSY a bit. Outside of a few holidays the bulk of candy sales come from impulse purchases a consumer makes at the checkout counter at the store. It usually isn't something a person puts on their shopping list. I think with some proactive management, HSY can get around that by working with vendors to advertise their products while checking out online (much like how pizza joints upsell soda/breadsticks etc at checkout time).
Conclusion
If you've made it this far, I thank you for reading this post. I mostly wrote this for people who might be looking into buying individual stocks. I think HSY is an excellent stock for those looking for an above average dividend yield and dividend growth. Buffet often speaks fondly of his See's Candies investment. Much like his own investment, with some luck HSY's dividends alone can pay you back your initial investment and then some over an investing lifetime. As always, sticking with a low cost index fund is a sound strategy. Even a stock like HSY requires a few hours of work each year.
TLDR: HSY good. VTSAX good.
submitted by vipnasty to investing [link] [comments]

Plain english warning about CFD trading, just something I wish someone had told me

tl;dr - trading CFD's is the equivalent of drag racing your drunk mate down the freeway into oncoming traffic. No self respecting adult would bother with them, CFD's are for cocaine-snorting thrill-seeking morons (like me apparently) who have no respect for risk management. Don't gamble with your savings.

What are CFDs
CFD's are 'Contracts for Difference'. Very simply, if you have a trading account with the right permissions you can trade in CFD's.
Why are they dangerous
Because say you trade $250, on a normal trade (ie stocks etc) if the price falls by 10% you lose $25, which sucks but isn't world ending. CFD's are NOT like that - they are 'leveraged' which just means that if you put up $50 your exposure is many many many many times larger than that
EXAMPLE
You buy 50 contracts on a stock that is trading at $100 a share.The stock then drops $10 in value.Your exposure is (50 * 100) = $5,000 BUT because your 'margin' is only 5% of that, the initial amount you put up is a mere $250.
So to illustrate:
Stock Trading
Initial Investment - $250
Value drop - 10%
Loss - $25
CFD Trading
Initial investment - $250
Value drop - 10%
Loss - $5,000

Closing remarks
These things are illegal in the US for a good reason.
CFD's are for suckers, don't listen to anything that you hear to the contrary. EU regulators say that 76% of CFD accounts lose money. Let me say that again, 76% of these things lose $&*#ing money. If the odds at the casino were 1:4 there is no fkn way anybody would go. When you trade CFD's you are essentially just gambling but with WAY WAY worse odds.Cited: https://www.iexpats.com/76-of-cfd-traders-lose-money-on-their-deals/
You can't make long investments with CFD's, they aren't a long-term strategy and they are not part of ANY investment strategy with a reasonable risk profile. Please don't make the mistake I did and get sucked into trading them, it's stressful as hell and it is pure bravado driven bullshit.

Stay safe out there folks, times are nuts
Edit 1: Formatting got stuffed up
submitted by loathingq to AusFinance [link] [comments]

Yield farming thread

What is yield farming? Most broadly, it means getting some benefit for providing capital, usually in the form of tokens. Currently, there are three major different schemes:
  1. Staked funds aren't utilized in any way and tokens are distributed proportionally to what's staked (may be dai, weth, ycrv, or other tokens). Token price risk: zero. Token accrues, but even if it falls to zero you lose nothing. Smart contract/protocol risk: depends on the staking contract, usually low to zero. Contracts are usually simple modification of the first contract used by yearn (taken from synthetix), making analysis easy by only looking for differences. APR: may start high, but usually collapses fast to relatively low values as funds pour in.
  2. Providing liquidity in trading pools. Tokens are gained in return for providing liquidity for requested tokens on uniswap, balancer, curve, mooniswap. Token price risk: medium to high, depends on pool weights. See these two articles for details on how liquidity providing works: Uniswap - pool weight is always 50%/50% Balancer - arbitrary pool weights, down to 2% for one token. Can be multitoken, not just two. Smart contract security risk: medium to high. In addition to checking the (usually simple) staking contract, requires security analysis of the token contract. If it's possible to mint a very large amount of token, or someone has a hidden enormous stash, the attacker could clean the pool by dumping them at once. I'm aware of one scam called "YYFI" that did this - you can see the attacker successively getting DAI from the balancer pool. Fortunately for the victims, he wasn't very competent and did everything manually, giving time for people to withdraw. A more competent attacker would automate the pool cleaning process in a smart contract. APR: usually very high - upper three digits or four. It's rarely realized APR because it's calculated assuming that token price stays constant. If you think the token being distributed is undervalued definitely the best option to farm.
  3. Depositing and borrowing funds for defi. Currently utilized by compound and cream (a compound clone). Users get rewarded with tokens for lending and borrowing tokens. Token price risk: zero. Security risk: the most complex to analyze option of all, although Compound itself is definitely the safest defi dapp on ethereum.
Warning: gas fees are high. $10k is probably the minimum amount that makes sense for active manual farming, which still only makes sense for a more long-term farms like COMP or CRV, at the cost of not maximizing APR. I have spent over $3k in gas during the last two months by farming very actively. Below $100k, or if you don't want to spend a lot of time on this, it's probably best to deposit your funds into one of yearn vaults that yield farms for users. https://yearn.finance/vaults
A partial list of current yield farms (feel free to comment with more farms! I can edit and add them to this list):
  • COMP farming, the oldest one (I think?). Relatively low returns (58% on DAI), safe, no price risk. Efficient way to farm is to supply and borrow the same asset (can be done via instadapp) up to maximum leverage possible (with some margin for interest payments).
  • BAL farming, provide liquidity to BAL pools. Safe smart contracts (just don't deposit deflationary tokens). Price risk and APR depends on the pair. https://balancer.exchange/
    See returns for both balancer and compound at https://www.predictions.exchange/
  • YFV finance, one of the many clones of YFI. The seed pool is safe IF you withdraw before the staking period ends (see the security part). Current APR on stablecoins: 121%
  • CRV farming, providing liquidity to curve pools. Mostly safe - curve smart contracts tself are safe, but keep in mind if one of tokens in the pool collapses (renBTC is probably the riskiest) other tokens are going to get drained. You can see the current APR on https://dao.curve.fi/mintegauges. As of now, the highest APR is for compound pool - 105.27%. It's varying and there's complicated game with CRV voting that impacts it.
  • CREAM farming. CREAM is a clone of compound. It's definitely less safe than Compound. Initially, it launched with a direct control by one normal address, but recently they moved to a 5-of-9 multisig.
  • YFII, another YFI clone. Current APR 95%. https://yfii.finance/#/staking
  • Mstable, liquidity providing with stablecoins. APR about 50% (MTA + BAL). https://defirate.com/mta-yield-farming/
  • Zombie, meme token. Current APR is abysmal (33.5%) but token may unexpectedly pump, increasing it. There's a smart contract bug that, as long as rewardDistribution and owner aren't set to zero, potentially allows rewardDistribution to lock all staked funds (not steal). Makes zero sense as of today.
NEW
  • Sushi Swap - stake Uniswap LP tokens. Four digit APR, varying levels of price risk, depending on the pool. (added on 29 Aug UTC)
Analyzing security.
Edit: warning, a new type of scam just happened - degen.money site asked for token spending approval on the attacker's address, in addition to the (safe) contract's address. Always ensure you're approving a correct address.
Yield farms come and go. The key to earning high returns is to be agile and to jump fast into new farms, which requires manual analysis of security. Of course it's possible to yolo in without any analysis, but I don't recommend it. I'm going to show an example on two recent farming contracts (of the first type - funds just sit in contracts).
Original yearn staking contract. GRAP staking contract. Let's load two codes into a text diff tool, like this site. What interests us on the code level are changes relating to the withdrawal capability, which in the original code are limited to the withdraw() function. We can see that the only substantial change is the addition of the checkStart modifier which prevents both deposits and withdrawals if it's too early. As startime is set directly in source code and can't be modified anywhere, that change is safe - if it doesn't throw on deposit it's not going to throw on withdraw.
The next step is switch to the 'read contract' tab on etherscan and look at two variables: owner and rewardDistribution. In Grap's case, they lead to a timelock contract that requires all changes to wait for at least 24.5 hours - which makes any fund lockup extremely unlikely. At worst, we only have to look at the rewardDistribution contract once a day to see if there's any pending change.
GRAP farming is now finished with no security incidents.
Second example: YFV. This one is still active. Contract link. After comparing them we can see that changes are much more extensive. The withdrawal function also has the checkStart modifier, but that part is fine (ctrl-f to check if starttime can be modified somewhere else - it can't). What's the problem is the checkNextEpoch modifier. There's a lot of things there and three external contract calls (mint calls). If anything in there throws, withdrawal would become impossible. Dangerous. However, that only happens after the staking period ends, so withdrawing before block.timestamp >= periodFinish is relatively safe.
Another check is to look at the owner and rewardDistribution variables. Owner is set to zero, but where's rewardDistribution? Unfortunately, contrary to GRAP, it's private. It's possible to read it with the getStorageAt web3 api (although finding the index is more work - it's 3). However, the team has provided a link to the transaction in which they set rewardDistribution to 0 so it's fine.
In conclusion, as long as you don't hold the funds after the locking period ended there's no security risk here. The current period ends on Tue Sep 1 14:02:29 2020, UTC.
submitted by nootropicat to ethtrader [link] [comments]

PRPL Q2 2020 Earnings Expectations

PRPL Q2 2020 Earnings Expectations

tl;dr - Earnings is gonna be lit!

PRPL earnings is tomorrow, 8/13, after hours. Any other date is wrong. Robinhood is wrong (why are you using Robinhood still!?!).
I'm going to take you through my earnings projections and reasoning as well the things to look for in the earnings release and the call that could make this moon even further.

Earnings Estimates

https://preview.redd.it/w3qad4gb9ng51.png?width=854&format=png&auto=webp&s=7a88656a9867d0e40710736f61974a22b5f4a631
I'm calling $244M Net Revenue with $39.75M in Net Income, which would be $0.75 Diluted EPS. I'll walk you through how I got here

Total Net Revenue

I make the assumption that Purple is still selling every mattress it can make (since that is what they said for April and May) and that this continued into June because the website was still delayed 7-14 days across all mattresses at the end of June.
May Revenue and April DTC: The numbers in purple were provided by Purple here and here.
April Wholesale: My estimate of $2.7M for Wholesale sales in April comes from this statement from the Q1 earnings release: " While wholesale sales were down 42.7% in April year-over-year, weekly wholesale orders have started to increase on a sequential basis. " I divided Q2 2019's wholesale sales evenly between months and then went down 42.7%.
June DTC: This is my estimate based upon the fact that another Mattress Max machine went online June 1, thus increasing capacity, and the low end model was discontinued (raising revenue per unit).
June Wholesale: Joe Megibow stated at Commerce Next on 7/30 that wholesale had returned to almost flat growth. I'm going to assume he meant for the quarter, so I plugged the number here to finish out the quarter at $39.0M, just under $39.3M from a year ago.

Revenue Expectations from Analysts (via Yahoo)
https://preview.redd.it/notxd6hhbng51.png?width=384&format=png&auto=webp&s=aa0453414f467aa6c5bf72ce8a8046c0ae6e62a5
My estimate of $244M comes in way over the high, let alone the consensus. PRPL has effectively already disclosed ~$145M for April/May, so these expectations are way off. I'm more right than they are.

Gross Margins

I used my estimates for Q3/Q4 2019 to guide margins in April/May as there were some one time events that occurred in Q1 depressing margins. June has higher margin because of the shift away from the low end model (which is priced substantially lower than the high end model). Higher priced models were given manufacturing priority.

Operating Expenses

Marketing and Sales
Joe mentioned in the Commerce Next video that they were able to scale sales at a constant CAC (Customer Acquisition Cost). There's three ways of interpreting this:
  1. Overall customer acquisition cost was constant with previous quarters (assume $36M total, not $93.2M), which means you need to add another $57M to bottom line profit and $1.08 to EPS, or
  2. Customer Acquisition Costs on a unit basis were constant, which means I'm still overstating total marketing expense and understating EPS massively, or
  3. Customer Acquisition Costs on a revenue basis were constant, which is the most conservative approach and the one I took for my estimate.
I straightlined the 2.2 ratio of DTC sales to Marketing costs from Q1. I am undoubtably too high in my expense estimate here as PRPL saw marketing efficiencies and favorable revenue shifts during the quarter. So, $93.2M
General and Administrative
A Purple HR rep posted on LinkedIn about hiring 330 people in the quarter. I'm going to assume that was relative to the pre-COVID furloughs, so I had June at that proportional amount to previous employees and adjusted April and May for furloughs and returns from furlough.
Research and Development
I added just a little here and straight lined it.

Other Expenses

Interest Expense
Straightlined from previous quarters, although they may have tapped ABL lines and so forth, so this could be under.
One Time and Other
Unpredictable by nature.
Warrant Liability Accrual
I'm making some assumptions here.
  1. We know that the secondary offering event during Q2 from the Pearce brothers triggered the clause for the loan warrants (NOT the PRPLW warrants) to lower the strike price to $0.
  2. I can't think of a logical reason why the warrant holders wouldn't exercise at this point.
  3. Therefore there is no longer a warrant liability where the company may need to repurchase warrants back.
  4. The liability accrual of $7.989M needs to be reversed out for a gain.
This sucker is worth about $0.15 EPS on its own.

Earnings (EPS)

I project $39.75M or $0.75 Diluted EPS (53M shares). How does this hold up to the analysts?
EPS Expectations from Analysts (via Yahoo)
https://preview.redd.it/o2i1dvk6hng51.png?width=373&format=png&auto=webp&s=27e63f7934d85393e1f7b87bf2e2066c28047202
EPS Expectations from Analysts (via MarketBeat)
https://preview.redd.it/psu5rajfhng51.png?width=1359&format=png&auto=webp&s=0612d43777c644789b14f8c5decbe36f41925f5e
These losers are way under. Now you know why I am so optimistic about earnings.
Keep in mind, these analysts are still giving $28-$30 price targets.

What to Watch For During Earnings (aka Reasons Why This Moons More)

Analysts, Institutionals, and everyone else who uses math for investing is going to be listening for the following:
  • Margin Growth
  • Warrant Liability Accrual
  • Capacity Expansion Rate
  • CACs (Customer Acquisition Costs)
  • New Product Categories
  • Cashless Exercise of PRPLW warrants

Margin Growth
This factor is HUGE. If PRPL guides to higher margins due to better sales mix and continued DTC shift, then every analyst and investor is going to tweak their models up in a big way. Thus far, management has been relatively cautious about this fortuitous shift to DTC continuing. If web traffic is any indicator, it will, but we need management to tell us that.
Warrant Liability Accrual
I could be dead wrong on my assumptions above on this one. If it stays, there will be questions about it due to the drop in exercise price. It does impact GAAP earnings (although it shouldn't--stupid accountants).
Capacity Expansion Rate
This is a BIG one as well. As PRPL has been famously capacity constrained: their rate of manufacturing capacity expansion is their growth rate over the next year. PRPL discontinued expansion at the beginning of COVID and then re-accelerated it to a faster pace than pre-COVID by hurrying the machines in-process out to the floor. They also signed their manufacturing space deal which has nearly doubled manufacturing space a quarter early. The REAL question is when the machines will start rolling out. Previous guidance was end of the year at best. If we get anything sooner than that, we are going to ratchet up.
CACs (Customer Acquisition Costs)
Since DTC is the new game in town, we are all going to want to understand exactly where marketing expenses were this quarter and, more importantly, where management thinks they are going. The magic words to listen for are "marketing efficiencies". Those words means the stock goes up. This is the next biggest line item on the P&L besides revenue and cost of goods sold.
New Product Categories
We heard the VP of Brand from Purple give us some touchy-feely vision of where the company is headed and that mattresses was just the revenue generating base to empower this. I'm hoping we hear more about this. This is what differentiated Amazon from Barnes and Noble: Amazon's vision was more than just books. Purple sees itself as more than just mattresses. Hopefully we get some announced action behind that vision. This multiplies the stock.
Cashless Exercise of PRPLW Warrants
I doubt this will be answered, even if the question is asked. I bet they wait until the 20 out of 30 days is up and they deliver notice. We could be pleasantly surprised. If management informs us that they will opt for cashless exercise of the warrants, this is anti-dilutive to EPS. It will reduce the number of outstanding shares and automatically cause an adjustment up in the stock price (remember kids, some people use math when investing). I'm hopeful, but not expecting it. The amount of the adjustment depends on the current price of the stock. Also, I fully expect PRPL management to use their cashless exercise option at the end of the 20 out of 30 days as they are already spitting cash.

Positions


https://preview.redd.it/tho65crvkng51.png?width=1242&format=png&auto=webp&s=6241ff5e8b26744f9d7119ddef7da86f163c741d
I'm not just holding, I added.
PRPLW Warrants: 391,280
PRPL Call Debit Spreads: 17.5c/25c 8/21 x90, 20c/25c 8/21 x247
Also, I bought some CSPR 7.5p 8/21 x200 for fun because I think that sucker is going to get shamed back down to $6 after a real mattress company shows what it can do.

UPDATES

I've made some updates to the model, and produced two different models:
  1. Warrant Liability Accrual Goes to Zero
  2. Warrant Liability Accrual Goes to $47M
I made the following adjustments generally:
  • I reduced marketing expenses signifanctly based upon comments made by Joe Megibox on 6/29 in this CNBC video to 30% of sales (thanks u/deepredsky).
  • I reduced June wholesale revenue to 12.6M to be conservative based upon another possible interpretation of Joe's comments in this video here. It is a hard pill to swallow that June wholesale sales would be less than May's. The only reasoning I can think of is if May caused a large restock and then June tapered back off. The previous number of $19.0M was still a retrenchment from the 40-50% YoY growth rate. I'm going to keep the more conservative number (thanks again u/deepredsky).
  • I modified the number of outstanding shares used for EPS calculations from 53M (last quarters number used on the 10-Q) to almost 73M based upon the fact that all of the warrants and employee stock options are now in the money. Math below. (thanks DS_CPA1 on Stocktwits for pointing this out)
Capital Structure for EPS Calculations
From the recent S-3 filing for the May secondary, I pulled the following:
https://preview.redd.it/qw7awg8w7sg51.png?width=368&format=png&auto=webp&s=66c884682ddb8517939468ab1e6780742f55d427
I diluted earnings by the above share count.

Model With Warrant Liability Going to Zero
https://preview.redd.it/cz2ydomi4sg51.png?width=852&format=png&auto=webp&s=53cc457a3143cabb16bfff9a1503054a9a8c0fca
Model With Warrant Liability Going to $47M
https://preview.redd.it/o2hltrgf5sg51.png?width=853&format=png&auto=webp&s=41cbe73a7aa0894a86a09ccc9179b100e9d3372d
A few people called me out on my assumption, that I also said could be wrong. My favorite callout came from u/lawschoolbluesny who started all smug and condescending, and proceeded to tell me about June 31st, from which I couldn't stop laughing. Stay in law school bud a bit longer...
https://preview.redd.it/dd4tcdue4sg51.png?width=667&format=png&auto=webp&s=d27f3ad40c702502ee62f106b6135f0db2c1e7be
One other comment he made needs an answer because WHY we are accruing MATTERS a lot!
Now that we have established that coliseum still has not exercised the options as of july 7, and that purple needs to record as a liability the fair value of the options as of june 31, we now need to determine what that fair value is. You state that since you believe that there is no logical reason that coliseum won't redeem their warrants "there is no longer a warrant liability where the company may need to repurchase warrants back." While I'm not 100% certain your logic here, I can say for certain that whether or not a person will redeem their warrants does not dictate how prpl accounts for them.

The warrant liability accrual DOES NOT exist because the warrants simply exist. The accrual exists because the warrants give the warrant holder the right to force the company to buy back the warrants for cash in the event of a fundamental transaction for Black Scholes value ($18 at the end of June--June 31st that is...). And accruals are adjusted for the probability of a particular event happening, which I STILL argue is close to zero.
A fundamental transaction did occur. The Pearce brothers sold more than 10M shares of stock which is why the exercise price dropped to zero. (Note for DS_CPA1 on Stocktwits: there is some conflicting filings as to what the exercise price can drop to. The originally filed warrant draft says that the warrant exercise price cannot drop to zero, but asubsequently filed S-3, the exercise price is noted as being able to go to zero. I'm going with the S-3.)
Now, here is where it gets fun. We know from from the Schedule 13D filed with a July 1, 2020 event date from Coliseum that Coliseum DID NOT force the company to buy back the warrants in the fundamental transaction triggered by the Pearce Brothers (although they undoubtably accepted the $0 exercise price). THIS fundamental transaction was KNOWN to PRPL at the end Q4 and Q1 as secondary filings were made the day after earnings both times. This drastically increased the probability of an event happening.
Where is the next fundamental transaction that could cause the redemption for cash? It isn't there. What does exist is a callback option if the stock trades above $24 for 20 out of 30 days, which we are already 8 out of 10 days into.
Based upon the low probability of a fundamental transaction triggering a redemption, the accrual will stay very low. Even the CFO disagrees with me and we get a full-blown accrual, I expect a full reversal of the accrual next quarter if the 20 out of 30 day call back is exercised by the company.
I still don't understand why Coliseum would not have exercised these.
Regardless, the Warrant Liability Accrual is very fake and will go away eventually.

ONE MORE THING...

Seriously, stop PMing me with stupid, simple questions like "What are your thoughts on earnings?", "What are your thoughts on holding through earnings?", and "What are your thoughts on PRPL?".
It's here. Above. Read it. I'm not typing it again in PM. I've gotten no less than 30 of these. If you're too lazy to read, I'm too lazy to respond to you individually.

submitted by lurkingsince2006 to wallstreetbets [link] [comments]

The results are in for: LEAST Valuable Player

The NBA league office announced that all awards will be officially based on play PRIOR to the bubble. With that, the cases are locked, the campaigns are closed, and the voting will begin.
While the media may focus on the MVP award and other prestigious honors, reddit has the distinct honor of awarding the LVP. The LEAST Valuable Player. It's a tradition that dates back to 2016-17, when aging Indiana SG Monta Ellis won the inaugural trophy and then promptly disappeared from the NBA forever. In 2017-18, Minnesota SG Jamal Crawford won the (dis)honor with some incredibly bad defensive numbers. Last season, New Orleans SF Solomon Hill won LVP by helping to sink a drowning team and accelerating Anthony Davis' decision to fly the coop.
Before we announce this year's winner, let's review the criteria and caveats:
--- Obviously, the worst players in the league are the ones who sit at the end of the bench and don't get any playing time. However, this award focuses on players who log a decent amount of minutes and consequently affected their team's play the most. Simply put: the more you play, the more damage you can do.
--- And that actual "damage" is important. If you're on a tanking team, no one cares about your poor play; it may even be a positive. I'm also ignoring young players (under 21) who are still developing and can't be expected to be solid players yet.
--- Similarly, we don't want to judge players within the context of their salary any more than the actual MVP does. We also do not weigh in injuries either. For example, the Wizards would have a hard time competing with John Wall on the sidelines (0 games played, $32M in salary), but we want to focus on players' on-court performance instead.
dishonorable mentions
PG Mike Conley, Utah: 28.6 minutes per game, -0.80 RPM
We're using Mike Conley to reiterate that the LVP does NOT factor salary into the equation any more than the MVP does. But if it did, Mike Conley and his $33M salary may be in trouble.
It was a disastrous start to the season for Conley. Playing in a new role as a second fiddle to another guard, he could never find his groove. His assists plummeted (down to 4.3 per game), his free-throw attempts cut in half (from 5.8 to 2.9), and he only shot 42.9% from two-point range. That said, he still shot pretty well from 3 (37.6%) and played OK defense, keeping him off our official ballot.
SF Miles Bridges, Charlotte: 30.7 minutes per game, -2.68 RPM
Like Mike Conley, Miles Bridges seems like a great guy whom you'd hate to criticize. Alas, that's our exercise here. Caught in between positions, Bridges hasn't been able to figure out his rhythm on offense in the NBA either. He hasn't shot well (33% from three, 48.6% from two) and doesn't get to the line enough (2.0 FTA) to make up for it. The advanced stats get even worse from there (although to be fair, they get dragged down by playing in a bad starting lineup.)
Fortunately for him, Bridges is spared by his youth. At 22, he's technically over our "21 year old" threshold, but it still feels unfair to pick on his growing pains as a sophomore. Perhaps in time, he can find a role that can take advantage of his athleticism and talent. But be warned: the clock is ticking. We're taking the kid gloves off soon. Bridges and fellow analytics-allergic Kevin Knox (-7.7 RPM!) will be entering Year 3 next season and will need to step their games up to avoid LVP discussion.
SF Kyle Kuzma, L.A. Lakers: 24.6 minutes per game, -0.74 RPM
Kyle Kuzma can score if need be, but his skill set never made him a natural fit to play third banana to superstars like LeBron James and Anthony Davis. He's not a 3+D player -- he's more of a no-3 (30% this year) no-D player. At the same time, the LVP is about negative impact, and it's hard to find much of consequence here. After all, the Lakers still finished with the # 1 record in the West. Kuzma struggling to find his way is like a tree falling in the woods or a person farting in an empty elevator – ultimately it didn't matter.
SF Andre Iguodala, Memphis/Miami
It feels like ancient history now, but this past offseason, the Memphis Grizzlies acquired Andre Iguodala in a trade (under the presumption he may be dealt again.) According to official reports, Iguodala and the Grizzlies MUTUALLY decided that he wouldn't play for Memphis and wouldn't even report to the team in the meantime. Okay. Fine. We'll go along with that.
Still, that situation leaves a sour taste in the LVP headquarters. Memphis turned out to be better than expected, and could have used an extra rotational player. And even if Iguodala wouldn't have helped much on the court, he could have been a valuable mentor for their young kids. That's the least you can expect for a nice $15M in salary.
our official top 5 LVP ballot
(5) PF Anthony Tolliver (POR, SAC, MEM): 15.6 minutes per game, -3.60 RPM
I've always had a soft spot for the wise ol' owl, Anthony Tolliver. He's reportedly a great teammate and locker room presence. He also started to develop into an effective stretch four towards the end of this career.
But alas, the end of his career may have snuck up on us sooner than we expected. Tolliver disappointed for Minnesota last season, and completely flopped in his return to Portland. At age 34, he doesn't seem to be a viable rotation player anymore. He didn't play quite enough to merit LVP, but he still played more than he should have.
There's a chance Tolliver comes back next year to serve as a veteran mentor and pseudo-assistant coach somewhere, but it's more likely that he retires. If he does, he'll have played for 10 different franchises in his not-so-illustrious but very respectable career.
(4) SG Bryn Forbes, San Antonio: 25.1 minutes per game, -0.95 RPM
The NBA is all about shooting these days, and Bryn Forbes can shoot. He's hit an even 40.0% from three during his NBA career so far, and wasn't too far removed from that this season with 38.8% on 6.0 attempts per game. As a result, his true shooting percentage (57%) was above average. The Spurs lacked spacers, and Forbes fit that bill.
So what's the problem...? Turns out, basketball is more than a halfcourt game. And whenever the ball crosses that pesky midcourt line, Bryn Forbes starts to become a liability.
At only 6'3", Forbes is undersized to play the SG position, which is where the Spurs played him 74% of the time (according to basketball-reference.) Partly due to those athletic limitations, he only registered 0.5 steals per game, and blocked a grand total of 0 shots in his 1579 minutes of action. The advanced stats get ugly; Forbes ranks near the bottom at his position in DRPM, DBPM, all the alphabet formulas that you can cook up.
At the end of the day, LVP is about negative impact, and there's plenty here. Forbes is not a bad player in a vacuum, but he did not help the Spurs this year. In fact, their undersized lineup is a big reason why they're struggling so much on defense (25th in the NBA). As a direct result, they're on track to miss the playoffs for the first time in decades.
(3) SF Mario Hezonja, Portland: 16.3 minutes per game, -2.79 RPM
During the entire run of the Damian Lillard - C.J. McCollum era, Portland has struggled to figure out their wing rotation. That would be tested even more this season, with familiar faces like Moe Harkless, Al-Farouq Aminu, and Evan Turner slipping out the door. The trials and tribulations kept coming like Damian Lillard was Job, as injuries ravaged the Blazers' new depth chart. The team didn't need a star to emerge at forward -- but they needed somebody. Anybody.
In theory, that player should have been Mario Hezonja, a former lottery pick and a live body with good athleticism and size at 6'8". Signed this summer for a modest price ($1.7M), Hezonja had the chance to jumpstart his NBA career with a major opportunity on the team. Instead, he flopped like Marcus Smart taking a phantom elbow.
Hezonja's biggest problem is that, at age 25, he still hasn't found his feel on the court. He's not a good shooter (32.8% from three), and doesn't use his athleticism to find his way to the line (1.1 attempts per game.) He was a non-factor (5 PPG, 3 RPG) on a team that desperately needed him to step up. In fact, the Blazers were so desperate for help that they not only signed Carmelo Anthony, but they played him over 32 minutes a game.
Again, we see a real "LVP" candidacy here with a direct effect on the standings. The Blazers' getting a big fat nothing from Hezonja was a major part of their struggle to get to .500 this season.
(2) C Dewayne Dedmon, SAC/ATL: 17.6 minutes per game, -2.51 RPM
We're not supposed to factor in salaries into this equation, but Dewayne Dedmon's situation merits a mention for context. The Sacramento Kings signed the big man to a head-scratching 3-year, $40M deal this summer (seriously.) Clearly, GM Vlade Divac thought his young Kings were only a few veterans away from making the playoffs, bringing in (and over-paying) Dedmon, Cory Joseph, and Trevor Ariza.
Among the three, Dedmon turned out to be the most disappointing for several reasons. He didn't play well to start the season, and got usurped in the rotation by underrated Richaun Holmes. Rather than suck it up, take a deep breath, and take a relaxing dive in his new Scrooge McDuck money pool, Dedmon started to whine and complain and push for a trade. For a team that was struggling, Dedmon's headache became the last thing they needed. Ultimately, they ditched him back to where he came from in Atlanta.
Now, being difficult and being a prima donna isn't enough to get you LVP honors. You have to stink on the court as well. And sure enough, Dedmon started to check those boxes. Billed as a stretch five after hitting some threes in Atlanta, Dedmon lost his shot in the SMF airport baggage claim. He shot only 19.7% from three for the Kings, registering a 47.3% true shooting percentage on the season. His defense is OK, but it's not good enough make up for his poor offensive play. He's not bad enough to get LVP, but he hurt his team this year.
(1) PG Isaiah Thomas, Washington: 23.1 minutes per game, -2.75 RPM
We've awarded three LVP trophies in the past, and a familiar pattern is starting to emerge. The most dangerous players aren't necessarily the bad players; they're the players who used to be good. Because of their prior success, they tend to get overplayed by their coaches and drag their teams down with them.
It wasn't too long ago that Isaiah Thomas found himself in the MVP conversation for the Boston Celtics, as his incredible shotmaking helped make up for any defensive limitations he may have as a 5'9" player. That said, a small player like Thomas is always going to have a thin margin for error to remain a winning player. He needs to be GREAT offensively to make up for his defense. Unfortunately, his offense has not been great since his infamous injury. He can still make shots (hitting 41.3% of his threes), but he's not getting inside the paint and not getting to the free-throw line (1.9 attempts per game.) As a result, his true-shooting percentage lagged to 53.1%, well below league average.
If Isaiah Thomas isn't making scoring efficiently, then what is he doing to help a team win? He's not a great distributor (3.7 assists per game.) He's a very poor rebounder (1.7 per game.) And yes, that defense is still a major problem. According to ESPN's RPM metric, Thomas graded as a -4.2 impact per 100 possessions, the second worst in the league at PG after Trae Young. Basketball-reference lists his "defensive rating" at 121. For comparison's sake, the worst team defense in the league still held teams under 116. (That worst team? The Wizards.)
You can make an argument that there's still a place for Thomas in the NBA as a sparkplug scorer off the bench. Alas, that's not how the Wizards had been using him this season. He started 37 of 40 games for the team. Largely as a result of that, the Wizards' starting lineup was atrocious defensively. Fellow starters like Bradley Beal and Rui Hachimura ranked toward the bottom of their position in defensive metrics as well. When your lineup stinks defensively, a good coach may look in the mirror and say: hey, maybe we need a change here. Sadly, quick reactions are not Scottie Brooks' strong suit. He has the type of sloth-like speed that even frustrate workers at the DMV. The Wizards eventually dumped IT, but it took far too long to make that shift.
To be fair, the Wizards' options at point guard were limited with John Wall injured. Veteran Ish Smith is mediocre right now, and Shabazz Napier arrived late in the season. Still, the point here is: almost any competent point guard (like a Napier) would have helped the Wizards more than Isaiah Thomas. He had become a negative for them. The cold hard truth is that: it's very difficult to win basketball games with Thomas starting. And given that, he is our official LVP.
submitted by ZandrickEllison to nba [link] [comments]

What has Trump actually done? I've done some research...

A little about myself: I have always been a right-leaning financially conservative liberal. Meaning I'm all for newer technologies. I want solar energy, electric cars, auto-driving technologies (Love Musk). I do care about our environment. I do believe LGBT relationships/marriage is awesome. I'm all for Black people having their fair style of policing as well. I hate Nazis, hate Communists, hate racism, sexism, abuse, etc. I hate hate. I love LOVE! I want our government to be LESS controlling and want less taxes. I do NOT believe we should be handing out welfare checks unless IF needed (you just lost a job, sure). If you are sitting on welfare for 10 years....that becomes a problem. I look at BOTH SIDES. I've signed up for newsletters/emails/facebook/twitter groups from both sides. However I've seen that the left has become a socialist groupthink mindset, for example omitting the word God in a few speeches....It's not a BIG deal but small unnoticed details may lead to big overhauls. The censorships of channels, the media attacking conservatives, people getting fired for just having a different political opinion...are you kidding me?? The media turning a blind eye to destruction yet talk about Coronavirus numbers and criminals that are resisting arrest get shot as the cop's fault...however we do need more police training. Cops are aggressive here (I do agree with my liberal friends on that). The double standard: letting people protest for BLM but when the Conservatives tried to protest to go back to work, at the beginning in March/April, they were at fault. Or how CA Gov Newsom stated "You're allowed to protest, but not allowed to have social gatherings"....isn't a protest a type of social gathering.
I don't like to be biased, but holy crap how much I've found what Trump has done for the past 3.5 years is insane!! My point is I look at both sides for politics. Anyways, I decided to do a full day's work with the help of some people to compile a list:
  1. Trump recently signed 3 bills to benefit Native people. One gives compensation to the Spokane tribe for loss of their lands in the mid-1900s, one funds Native language programs, and the third gives federal recognition to the Little Shell Tribe of Chippewa Indians in Montana.
  2. Trump finalized the creation of Space Force as our 6th Military branch.
  3. Trump signed a law to make cruelty to animals a federal felony so that animal abusers face tougher consequences.
  4. Violent crime has fallen every year he’s been in office after rising during the 2 years before he was elected.
  5. Trump signed a bill making CBD and Hemp legal.
  6. Trump’s EPA gave $100 million to fix the water infrastructure problem in Flint, Michigan.
  7. Under Trump’s leadership, in 2018 the U.S. surpassed Russia and Saudi Arabia to become the world’s largest producer of crude oil.
  8. Trump signed a law ending the gag orders on Pharmacists that prevented them from sharing money-saving information.
  9. Trump signed the “Allow States and Victims to Fight Online Sex Trafficking Act” (FOSTA), which includes the “Stop Enabling Sex Traffickers Act” (SESTA) which both give law enforcement and victims new tools to fight sex trafficking.
  10. Trump signed a bill to require airports to provide spaces for breastfeeding Moms.
  11. The 25% lowest-paid Americans enjoyed a 4.5% income boost in November 2019, which outpaces a 2.9% gain in earnings for the country's highest-paid workers.
  12. Low-wage workers are benefiting from higher minimum wages and from corporations that are increasing entry-level pay.
  13. Trump signed the biggest wilderness protection & conservation bill in a decade and designated 375,000 acres as protected land.
  14. Trump signed the Save our Seas Act which funds $10 million per year to clean tons of plastic & garbage from the ocean.
  15. He signed a bill this year allowing some drug imports from Canada so that prescription prices would go down.
  16. Trump signed an executive order this year that forces all healthcare providers to disclose the cost of their services so that Americans can comparison shop and know how much less providers charge insurance companies.
  17. When signing that bill he said no American should be blindsided by bills for medical services they never agreed to in advance.
  18. Hospitals will now be required to post their standard charges for services, which include the discounted price a hospital is willing to accept.
  19. In the eight years prior to President Trump’s inauguration, prescription drug prices increased by an average of 3.6% per year. Under Trump, drug prices have seen year-over-year declines in nine of the last ten months, with a 1.1% drop as of the most recent month.
  20. He created a White House VA Hotline to help veterans and principally staffed it with veterans and direct family members of veterans.
  21. VA employees are being held accountable for poor performance, with more than 4,000 VA employees removed, demoted, and suspended so far.
  22. Issued an executive order requiring the Secretaries of Defense, Homeland Security, and Veterans Affairs to submit a joint plan to provide veterans access to access to mental health treatment as they transition to civilian life.
  23. Because of a bill signed and championed by Trump, In 2020, most federal employees will see their pay increase by an average of 3.1% — the largest raise in more than 10 years.
  24. Trump signed into a law up to 12 weeks of paid parental leave for millions of federal workers.
  25. Trump administration will provide HIV prevention drugs for free to 200,000 uninsured patients per year for 11 years.
  26. All-time record sales during the 2019 holidays.
  27. Trump signed an order allowing small businesses to group together when buying insurance to get a better price
  28. President Trump signed the Preventing Maternal Deaths Act that provides funding for states to develop maternal mortality reviews to better understand maternal complications and identify solutions & largely focuses on reducing the higher mortality rates for Black Americans.
  29. In 2018, President Trump signed the groundbreaking First Step Act, a criminal justice bill which enacted reforms that make our justice system fairer and help former inmates successfully return to society.
  30. The First Step Act’s reforms addressed inequities in sentencing laws that disproportionately harmed Black Americans and reformed mandatory minimums that created unfair outcomes.
  31. The First Step Act expanded judicial discretion in sentencing of non-violent crimes.
  32. Over 90% of those benefitting from the retroactive sentencing reductions in the First Step Act are Black Americans.
  33. The First Step Act provides rehabilitative programs to inmates, helping them successfully rejoin society and not return to crime.
  34. Trump increased funding for Historically Black Colleges and Universities (HBCUs) by more than 14%.
  35. Trump signed legislation forgiving Hurricane Katrina debt that threatened HBCUs.
  36. New single-family home sales are up 31.6% in October 2019 compared to just one year ago.
  37. Made HBCUs a priority by creating the position of executive director of the White House Initiative on HBCUs.
  38. Trump received the Bipartisan Justice Award at a historically black college for his criminal justice reform accomplishments.
  39. The poverty rate fell to a 17-year low of 11.8% under the Trump administration as a result of a jobs-rich environment.
  40. Poverty rates for African-Americans and Hispanic-Americans have reached their lowest levels since the U.S. began collecting such data.
  41. President Trump signed a bill that creates five national monuments, expands several national parks, adds 1.3 million acres of wilderness, and permanently reauthorizes the Land and Water Conservation Fund.
  42. Trump’s USDA committed $124 Million to rebuild rural water infrastructure.
  43. Consumer confidence & small business confidence is at an all-time high.
  44. More than 7 million jobs created since election.
  45. More Americans are now employed than ever recorded before in our history.
  46. More than 400,000 manufacturing jobs created since his election.
  47. Trump appointed 5 openly gay ambassadors.
  48. Trump ordered Ric Grenell, his openly gay ambassador to Germany, to lead a global initiative to decriminalize homosexuality across the globe.
  49. Through Trump’s Anti-Trafficking Coordination Team (ACTeam) initiative, Federal law enforcement more than doubled convictions of human traffickers and increased the number of defendants charged by 75% in ACTeam districts.
  50. In 2018, the Department of Justice (DOJ) dismantled an organization that was the internet’s leading source of prostitution-related advertisements resulting in sex trafficking.
  51. Trump’s OMB published new anti-trafficking guidance for government procurement officials to more effectively combat human trafficking.
  52. Trump’s Immigration and Customs Enforcement’s Homeland Security Investigations arrested 1,588 criminals associated with Human Trafficking.
  53. Trump’s Department of Health and Human Services provided funding to support the National Human Trafficking Hotline to identify perpetrators and give victims the help they need.
  54. The hotline identified 16,862 potential human trafficking cases.
  55. Trump’s DOJ provided grants to organizations that support human trafficking victims – serving nearly 9,000 cases from July 1, 2017, to June 30, 2018.
  56. The Department of Homeland Security has hired more victim assistance specialists, helping victims get resources and support.
  57. President Trump has called on Congress to pass school choice legislation so that no child is trapped in a failing school because of his or her zip code.
  58. The President signed funding legislation in September 2018 that increased funding for school choice by $42 million.
  59. The tax cuts signed into law by President Trump promote school choice by allowing families to use 529 college savings plans for elementary and secondary education.
  60. Under his leadership ISIS has lost most of their territory and been largely dismantled.
  61. ISIS leader Abu Bakr Al-Baghdadi was killed.
  62. Signed the first Perkins CTE reauthorization since 2006, authorizing more than $1 billion for states each year to fund vocational and career education programs.
  63. Executive order expanding apprenticeship opportunities for students and workers.
  64. Trump issued an Executive Order prohibiting the U.S. government from discriminating against Christians or punishing expressions of faith.
  65. Signed an executive order that allows the government to withhold money from college campuses deemed to be anti-Semitic and who fail to combat anti-Semitism.
  66. President Trump ordered a halt to U.S. tax money going to international organizations that fund or perform abortions.
  67. Trump imposed sanctions on the socialists in Venezuela who have killed their citizens.
  68. Finalized new trade agreement with South Korea.
  69. Made a deal with the European Union to increase U.S. energy exports to Europe.
  70. Withdrew the U.S. from the job killing TPP deal.
  71. Secured $250 billion in new trade and investment deals in China and $12 billion in Vietnam.
  72. Okay’ d up to $12 billion in aid for farmers affected by unfair trade retaliation.
  73. Has had over a dozen US hostages freed, including those Obama could not get freed.
  74. Trump signed the Music Modernization Act, the biggest change to copyright law in decades.
  75. Trump secured Billions that will fund the building of a wall at our southern border.
  76. The Trump Administration is promoting second chance hiring to give former inmates the opportunity to live crime-free lives and find meaningful employment.
  77. Trump’s DOJ and the Board Of Prisons launched a new “Ready to Work Initiative” to help connect employers directly with former prisoners.
  78. President Trump’s historic tax cut legislation included new Opportunity Zone Incentives to promote investment in low-income communities across the country.
  79. 8,764 communities across the country have been designated as Opportunity Zones.
  80. Opportunity Zones are expected to spur $100 billion in long-term private capital investment in economically distressed communities across the country.
  81. Trump directed the Education Secretary to end Common Core.
  82. Trump signed the 9/11 Victims Compensation Fund into law.
  83. Trump signed measure funding prevention programs for Veteran suicide.
  84. Companies have brought back over a TRILLION dollars from overseas because of the TCJA bill that Trump signed.
  85. Manufacturing jobs are growing at the fastest rate in more than 30 years.
  86. Stock Market has reached record highs.
  87. Median household income has hit highest level ever recorded.
  88. African-American unemployment is at an all-time low.(was until Covid bullshit)
  89. Hispanic-American unemployment is at an all-time low.
  90. Asian-American unemployment is at an all-time low.
  91. Women’s unemployment rate is at a 65-year low.
  92. Youth unemployment is at a 50-year low.
  93. We have the lowest unemployment rate ever recorded.
  94. The Pledge to America’s Workers has resulted in employers committing to train more than 4 million Americans.
  95. 95 percent of U.S. manufacturers are optimistic about the future— the highest ever.
  96. As a result of the Republican tax bill, small businesses will have the lowest top marginal tax rate in more than 80 years.
  97. Record number of regulations eliminated that hurt small businesses.
  98. Signed welfare reform requiring able-bodied adults who don’t have children to work or look for work if they’re on welfare.
  99. Under Trump, the FDA approved more affordable generic drugs than ever before in history.
  100. Reformed Medicare program to stop hospitals from overcharging low-income seniors on their drugs—saving seniors 100’s of millions of $$$ this year alone.
  101. Signed Right-To-Try legislation allowing terminally ill patients to try experimental treatment that wasn’t allowed before.
  102. Secured $6 billion in new funding to fight the opioid epidemic.
  103. Signed VA Choice Act and VA Accountability Act, expanded VA telehealth services, walk-in-clinics, and same-day urgent primary and mental health care.
  104. U.S. oil production recently reached all-time high so we are less dependent on oil from the Middle East.
  105. The U.S. is a net natural gas exporter for the first time since 1957.
  106. NATO allies increased their defense spending because of his pressure campaign.
  107. Withdrew the United States from the job-killing Paris Climate Accord in 2017 and that same year the U.S. still led the world by having the largest reduction in Carbon emissions.
  108. Has his circuit court judge nominees being confirmed faster than any other new administration.
  109. Had his Supreme Court Justice’s Neil Gorsuch and Brett Kavanaugh confirmed.
  110. Moved U.S. Embassy in Israel to Jerusalem.
  111. Agreed to a new trade deal with Mexico & Canada that will increase jobs here and $$$ coming in.
  112. Reached a breakthrough agreement with the E.U. to increase U.S. exports.
  113. Imposed tariffs on China in response to China’s forced technology transfer, intellectual property theft, and their chronically abusive trade practices, has agreed to a Part One trade deal with China.
  114. Signed legislation to improve the National Suicide Hotline.
  115. Signed the most comprehensive childhood cancer legislation ever into law, which will advance childhood cancer research and improve treatments.
  116. The Tax Cuts and Jobs Act signed into law by Trump doubled the maximum amount of the child tax credit available to parents and lifted the income limits so more people could claim it.
  117. It also created a new tax credit for other dependents.
  118. In 2018, President Trump signed into law a $2.4 billion funding increase for the Child Care and Development Fund, providing a total of $8.1 billion to States to fund child care for low-income families.
  119. The Child and Dependent Care Tax Credit (CDCTC) signed into law by Trump provides a tax credit equal to 20-35% of child care expenses, $3,000 per child & $6,000 per family + Flexible Spending Accounts (FSAs) allow you to set aside up to $5,000 in pre-tax $ to use for child care.
  120. In 2019 President Donald Trump signed the Autism Collaboration, Accountability, Research, Education and Support Act (CARES) into law which allocates $1.8 billion in funding over the next five years to help people with autism spectrum disorder and to help their families.
  121. In 2019 President Trump signed into law two funding packages providing nearly $19 million in new funding for Lupus specific research and education programs, as well an additional $41.7 billion in funding for the National Institutes of Health (NIH), the most Lupus funding EVER.
  122. Another upcoming accomplishment to add: In the next week or two Trump will be signing the first major anti-robocall law in decades called the TRACED Act (Telephone Robocall Abuse Criminal Enforcement and Deterrence.) Once it’s the law, the TRACED Act will extend the period of time the FCC has to catch & punish those who intentionally break telemarketing restrictions. The bill also requires voice service providers to develop a framework to verify calls are legitimate before they reach your phone.
  123. Israel-UAE peace. More Muslim countries (Countries such as Oman, Morocco, Sudan, Lebanon) said they may follow. Last time Israel and a Muslim country normalized ties was 26 years ago.
  124. US stock market continually hits all-time record highs.
Note: I would like to also add that this list will obviously be very similar to other lists if not the same, since these are facts and not really opinions.
I may have missed some stuff or duplicated a few things. Sorry about that. Please let me know if you have anything to add. Thanks for reading!
Edit:
I just want to clarify I’m not a Trump Supporter. I actually voted for Bernie in 2016. Even in 2016, I’ve wanted someone against the establishment. I did not like most of what Obama has done and still don’t. I really just wanted to see what Trump has done over his term after my mom was like “It virtually doesn’t matter who becomes president. I just want stability.” I just can’t vote for socialistic ideologies and the allowable riots/looting. Someone we know has Black bums living in their bought Chicago apt and because of Mayor Lightfoot’s “racial political correctness” directions, cops don’t want to get involved/kick them out and told them to go to court-which can take up to 8 months of waiting....WHERE are they supposed to live? These liberals don’t know how to run their states or cities.
submitted by Jules0328 to trump [link] [comments]

DDDD - Retail Investors, Bankruptcies, Dark Pools and Beauty Contests

DDDD - Retail Investors, Bankruptcies, Dark Pools and Beauty Contests
For this week's edition of DDDD (Data-Driven DD), we're going to look in-depth at some of the interesting things that have been doing on in the market over the past few weeks; I've had a lot more free time this week to write something new up, so you'll want to sit down and grab a cup of coffee for this because it will be a long one. We'll be looking into bankruptcies, how they work, and what some companies currently going through bankruptcies are doing. We'll also be looking at some data on retail and institutional investors, and take a closer look at how retail investors in particular are affecting the markets. Finally, we'll look at some data and magic markers to figure out what the market sentiment, the thing that's currently driving the market, looks like to help figure out if you should be buying calls or puts, as well as my personal strategy.
Disclaimer - This is not financial advice, and a lot of the content below is my personal opinion. In fact, the numbers, facts, or explanations presented below could be wrong and be made up. Don't buy random options because some person on the internet says so; look at what happened to all the SPY 220p 4/17 bag holders. Do your own research and come to your own conclusions on what you should do with your own money, and how levered you want to be based on your personal risk tolerance.

How Bankruptcies Work

First, what is a bankruptcy? In a broad sense, a bankruptcy is a legal process an individual or corporation (debtor) who owes money to some other entity (creditor) can use to seek relief from the debt owed to their creditors if they’re unable to pay back this debt. In the United States, they are defined by Title 11 of the United States Code, with 9 different Chapters that govern different processes of bankruptcies depending on the circumstances, and the entity declaring bankruptcy.
For most publicly traded companies, they have two options - Chapter 11 (Reorganization), and Chapter 7 (Liquidation). Let’s start with Chapter 11 since it’s the most common form of bankruptcy for them.
A Chapter 11 case begins with a petition to the local Bankruptcy court, usually voluntarily by the debtor, although sometimes it can also be initiated by the creditors involuntarily. Once the process has been initiated, the corporation may continue their regular operations, overseen by a trustee, but with certain restrictions on what can be done with their assets during the process without court approval. Once a company has declared bankruptcy, an automatic stay is invoked to all creditors to stop any attempts for them to collect on their debt.
The trustee would then appoint a Creditor’s Committee, consisting of the largest unsecured creditors to the company, which would represent the interests creditors in the bankruptcy case. The debtor will then have a 120 day exclusive right after the petition date to file a Plan of Reorganization, which details how the corporation’s assets will be reorganized after the bankruptcy which they think the creditors may agree to; this is usually some sort of restructuring of the capital structure such that the creditors will forgive the corporation’s debt in exchange for some or all of the re-organized entity’s equity, wiping out the existing stockholders. In general, there’s a capital structure pecking order on who gets first dibs on a company’s assets - secured creditors, unsecured senior bond holders, unsecured general bond holders, priority / preferred equity holders, and then finally common equity holders - these are the classes of claims on the company’s assets. After the exclusive period expires, the Creditor’s Committee or an individual creditor can themselves propose their own, possibly competing, Restructuring Plan, to the court.
A Restructuring Plan will also be accompanied by a Disclosure Statement, which will contain all the financial information about the bankrupt company’s state of affairs needed for creditors and equity holders to make an informed decision about how to proceed. The court will then hold a hearing to approve the Restructuring Plan and Disclosure Statement before the plan can be voted on by creditors and equity holders. In some cases, these are prepared and negotiated with creditors before bankruptcy is even declared to speed things up and have more favorable terms - a prepackaged bankruptcy.
Once the Restructuring Plan and Disclosure Statement receives court approval, the plan is voted on by the classes of impaired (i.e. debt will not be paid back) creditors to be confirmed. The legal requirement for a bankruptcy court to confirm a Restructuring Plan is to have at least one entire class of impaired creditors vote to accept the plan. A class of creditors is deemed to have accepted a Restructuring Plan when creditors that hold at least 2/3 of the dollar amount and at least half of the number of creditors vote to accept the plan. After another hearing, and listening to any potential objections to the proposed Restructuring Plan, such as other impaired classes that don't like the plan, the court may then confirm the plan, putting it to effect.
This is one potential ending to a Chapter 11 case. A case can also end with a conversion to a Chapter 7 (Liquidation) case, if one of the parties involved file a motion to do so for a cause that is deemed by the courts to be in the best interest of the creditors. In Chapter 7, the company ceases operating and a trustee is appointed to begin liquidating (i.e. selling) the company’s assets. The proceeds from the liquidation process are then paid out to creditors, with the most senior levels of the capital structure being paid out first, and the equity holders are usually left with nothing. Finally, a party can file a motion to dismiss the case for some cause deemed to be in the best interest of the creditors.

The Tale of Two Bankruptcies - WLL and HTZ

Hertz (HTZ) has come into news recently, with the stock surging up to $6, or 1500% off its lows, for no apparent fundamental reason, despite the fact that they’re currently in bankruptcy and their stock is likely worthless. We’ll get around to what might have caused this later, for now, we’ll go over what’s going on with Hertz in its bankruptcy proceedings. To get a clearer picture, let’s start with a stock that I’ve been following since April - Whiting Petroleum (WLL).
WLL is a stock I’ve covered pretty extensively, especially with it’s complete price dislocation between the implied value of the restructured company by their old, currently trading, stock being over 10x the implied value of the bonds, which are entitled to 97% of the new equity. Usually, capital structure arbitrage, a strategy to profit off this spread by going long on bonds and shorting the equity, prevents this, but retail investors have started pumping the stock a few days after WLL’s bankruptcy to “buy the dip” and make a quick buck. Institutions, seeing this irrational behavior, are probably avoiding touching at risk of being blown out by some unpredictable and irrational retail investor pump for no apparent reason. We’re now seeing this exact thing play out a few months later, but at a much larger scale with Hertz.
So, how is WLL's bankruptcy process going? For anyone curious, you can follow the court case in Stretto. Luckily for Whiting, they’ve entered into a prepackaged bankruptcy process and filed their case with a Restructuring Plan already in mind to be able to have existing equity holders receive a mere 3% of new equity to be distributed among them, with creditors receiving 97% of new equity. For the past few months, they’ve quickly gone through all the hearings and motions and now have a hearing to receive approval of the Disclosure Statement scheduled for June 22nd. This hearing has been pushed back a few times, so this may not be the actual date. Another pretty significant document was just filed by the Committee of Creditors on Friday - an objection to the Disclosure Statement’s approval. Among other arguments about omissions and errors the creditor’s found in the Disclosure Statement, the most significant thing here is that Litigation and Rejection Damage claims holders were treated in the same class as a bond holders, and hence would be receiving part of their class’ share of the 97% of new equity. The creditors claim that this was misleading as the Restructuring Plan originally led them to believe that the 97% would be distributed exclusively to bond holders, and the claims for Litigation and Rejection Damage would be paid in full and hence be unimpaired. This objection argues that the debtors did this gerrymandering to prevent the Litigation and Rejection Damage claims be represented as their own class and able to reject the Restructuring Plan, requiring either payment in full of the claims or existing equity holders not receiving 3% of new equity, and be completely wiped out to respect the capital structure. I’d recommend people read this document if they have time because whoever wrote this sounds legitimately salty on behalf of the bond holders; here’s some interesting excerpts:
Moreover, despite the holders of Litigation and Rejection Damage Claims being impaired, existing equity holders will still receive 3% of the reorganized company’s new equity, without having to contribute any new value. The only way for the Debtors to achieve this remarkable outcome was to engage in blatant classification gerrymandering. If the Debtors had classified the Litigation and Rejection Damage Claims separately from the Noteholder claims and the go-forward Trade Claims – as they should have – then presumably that class would reject a plan that provides Litigation and Rejection Damage Claims with a pro rata share of minority equity.
The Debtors have placed the Rejection Damage and Litigation Claims in the same class as Noteholder Claims to achieve a particular result, namely the disenfranchisement of the Rejection Damage and Litigation Claimants who, if separately classified, may likely vote to reject the Plan. In that event, the Debtor would be required to comply with the cramdown requirements, including compliance with the absolute priority rule, which in turn would require payment of those claims in full, or else old equity would not be entitled to receive 3% of the new equity. Without their inclusion in a consenting impaired class, the Debtors cannot give 3% of the reorganized equity to existing equity holders without such holders having to contribute any new value or without paying the holders of Litigation and Rejection Damage Claims in full.
The Committee submits that the Plan was not proposed in good faith. As discussed herein, the Debtors have proposed an unconfirmable Plan – flawed in various important respects. Under the circumstances discussed above, in the Committee’s view, the Debtors will not be able to demonstrate that they acted with “honesty and good intentions” and that the Plan’s results will not be consistent with the Bankruptcy Code’s goal of ratable distribution to creditors.
They’re even trying to have the court stop the debtor from paying the lawyers who wrote the restructuring agreement.
However, as discussed herein, the value and benefit of the Consenting Creditors’ agreements with the Debtors –set forth in the RSA– to the Estates is illusory, and authorizing the payment of the Consenting Creditor Professionals would be tantamount to approving the RSA, something this Court has stated that it refuses to do.20 The RSA -- which has not been approved by the Court, and indeed no such approval has been sought -- is the predicate for a defective Plan that was not proposed in good faith, and that gives existing equity holders an equity stake in the reorganized enterprise even though Litigation and Rejection Damage Creditors will (presumably) not be made whole under the Plan and the existing interest holders will not be contributing requisite new value.
As a disclaimer, I have absolutely zero knowledge nor experience in law, let alone bankruptcy law. However, from reading this document, if what the objection indicates to be true, could mean that we end up having the court force the Restructuring agreement to completely wipe out the current equity holders. Even worse, entering a prepackaged bankruptcy in bad faith, which the objection argues, might be grounds to convert the bankruptcy to Chapter 7; again, I’m no lawyer so I’m not sure if this is true, but this is my best understanding from my research.
So what’s going on with Hertz? Most analysts expect that based on Hertz’s current balance sheet, existing equity holders will most likely be completely wiped out in the restructuring. You can keep track of Hertz’s bankruptcy process here, but it looks like this is going to take a few months, with the first meeting of creditors scheduled for July 1. An interesting 8-K got filed today for HTZ, and it looks like they’re trying to throw a hail Mary for their case by taking advantage of dumb retail investors pumping up their stock. They’ve just been approved by the bankruptcy court to issue and sell up to $1B (double their current market cap) of new shares in the stock market. If they somehow pull this off, they might have enough money raised to dismiss the bankruptcy case and remain in business, or at very least pay off their creditors even more at the expense of Robinhood users.

The Rise of Retail Investors - An Update

A few weeks ago, I talked about data that suggested a sudden surge in retail investor money flooding the market, based on Google Trends and broker data. Although this wasn’t a big topic back when I wrote about it, it’s now one of the most popular topics in mainstream finance news, like CNBC, since it’s now the only rational explanation for the stock market to have pumped this far, and for bankrupt stocks like HTZ and WLL to have surges far above their pre-bankruptcy prices. Let’s look at some interesting Google Trends that I found that illustrates what retail investors are doing.

Google Trends - Margin Calls
Google Trends - Robinhood
Google Trends - What stock should I buy
Google Trends - How to day trade
Google Trends - Pattern Day Trader
Google Trends - Penny Stock
The conclusion that can be drawn from this data is that in the past two weeks, we are seeing a second wave of new retail investor interest, similar to the first influx we saw in March. In particular, these new retail investors seem to be particularly interested in day trading penny stocks, including bankrupt stocks. In fact, data from Citadel shows that penny stocks have surged on average 80% in the previous week.
Why Retail Investors Matter
A common question that’s usually brought up when retail investors are brought up is how much they really matter. The portfolio size of retail investors are extremely small compared to institutional investors. Anecdotally and historically, retail investors don’t move the market, outside of some select stocks like TSLA and cannabis stocks in the past few years. However when they do, shit gets crazy; the last time retail investors drove the stock market was in the dot com bubble. There’s a few papers that look into this with similar conclusions, I’ll go briefly into this one, which looks at almost 20 years of data to look for correlations between retail investor behavior and stock market movements. The conclusion was that behaviors of individual retail investors tend to be correlated and are not random and independent of each other. The aggregate effect of retail investors can then drive prices of equities far away from fundamentals (bubbles), which risk-averse smart money will then stay away from rather than try taking advantage of the mispricing (i.e. never short a bubble). The movement in the prices are typically short-term, and usually see some sort of reversal back to fundamentals in the long-term, for small (i.e. < $5000) trades. Apparently, the opposite is true for large trades; here’s an excerpt from the paper to explain.
Stocks recently sold by small traders perform poorly (−64 bps per month, t = −5.16), while stocks recently bought by small traders perform well (73 bps per month, t = 5.22). Note this return predictability represents a short-run continuation rather than reversal of returns; stocks with a high weekly proportion of buys perform well both in the week of strong buying and the subsequent week. This runs counter to the well-documented presence of short-term reversals in weekly returns.14,15 Portfolios based on the proportion of buys using large trades yield precisely the opposite result. Stocks bought by large traders perform poorly in the subsequent week (−36 bps per month, t = −3.96), while those sold perform well (42 bps per month, t = 3.57). We find a positive relationship between the weekly proportion of buyers initiated small trades in a stock and contemporaneous returns. Kaniel, Saar, and Titman (forthcoming) find retail investors to be contrarians over one-week horizons, tending to sell more than buy stocks with strong performance. Like us, they find that stocks bought by individual investors one week outperform the subsequent week. They suggest that individual investors profit in the short run by supplying liquidity to institutional investors whose aggressive trades drive prices away from fundamental value and benefiting when prices bounce back. Barber et al. (2005) document that individual investors can earn short term profits by supplying liquidity. This story is consistent with the one-week reversals we see in stocks bought and sold with large trades. Aggressive large purchases may drive prices temporarily too high while aggressive large sells drive them too low both leading to reversals the subsequent week.
Thus, using a one-week time horizon, following the trend can make you tendies for a few days, as long as you don’t play the game for too long, and end up being the bag holder when the music stops.

The Keynesian Beauty Contest

The economic basis for what’s going on in the stock market recently - retail investors driving up stocks, especially bankrupt stocks, past fundamental levels can be explained by the Keynesian Beauty Contest, a concept developed by Keynes himself to help rationalize price movements in the stock market, especially during the 1920s stock market bubble. A quote by him on the topic of this concept, that “the market can remain irrational longer than you can remain solvent”, is possibly the most famous finance quote of all time.
The idea is to imagine a fictional newspaper beauty contest that asks the reader to pick the six most attractive faces of 100 photos, and you win if you pick the most popular face. The naive strategy would be to pick the faces that you think are the most attractive. A smarter strategy is to figure out what the most common public perception of attractiveness would be, and to select based on that. Or better yet, figure out what most people believe is the most common public perception of what’s attractive. You end up having the winners not actually be the faces people think are the prettiest, but the average opinion of what people think the average opinion would be on the prettiest faces. Now, replace pretty faces with fundamental values, and you have the stock market.
What we have today is the extreme of this. We’re seeing a sudden influx of dumb retail money into the market, who don’t know or care about fundamentals, like trading penny stocks, and are buying beaten down stocks (i.e. “buy the dip”). The stocks that best fit all three of these are in fact companies that have just gone bankrupt, like HTZ and WLL. This slowly becomes a self-fulfilling prophecy, as people start seeing bankrupt stocks go up 100% in one day, they stop caring about what stocks have the best fundamentals and instead buy the stocks that people think will shoot up, which are apparently bankrupt stocks. Now, it gets to the point where even if a trader knows a stock is bankrupt, and understands what bankruptcy means, they’ll buy the stock regardless expecting it to skyrocket and hope that they’ll be able to sell the stock at a 100% profit in a few days to an even greater fool. The phenomenon is well known in finance, and it even has a name - The Greater Fool Theory. I wouldn’t be surprised if the next stock to go bankrupt now has their stock price go up 100% the next day because of this.

What is the smart money doing - DIX & GEX

Alright that’s enough talk about dumb money. What’s all the smart money (institutions) been doing all this time? For that, you’ll want to look at what’s been going on with dark pools. These are private exchanges for institutions to make trades. Why? Because if you’re about to buy a $1B block of SPY, you’re going to cause a sudden spike in prices on a normal, public exchange, and probably end up paying a much higher cost basis because of it. These off-exchange trades account for about one third of all stock volume. You can then use data of market maker activity in these dark pools to figure out what institutions have been doing, the most notable indicators being DIX by SqueezeMetrics.
Another metric they offer is GEX, or gamma exposure. The idea behind this is that market markets who sell option contracts, typically don’t want to (or can’t legally) take an actual position in the market; they can only provide liquidity. Hence, they have to hedge their exposure from the contracts they wrote by going long or short on the stocks they wrote contracts to. This is called delta-hedging, with delta representing exposure to the movement of a stock. With options, there’s gamma, which represents the change in delta as the stock price moves. So as stock prices move, the market maker needs to re-hedge their positions by buying or selling more shares to remain delta-neutral. GEX is a way to show the total exposure these market makers have to gamma from contracts to predict stock price movements based on what market makers must do to re-hedge their positions.
Now, let’s look at what these indicators have been doing the past week or so.
DIX & GEX
In the graph above, an increasing DIX means that institutions are buying stocks in the S&P500, and an increasing GEX means that market makers have increasing gamma exposure. The DIX whitepaper, it has shown that a high DIX is often correlated with increased near-term returns, and in the GEX whitepaper, it shows that a decreased GEX is correlated with increased volatility due to re-hedging. It looks like from last week’s crash, we had institutions buy the dip and add to their current positions. There was also a sudden drop in GEX, but it looks like it’s quickly recovered, and we’ll see volatility decreased next week. Overall, we’re getting bullish signals from institutional activity.

Bubbles and Market Sentiment

I’ve long held that the stock market and the economy has been in a decade-long bubble caused by liquidity pumping from the Fed. Recently, the bubble has been accelerated and it’s becoming clearer to people that we are in a bubble. Nevertheless, you shouldn’t short the bubble, but play along with it until it bursts. Bubbles are driven by pure sentiment, and this can be a great contrarian indicator to what stage of the bubble we are in. You want to be a bear when the market is overly greedy and a bull when the market is overly bearish. One of the best tools to measure this is the equity put / call ratio.
Put / Call Ratio
The put/call ratio dropped below 0.4 last week, something that’s almost never happened and has almost always been immediately followed up by a correction - which it did this time as well. A low put / call ratio is usually indicative of an overly-greedy market, and a contrarian indicator that a drop is imminent. However, right after the crash, the put/call ratio absolutely skyrocketed, closing right above 0.71 on Friday, above the mean put / call ratio for the entire rally since March’s lows. In other words, a ton of money has just been poured into SPY puts expecting to profit off of a downtrend. In fact, it’s possible that the Wednesday correction itself has been exasperated by delta hedging from SPY put writers. However, this sudden spike above the mean for put/call ratio is a contrarian indicator that we will now see a continued rally.

Technicals

Magic Markers on SPY, Daily
With Technical Indicators, there’s a few things to note
  • 1D RSI on SPY was definitely overbought last week, and I should have taken this as a sign to GTFO from all my long positions. The correction has since brought it back down, and now SPY has even more room to go further up before it becomes overbought again
  • 1D MACD crossed over on Wednesday to bearish - a very strong bearish indicator, however 1W MACD is still bullish
  • For the bulls, there’s very little price levels above 300, with a small possible resistance at 313, which is the 79% fib retracement. SPY has never actually hit this price level, and has gapped up and down past this price. Below 300, there’s plenty of levels of support, especially between 274 and 293, which is the range where SPY consolidated and traded at for April and May. This means that a movement up will be met with very little resistance, while a movement down will be met with plenty of support
  • The candles above 313 form an island top pattern, a pretty rare and strong bearish indicator.
The first line of defense of the bulls is 300, which has historically been a key support / resistance level, and is also the 200D SMA. So far, this price level has held up as a solid support last week and is where all downwards price action in SPY stopped. Overall, there’s very mixed signals coming from technical indicators, although there’s more bearish signals than bullish.
My Strategy for Next Week
While technicals are pretty bearish, retail and institutional activity and market sentiment is indicating that the market still continue to rally. My strategy for next week will depend on whether or not the market opens above or below 300. I’m currently mostly holding long volatility positions, that I’ve started existing on Friday.
The Bullish case
If 300 proves to be a strong support level, I’ll start entering bullish positions, following my previous strategy of going long on weak sectors such as airlines, cruises, retail, and financials, once they break above the 24% retracement and exit at the 50% retracement. This is because there’s very little price levels and resistance above 300, so any movements above this level will be very parabolic up to ATHs, as we saw in the beginning of 2020 and again the past two weeks. If SPY moves parabolic, the biggest winners will likely be the weakest stocks since they have the most room to go up, with most of the strongest stocks already near or above their ATHs. During this time, I’ll be rolling over half of my profits to VIX calls of various expiry dates as a hedge, and in anticipation of any sort of rug pull for when this bubble does eventually pop.
The Bearish case
For me to start taking bearish positions, I’ll need to see SPY open below 300, re-test 300 and fail to break above it, proving it to be a resistance level. If this happens, I’ll start entering short positions against SPY to play the price levels. There’s a lot of price levels between 300 and 274, and we’d likely see a lot of consolidation instead of a big crash in this region, similar to the way up through this area. Key levels will be 300, 293, 285, 278, and finally 274, which is the levels I’d be entering and exiting my short positions in.
I’ve also been playing with WLL for the past few months, but that has been a losing trade - I forgot that a market can remain irrational longer than I can remain solvent. I’ll probably keep a small position on WLL puts in anticipation of the court hearing for the disclosure statement, but I’ve sold most of my existing positions.

Live Updates

As always, I'll be posting live thoughts related to my personal strategy here for people asking.
6/15 2AM - /ES looking like SPY is going to gap down tomorrow. Unless there's some overnight pump, we'll probably see a trading range of 293-300.
6/15 10AM - Exited any remaining long positions I've had and entered short positions on SPY @ 299.50, stop loss at 301. Bearish case looking like it's going to play out
6/15 10:15AM - Stopped out of 50% of my short positions @ 301. Will stop out of the rest @ 302. Hoping this wasn't a stop loss raid. Also closed out more VIX longer-dated (Sept / Oct) calls.
6/15 Noon - No longer holding any short positions. Gap down today might be a fake out, and 300 is starting to look like solid support again, and 1H MACD is crossing over, with 15M remaining bullish. Starting to slowly add to long positions throughout the day, starting with CCL, since technicals look nice on it. Also profit-took most of my VIX calls that I bought two weeks ago
6/15 2:30PM - Bounced up pretty hard from the 300 support - bull case looks pretty good, especially if today's 1D candle completely engulphs the Friday candle. Also sold another half of my remaining long-dated VIX calls - still holding on to a substantial amount (~10% of portfolio). Will start looking to re-buy them when VIX falls back below 30. Going long on DAL as well
6/15 11:30PM - /ES looking good hovering right above 310 right now. Not many price levels above 300 so it's hard to predict trading ranges since there's no price levels and SPY will just go parabolic above this level. Massive gap between 313 and 317. If /ES is able to get above 313, which is where the momentum is going to right now, we might see a massive gap up and open at 317 again. If it opens below 313, we might see the stock price fade like last week.
6/15 Noon - SPY filled some of the gap, but then broke below 313. 15M MACD is now bearish. We might see gains from today slowly fade, but hard to predict this since we don't have strong price levels. Will buy more longs near EOD if this happens. Still believe we'll be overall bullish this week. GE is looking good.
6/16 2PM - Getting worried about 313 acting as a solid resistance; we'll either probably gap up past it to 317 tomorrow, or we might go all the way back down to 300. Considering taking profit for some of my calls right now, since you'll usually want to sell into resistance. I might alternatively buy some 0DTE SPY puts as a hedge against my long positions. Will decide by 3:30 depending on what momentum looks like
6/16 3PM - Got some 1DTE SPY puts as a hedge against my long positions. We're either headed to 317 tomorrow or go down as low as 300. Going to not take the risk because I'm unsure which one it'll be. Also profit-took 25% of my long positions. Definitely seeing the 313 + gains fade scenario I mentioned yesterday
6/17 1:30AM - /ES still flat struggling to break through 213. If we don't break through by tomorrow I might sell all my longs. Norwegian announced some bad news AH about cancelling Sept cruises. If we move below $18.20 I'll probably sell all my remaining positions; luckily I took profit on CCL today so if options do go to shit, it'll be a relatively small loss or even small gain.
6/17 9:45AM - SPY not being able to break through 313/314 (79% retracement) is scaring me. Sold all my longs, and now sitting on cash. Not confident enough that we're actually going back down to 300, but no longer confident enough on the bullish story if we can't break 313 to hold positions
6/17 1PM - Holding cash and long-term VIX calls now. Some interesting things I've noticed
  1. 1H MACD will be testing a crossover by EOD
  2. Equity put/call ratio has plummeted. It's back down to 0.45, which is more than 1 S.D. below the mean. We reached all the way down to 0.4 last time. Will be keeping a close eye on this and start buying for VIX again + SPY puts we this continues falling tomorrow
6/17 3PM - Bought back some of my longer-dated VIX calls. Currently slightly bearish, but still uncertain, so most of my portfolio is cash right now.
6/17 3:50PM - SPY 15M MACD is now very bearish, and 1H is about to crossover. I'd give it a 50% chance we'll see it dump tomorrow, possibly towards 300 again. Entered into a very small position on NTM SPY puts, expiring Friday
6/18 10AM - 1H MACD is about to crossover. Unless we see a pump in the next hour or so, medium-term momentum will be bearish and we might see a dump later today or tomorrow.
6/18 12PM - Every MACD from 5M to 1D is now bearish, making me believe we'd even more likely see a drop today or tomorrow to 300. Bought short-dates June VIX calls. Stop loss for this and SPY puts @ 314 and 315
6/18 2PM - Something worth noting: opex is tomorrow and max pain is 310, which is the level we're gravitating towards right now. Also quad witching, so should expect some big market movements tomorrow as well. Might consider rolling my SPY puts forward 1 week since theoretically, this should cause us to gravitate towards 310 until 3PM on Friday.
6/18 3PM - Rolled my SPY puts forward 1W in case theory about max pain + quad witching end up having it's theoretical effect. Also GEX is really high coming towards options expiry tomorrow, meaning any significant price movements will be damped by MM hedging. Might not see significant price movements until quad witching hour tomorrow 3PM
6/18 10PM - DIX is very high right now, at 51%, which is very bullish. put/call ratio is still very low though. Very mixed signals. Will be holding positions until Monday or SPY 317 before reconsidering them.
6/18 2PM - No position changes. Coming into witching hour we're seeing increased volatility towards the downside. Looking good so far
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Margin Available and Margin Used in Zerodha Trading What is Margin Money in Trading Account ? (Hindi) What is Margin? What is Option Margin? What are Margin Requirements? What is Variation Margin?

Margin Trading: In the stock market, margin trading refers to the process whereby individual investors buy more stocks than they can afford to. Margin trading also refers to intraday trading in India and various stock brokers provide this service. Margin trading involves buying and selling of securities in one single session. Over time, What exactly is margin trading? When utilizing margin you should think about the term leverage. In reality, margin trading and the use of leverage go hand in hand when it comes to understanding the practice. Usually, when you are placing a forex trade, it is necessary for you to shell out a minimum amount of the position in good faith. A margin account is a brokerage account in which the broker lends the customer cash to purchase assets. When trading on margin, gains and losses are magnified. Margin refers to the amount of equity an investor has in their brokerage account. "To margin" or "to buy on margin" means to use money borrowed from a broker to purchase securities. Trading on margin is a common strategy employed in the financial world; however, it is a risky one. Margin is the money borrowed from a broker to buy or short an asset and allows the trader to pay

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Margin Available and Margin Used in Zerodha Trading

Here how can we use the margin amount in intraday trading explains... There are 2 types of margin trading or margin funding. 1. Intraday: This is further divided into two i.e. margin money for trades without stop loss and margin money for cover or bracket order. Buying on margin is borrowing money from a broker to purchase stock. You can think of it as a loan from your brokerage. Margin trading allows you to buy more stock than you'd be able to normally. Open a demat account with a margin amount, based on various plans that receive exposure to trade at an amount higher than what is present in your trading account. Learn more about margin amounts ... Margin is the amount of funds that you need in your account to trade stocks and certain types of options. Learning and understanding margin and leverage is key so that you don't over leverage...

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