BattleFin was founded by fund manager Tim Harrington and his colleagues to sponsor a series of trading tournaments where the best big data strategies win. Whats it like to trade and strategize in what has been called the Hunger Games for hedge funds? We asked prop trader Tim Fligg for his take in this Traders diary.
ENTRY 1: The Game Strategy
From atechnical standpoint, if the market was to get back to 1950 It would break 3 levels of resistance, and break through 1962 and close above it I’d get bullish again. But with everything I’m running and the market making lower lows again recently I feel we’re headed back to the 1800-1850 area.And we’ll see this once we break 1900 and close below it. I think we’ll see the same move we saw last month and it’ll be quick.
So what’s my game plan?
I’ve positioned myself for this move in the following way:
Shorting E-mini futures
Im long the 1940/1920 Nov put spread
Im long the 1880/1860 Nov put spread
I’m long the VixNovember 24calls –
I sold the NOV 1960 Calls for a credit to fund all of my put spreads. And I sold the 1830 Nov puts which will act as my defense if we get a sharp rally.
If we just sit here I’ll be golden.
If I’m wrong and we rally the loss, on the put spreads will be mitigated by the puts I’m short and Ill make it up on the credit.
If the market stays between 1835- 1960 Ill make money on the credits from the puts and calls Im short. And if I’m right I have laddered under 1900 with 1 sell stop on the e-mini for every point. I prefer to do laddered positions because when you’re right you make a ton, and when you’re wrong you’re never in a big position. So if we do tank hard the loss on the 1830 puts will be compensated with all the futures I’ll be short. The stops will be triggered every point at 1899 1898 1897 all the way down to 1870.
If my 1960 calls that I sold at 33.68 is my average go under 15 I’ll cover them.
If my 1830 puts that I sold at 34.64 go under 15 I’ll cover them.
The futures I’m short I’ve got buy stops laddered between 1960-1975 so I won’t get short squeezed, I’ll know I was wrong and I’ll compensate that loss with the 1830 puts profit.
If I’m right and we break 1900 and go down to a minimal of 1880-1870 I should be able to put up an additional 10 to 15 percent this week depending on volatility and the time decay on my options.
If we rally hard and I’m forced to cover I should take a 5 to 7 percent hit on my account depending on when I’m wrong.
Depending on when it happens if we hit 1895 I’ll take off my 1940/1920 put spread and probably the 1960 calls. I’ll then sell the 1930/1940 calls to collect premium. I’ll cover the 1830 puts if there’s a 30 percent chance or over that they’ll expire in the money. And I’ll sell the 1800/1780 puts as a defense encase there’s any sharp rallies or short squeezes.
I’m pretty much maxed out on my account and if I could I’d be longer the VIX, Silver, and Gold, I think Gold and Silver are about to take off.
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The headlines and fundamentals that I’m focused on are:
India Precious Metals Import Explosive – August Gold 126t, Silver 1,400t
In the month of August 2015, India imported 126 tonnes of gold and 1,400 tonnes of silver, according to data fromInfodrive India.Gold import into India is rising after a steep fall due to government import restrictions implemented in 2013.
Year-to-date India has imported 654 tonnes of gold, which is 66% up year on year. 6,782 tonnes in silver bars have crossed the Indian border so far this year, up 96% y/y.
Gold import is set to reach an annualized 980 tonnes, which would be up 26 percent relative to 2014 and would be the second highest figure on (my) record – my record goes back to 2008.
Silver import is on track to reach an annualized 10,172 tonnes, up 44 percent y/y!This would be a staggering 37 percent of world mining
Per Jim Grant, founder of Grant’s Interest Rate Observer, a twice-monthly journal of the financial markets. His most recent book is “The Forgotten Depression.”
This is a monetary moment. I think we are looking at the beginning of the worlds reappraisal of the words and deeds of central bankers like Janet Yellen and Mario Draghi. What were waiting for is a sufficient recognition of the monetary disorder. You see monetary disorder manifested in super low interest rates, in the mispricing of credit broadly and you see it in the escalation of radical monetary nastrums that are floating out of the various central banks and established temples of thought: Negative real rates, negative nominal rates and the idea of helicopter money. So you need some hedge against things not going according to the script and that makes gold and gold mining equities terrifically interesting now.
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All the talk about the Fed going to raise rates, I believe we’re not going to raise rates anytime soon. So I’m not worried about any surprise increase in ratesDEBT TO REV PIC
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I attribute the market hitting all-time highs this summer to all the company stock buy backs. But what I’m really interested in is how that’s funded and what’s been going on.
Companies making less and less are now selling bonds to fund their own stock repurchase programs. This shows you that companies are artificially inflating their earnings by leveraging their own balance sheets. When this ends and buying dries up who’s going to be keeping this market afloat?
Bio:
Tim Fligg has been a professional trader for more than 15 years. A trianed chef, he is currently a proprietary trader specializing in Options, Futures, and Equities. If he wins this round of BattleFin it will be his 4th time coming in first place in his category.
