About oil price

Ooh, long ago here I added nothing. Alas, until recently there was at all no opportunity to be engaged in independent researchers. Now it became slightly simpler with it, and it means that I will shortly publish some practices. Plus still is an idea entirely to move to the independent website shortly. Amicably, it would be necessary to give some comment on the global markets from the equipment or macroeconomic, especially against the background of the arriving news. It is remarkable that the other day Google recorded a historical maximum by requests for World War III. News of this sort always pushes people to invest in the "protected" assets and commodity. On the one hand, it looks quite reasonable, at the conflicting demand for raw materials will increase. But there is one problem: historically the prices don't keep long at the high levels, and correction will take away finally all collected profit. I have shown to one client who has wanted to invest for a long time in oil I the following chart:

The schedule shows dynamics of the price of oil from 1861 to 2011. At the same time, the blue line  price in nominal dollars, and the red line - in brought on inflation since 2011.

What can draw a conclusion? And very simple: Adjusted for inflation, the average price of oil of the hysteric woman was always not more expensive than $40 for the barrel. Any "carrying out" above finally was corrected. It means that oil purchase - initially unprofitable investment. The cost of providing a position, inflation and percent finally will destroy all profit, even if the price of some time grows.

Unfortunately, not so many people adhere to similar logic. And most of my clients don't consider similar historical extrapolation a sufficient argument and continue to play "random walks."

Closed straddle strategy

Here also the expiration of my options portfolio came that is the completion of an experiment.
Now I can sum up the full result and analyze the effect.
The portfolio kept one and a half months and had 3 modifications:

• Initial formation of a call spread in the form of "straddle."
• At renewal of a trend closing of the left leg and transition to a long stake
• Change to a bull call spread.

I described the first two points in the previous post (here the reference: https://vk.com/wall-103610476_242? w=page-103610476_53705610). I will dwell on the last a little:
After the closing of the left leg (sale of fetters options), I had a clean equivalent of Long. Considering that I work with options, but not with the primary market, a sin was not to seize all additional opportunities to maximize income. And I made decisions to begin to sell stakes "out of money," thereby forming "a bull call spread."
Eventually, at me the call spread 15000-17250 turned out. In such look, the position came to expiration.
I will tell at once, the sale of the option I well "cut off" to myself profit as sold a stake too close to money in the growing market. Of course, it was covered with other option, but the current variation took away a lot of money when the price of the option began to grow with a growth of the price (At the market in 17350, the option sold by me became "on money", so its price grew as much as possible. Here schedule of a teta.


Apparently, the market was closed to its maximum values. And it left to me in kopek.
Morals: it is impossible to underestimate the force of a trend and to form very narrow spreads.

Anyway, I consider that I the idea well worked myself. Both options were executed and made profit on "a long position."


As a result, the profitability of all portfolio in 1.5 months made 25.13% that in itself is quite good.

I think that about new year I will leave work with options so far, it is too much another matters, plus it will be necessary to analyze all mistakes once again. All best!

Negotiation methods

I here at work needed the skill of work with clients and ability to conduct negotiations. Up to this point, I was focused only on the financial analysis and did not take into account another part of this business at all - negotiations and process of the conclusion of transactions. The last experience showed that ability to communicate with clients not less valuable, than the ability to find the prospective company for investment. As well as always, I solved approach it from studying at the base. To be advised to read the book "It is possible to agree about everything! How to try to obtain a maximum in any negotiations" the author Gavin Kennedy. Here reference to profile: https://www.livelib.ru/book/1000686893-dogovoritsya-m. If to whom it is interesting, I can throw off the e-book.

Bought BANE in M&A anticipation (END)

Today, I closed my first M & A deal (Mergers and Acquisitions).
Owning shares in Bashneft, I put up an offer for the sale of Rosneft's securities.
The operation is quite simple, it is enough to apply through a broker:


Here are details about my investing :

• Buy price: 3529


• Offer price: 3706,4 

Total return is: 5,02%

I think the first experience is quite successful, but for further work in this area, it will be necessary to closely study all the features of working with M & A. For this I will look for relevant literature.

ETF Investment

It is known that any investor respecting himself puts the main objective ensuring profitability on the invested capital.
Both intraday traders and strategic investors aspire to it.
But how to define, an activity of the managing director is how productive? It is clear, that negative profitability is
inefficiency indicator, but how indeed to estimate actual cost-effectiveness? Let's assume, the trader earned about 20% in a year,
at a growth of index fund by only 15%. Whether it is worth investing in this managing director? Considering that a mean square deviation
at the trader is higher than at the index (coefficients 0,1 and 0,05 are taken), it is possible to calculate Sharp's indicator for two portfolios: for the trader,it will turn out 1.2, for the index 1.4. And it means that the trader spending for work with the market till many hours a day in the long term
will lose on profitability to the one who bought index fund.
It, of course, rough approach, and I do not consider that active management has no chances to overtake the index. Moreover, is
set of examples of how on an extent of decades funds showed the profitability advancing a benchmark by percent.
The idea is that before trying to overtake the index, it is necessary at first to be able to show profitability, commensurable with it. In search of the answer
on this question I came across material about how to operate risks in buy&hold of strategy for index funds. Especially it was pleasant to me
the idea with rebalancing of positions on volatility.
Generally, here article if to whom it is interesting:
http://www.long-short.ru/post/indeksnoe-investirovani..

Option spread SBRF

Hi, everybody!
I think it is time, to sum up, the intermediate results on option spread which I opened approximately a month ago.
The spread consisted of two bought options. At the same time all options of one strike, but a different type. Such spread is usually called long straddle.
Structure of an options portfolio:

Long  Call - SBRF-12.16M141216CA 15000
Long  Put- SBRF-12.16M141216PA 15000

The general idea was following. The future for stocks of Sberbank about the beginning of year technically strongly rose, having updated the maxima. The paper showing new Huy against the background of a decrease in the revenue suggests an idea that technical correction has to follow strong growth.
So the daily chart of SBRF at the time of opening of straddle looked:

Considering that the Russian market quite high, and the probability of the continuation of a rally is also present, to open an uncovered short position it was too risky.
Just the long spread of volatility very well is suitable for such situation.

The position profile on an expiration in spread looks as follows:



По горизонтали отложены цены базового актива. Тут видно, что пока фьючерс находится в диапазоне стоимость опионов перекрывает прирост их доходности, иными словами позиция оценивается ниже нуля. Для того, чтобы доходность перекрыла премию по опционам, базовый актив должен либо продолжить рост, либо начать падать.

Вот что происходило дальше:


Apparently, from the chart, the price derated twice, and indicators of sensitivity changed respectively:

Apparently, the delta jumped from-60 to +90. It created floating profit in the spread. But as I did not use a delta hedge in work, with each return to a strike profit on the monetary option was nullified.
Initially, I did not plan to hedge the delta, and I not especially worry about it. Just now I know as it is correct to do it and further I will surely watch the delta of a position closely. I will use most likely a contour for maintenance it about zero.
Besides the delta, the long spread still has one crucial risk - it is Teta, time disintegration of the option. As all my options bought, time works for me, and every day they lose the temporary cost. Considering what in approach to the expiration of the tet amplifies, now its profile looks as follows:


Time here is shown by the movement from the red line to dark blue. Apparently, it not linearly influences my spread.
As before an expiration, there were only about 2 weeks, and the probability of leaving in the left leg promptly decreases, the decision to close risk on tet was made, having sold out.
As a result at present, my spread passed a position on the option call into ordinary Long.
The current risk profile looks as follows:

Short results on a portfolio of options (in a month):

•  Calls up to: 84%


• total income: 4.02 %

Following actions:

• The Call will be held either before an expiration, or to the purpose on profitability (RR=3)


• I will monitor changes of the delta from now on and in time to hedge it to a contour not to lose profit.

Bought BANE in M&A anticipation

All heard about the arrest of our minister of a mine? I hope that all. And so, all this sensation is partially connected with the future (possible) transaction on privatization. Of course, privatization at all not that term which is suitable for this situation. And situation very simple: the Rosneft Oil Company is going to redeem the Bashneft company. Upon we have that one STATE company acquires other STATE company. Where here privatization, I think this question only Dasha pathfinder will be able to answer. But it is not even so important. My idea is in participating in this transaction. Namely to carry out small arbitration on the deal about the purchase. According to the latest data, Rosneft exposed the offer at a price 3700, and it on 200rr above, then the current market price. Having redeemed shares from the market and having sold them according to the offer to the issuer it is possible to take away just these 200r that about 6% of profitability. Let's look what from this will leave. Thus it is necessary to consider that the repayment price still is definitely not confirmed, and there are risks of changes or in general refusal from the transaction. For this reason apparently, participants of the market even did not drive quotation into the repayment prices. As it is my first transaction on absorption, volume I take extremely low. Info about offer

New book

Came across here one fascinating book on cognitive psychology. It not entirely corresponds to the name but well describes how more effectively to solve problems, to acquire material and to organize the time. I the fan of such books in itself not really, but this was pleasant.
Reference to the description of the book:
https://www.amazon.com/Mind-Numbers-Science-Flunked-Algebra-ebook/dp/B00G3L19ZU

Market cycles

I have decided to develop Barton Biggs's thought concerning recurrence of the market here and to note chronology of the main changes on the schedule of DJIA for the last 100 years (1 drawing). Biggs means that the "bear" market can be identified when the value of the index falls approximately for 40%, concerning the growth for the previous period and lasts long enough to cause changes in the structure of thinking of people.
In we wash understanding, Biggs too strongly differentiates waves. For example, during 1966-1982 the market hasn't received the necessary correction in 40% and was in stagnation to the extent of 6 years. At the same time stagnation affected more only the financial markets as GDP during this period increased (the 2nd drawing).
As a result, I can assume that the economy still is in a stage of the long-term "bull" market which has begun in 1950 and the tendency will be replaced when the correction in relative expression is comparable to a situation in the 1929th years. At the same time, correction in the financial markets has to be followed by changes in the economy and be reflected in the GDP loudspeaker.

 

Compound interest in the market

Perhaps, it is time to needle to people who in all throat shout that "HFT an era" and distribution of retail-traders introduced high volatility and instability on the markets. They still like to say that distribution of difficult derivatives, for example, of exotic options leads to increase in fluctuations in the primary market. Indisputable an argument Flash crash 2010 caused by HFT failure, and also, all known, "Global financial crisis" © which responsible were derivatives on mortgage bonds will be their - Cdo.Teper let's try to understand why this so "obvious" conclusion. For this purpose, it is enough to look at DJIA chart in 100 years.

Here kind of and to the fool it is clear that earlier the market was "quiet and peaceful," and in the last decades it is direct "wild and feverish."
But, I suggest looking at one schedule. On the same, only constructed not in linear axes, and in logarithmic. It is necessary "to make even" identical percentage change of the market on the different temporary periods. In that case, we will see more objective dynamics of the index. The constructed schedule is given below.

In the top part linear axes, in lower logarithmic.
The similar schedule suggests an opposite idea. Namely that the market became "quieter" in comparison with the 20th century. It, in the trailer, easily is explained by the inflow of liquidity on all leading platforms and development of market making. Anyway, draw a conclusion, but it is necessary to understand that severe percent can easily confuse.

Short sell covered puts

I continue to expand my options portfolio, and at the same time, I'm testing the strategy of recruiting a position in the stock market through derivatives.
The bottom line is selling out-of-the-money puts to keep the position before expiration. If the option goes into money, then I get the underlying asset at prices that are acceptable to me, and if the option burns, then I earn a premium on which I sell the new options of the next expiration just as out of the money.
In implementing this strategy, three problems arise in the Russian market:
1) On options, there is little liquidity. For this reason, the majority of shares that are currently traded at reasonable prices just cannot be written out an alternative.
2) Options for forts are marginal. This means that the variation margin is calculated on each clearing, and does not remain "paper." For such options, more collateral is required, and therefore higher financial risks.
3) Forts are traded options for stock futures, not the shares themselves. This also adds the risk of recalculation of the variation margin. But you should pay attention to this when the expiration dates of futures and options are very different.

Dealt with risks. Now it is necessary to choose the issuer whom I will trade. As I already wrote above, the choice is tiny. I stopped at papers of Gazprom (GZZ6). The company is actively underestimated and is lager about MICEX to the index. Considering that the share was traded in quite narrow range at meager relative prices, the yield on dividends makes about 12-13% (not precisely). Proceeding from these calculations, it is possible to gather a position in the amounts of 134-136 rub for the common stock.
Here also short options will be useful. Having sold to fetters with a strike 13500 we will provide ourselves or a premium to the option, or an award + with a position in the primary asset
. Generally, I and made. Data on the transaction are given below.