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The G7 meeting at the weekend spotlighted a growing rift between the US and its key allies, with German Chancellor Angela Merkel saying that Europe can no longer completely rely on the US and UK. GBP is on the backfoot due to tightening of opinion polls between Labour and the Conservatives in the run-up to the UK's June 8 election.
Squawk / 22 June 2016 at 18:24 GMT
Hypothesis Testing
United Kingdom
Continuing with todays article theme of trading the obvious...
https://www.tradingfloor.com/posts/are-we-trading-the-obvious-7804888
Currently we are all bored stiff awaiting the Brexit vote which will gainsay a marginal win for one side of the argument. Regardless of who wins it will not be decisive but what it will do is cause volatility.
Currently options are very expensive for long vix or if you prefer long volatility...after all it is an obvious trade. Today has been at best dreary and slow with little volatility so we have a calm and low VIX value. All those who are long will incur a corrosive time decay penalty all ready. But perhaps an equally obvious trade structure is to set an order to sell the VIX when it reaches an extreme high say 30 thus you enter a trade at extreme volatility when it is cheap and safer to trade and then await the market to return to normal trade volumes. We are not concerned about market direction just volumes.
22 June
zefy zefy
Obviously we want time decay to be on our side!
22 June
fxtime fxtime
Always :-)
23 June
fxtime fxtime
VIX is astonishingly low considering current event risks. Those who were long vix looking for volatility must be amazed to see a drop today so far. Currently flat still and suspect it will be tomorrow before my trade opens.
23 June
zefy zefy
Yeah, better to wait short trigger than see long position melting ;)
23 June
fxtime fxtime
good description mate.
24 June
zefy zefy
Shorting VSTOXX FVSN6 @33 working quite ok so far...
24 June
fxtime fxtime
:-)))))))))))
I also had a GTC short for 9955 on dax....I thought it had no chance of being filled ....what a day :-)
24 June
fxtime fxtime
Zefy it will be interesting to see if these index down gaps will fill within 5 subsequent trading days...as they do 84% of the time but a 50% gap fill has a far higher probability fwiw !
24 June
fxtime fxtime
I assume you also traded ROC for eurusd against cable and traded the safer eurgbp long as cable dropped faster than the eurusd etc. ?
24 June
zefy zefy
I decided already earlier not to trade currencies this week. Thanks for highlighting the opportunity that was there too.
24 June
zefy zefy
I really appreciate you point these opportunities!
24 June
zefy zefy
Helps to put focus on right trades and setups.
24 June
fxtime fxtime
They are only pointers....sometimes it is best to do nothing at all. Your choice of standing aside was a good call. My trade structures relied on an extreme event to trigger them that's all. Had the market rose or moved within expected and predicted ranges like the ones suggested by the Saxo team then none of my trades would have triggered. Eugene Fama stuff ....feel free to google the guy but the upshot is that there will be black swan events and when they occur outside the normal distribution curve then they keep going but we do revert eventually back to the 2nd std dev ! This was an extreme event....I haven't a clue when we revert back to 2 std devs as the trading ranges are huge but we will imho.
24 June
fxtime fxtime
Zefy ref comments 4hrs ago...ftse cash mkt has now completed the 50% expected move. Chart attached.
24 June
zefy zefy
Congrats on your great calls!
24 June
zefy zefy
Amazing day...
24 June
zefy zefy
Very interesting that probabilities were filled despite exceptional day and activity.
24 June
fxtime fxtime
Absolutely amazing day....I can't recall seeing the SP500 having such a wide trading range intraday !!!!!!! 30yr T Bonds have risen in percentage terms more than the SP500 have fallen so things should move late today again.
24 June
fxtime fxtime
Probabilities are based on distribution data so a big day doesn't alter the probability output !
24 June
zefy zefy
Yeah, got it :)
24 June
fxtime fxtime
We need to watch the three data ranges now as the extreme we have seen today makes a mockery of ALL averages as they will be distorted for days with this spike.
24 June
zefy zefy
FGBL not moved like 30y T Bond relation to stock indexes...
24 June
fxtime fxtime
I guess negative rates does have an impact after all :-)
24 June
zefy zefy
LOL

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