Q1 2017 Performance: Equity/Commodity Trading

In the previous two articles, I wrote about my forex trading and equity investments performance for the first quarter of this year. In this article, I will talk about my 1st quarter performance for equity/commodity trading.


For the first quarter of 2017, my active trading performance for equities and commodities (commodity ETFs) was up 3.51%.

Equity/Commodity Trading Portfolio (Robinhood) P/L
The white line represents the start of the year.

For years, I could not trade equities and commodity ETFs due to commissions. Thanks to Robinhood, I’m not able to trade for free.

My first loss came from the first trade of the year. I thought energy, especially oil would go up over the next few hours, but I was wrong. So I closed my long position on Direxion Daily Energy Bull and Bear 3X Shares (ERX) at 2.13% loss (everything was tweeted out)

A month later, I made another call on oil. This time, short oil. I went long inverse oil ETF. Here’s why I thought oil would drop;

I closed the SCO position a month later at 22.55% gain, the biggest gainer of all positions closed during the first quarter of this year.

My biggest loss came from VelocityShares Daily 2x VIX Short-Term ETN (TVIX). I thought volatility would pick up in the coming month (and it did a little bit). However, after they underwent 1:10 reverse split on March 16th, I did not want to risk having the ETN go to single digits once again, so I indeed closed the position at 17.27% loss.

In nominal terms, the 22.55% gain on SCO is 3 times larger than the 17.27 loss on TVIX.

There are other positions that made and lost money. But overall, my portfolio was up 3.51% in the 1st quarter.

Current Positions:

I can only go long securities on Robinhood. My current positions are SPXS, WFC, LULU, DIS, EXPE, VRX.

I went long on Direxion Daily S&P 500 Bill and Bear 3x Shares (SPXS), which is inverse of S&P 500, because I believe investors are underestimating the negatives of Trump’s policies. Once investors realize the negatives of Trump’s fiscal policies and/or his actual policies are less stimulative as he proposed, the market will take a dump.

A lot of people think tax rate will be reduced to 15%. I have been watching some of Trump’s TV interviews, especially on Fox News, and it seems Trump himself does not believe tax cut will be 15% or lower. He basically said it might have to be little higher, say around 20%.

I also watched Trump’s body language and I believe Trump is not confident in what he’s saying about his fiscal stimulus plan as he was during the campaign.

So when the actual plan is released, investors will be disappointed.

SPXS is also a small hedge for my portfolio as I’m long individual U.S. stocks.

I’m also long on Wells Fargo (WFC), Lulelemon Athletica (LULU). I believe the plunge on LULU is overdone and could fill half of the gap. WFC fell after the earnings report last week. General bank earnings are trending higher and Well Fargo is no different. I went long on WFC also due to technical purposes.

I’m also long on Disney (DIS). I bought just at the start of rumors that Apple (AAPL) would buy Disney.

I’m also long on Expedia (EXPE). See this awesome tweet thread.

And finally, I’m long Valeant (VRX). I went long on the pharmaceutical company the day after Bill Ackman revealed he cut his $4 billion loss.

Valeant recently extended the maturity of their debt until the early 2020s, which gives them about 5 years to restructure their capital and the company. Plus, they have over $5 in cash for each share.

Just because Ackman lost big on VRX does not mean he’s not a great investor. He is a great investor (that’s why he’s rich?). If you watch his presentations and talks, he knows about he’s talking about. He does his research and deeply cares about other people. At least that’s what I think.

The current positions I mentioned above can change at any time or reverse. Thank you.

Trump’s Market-Moving Tweets Are Awesome

Believe it or not. I love the tweets from @realDonaldTrump. No matter what the content of the tweets are, I love the fact it moves the markets. Why would I love it? Because I love volatility.

In December, Trump tweeted out;

The tweet sent shares in small uranium miners soaring, including Uranium Resources (NASDAQ: URRE) and Uranium Energy Corp. (NYSE: UEC) by 31% and 13%, respectively.

Despite the real world complications, I just love the fact it agitates the markets.

More tweets;

These tweets, as you can guess – sent the shares of Lockheed Martin (NYSE: LMT), which is the supplier of F-35 program, and Boeing (NYSE: BA) – down. From both tweets, Lockheed Martin lost billions in market cap. The rival Boeing was barely unchanged at the end, as it means more opportunities for them to gain more contracts.

However, Trump targeted Boeing in earlier December when he tweeted this;

The tweet sent the stock price down by 1%, but ended the day flat.

Year-to-date……so far, Trump has already targeted General Motors (NYSE: GM) and Toyota Motor (NYSE: TM);

Trump’s tweets are just awesome. The volatility it brings allows me to make more money than the non-volatility. As I mentioned in my previous article, I recently opened RobinHood account, broker with $0 commissions. Using the broker in the future, I’m planning to buy some shares of the companies Trump negatively targets, especially if investors overreact.

Since it seems Trump has a strong hatred towards Mexico and the U.S. companies working there, here are the potential targets;

It seems there are seconds delay until the stocks react to Trump’s tweets. That’s rare considering the era of algorithm trading which can react in milliseconds and less.

Algos have yet to incorporate Trump’s tweets into their codes. It’s not that simple yet as it can be difficult to determine the sentiment from a tweet. Algos can easily get the direction of the stock wrong. We need more tweets to better analyze it.

But, will the future tweets move the markets or not? It all depends on how successful Trump is in implementing what he tweets. If Trump is unable to do so, he will just lose credibility.

Meanwhile, markets will react to the tweets and I plan to take advantage of them.

Trigger (originally a class project at Cornell Tech) just recently introduced “Trump Trigger” that will send you a notification every time Trump tweets about your investments. Not an algo, but notification that can be useful for amateur investors. Not my thing.

Photograph courtesy of Trigger

Almost 4 years ago, Associated Press (AP)’s twitter account tweeted out;

Photo: Screenshots.
Source: USA Today

It was tweeted minutes after the account was hacked. Seconds after the tweet, S&P 500 lost $136 billion in market cap., before quickly rebounding.

What if Trump’s account was hacked? The account can be exploited for financial gain, to cause geopolitical instability, or worse.

Whatever it is, I plan to take take advantage of them for financial gain.

Speaking of Twitter, follow me. I tweet about some of the articles I read, my trades and some sarcasm. Unfortunately, my tweets do not move the markets……for now.

Forex Portfolio Performance: Inception & 2016

 

WHAT A YEAR! Market sell-off. Complete reverse afterwards. Full of surprises, from Brexit to Trump (not for me since I predicted them).

During the global markets crash in August of 2015, I completely lost all the money I made that year plus some more in forex. Witnessing markets free fall – faster than Luke skydiving 25,000 feet without parachute – for the first time ever crushed my account to death. (For the record, I wasn’t trading in 2008 and had absolutely no idea what was unfolding that time).

Thinking euro will go to the parity level by the end of 2015, most of my positions were crowded in shorting EUR (The Big Short). Just when I thought euro would follow the markets, it acted as a safe-haven.

Lessons learned the hard way:

  • Always keep enough cash for emergency and/or new opportunities (could not make new trades)
  • Do not keep most things in one place (EUR short)
  • Do not let the perceptions – media, traders, experts, you name it – fool you (“Euro is not a safe-haven asset”)

Taking all these lessons, I completely changed my strategy and will continue to tweak it to adapt to the current conditions. After taking a break from trading in September (2015), I opened a new forex account.

Started off strongly, with high standard deviations, but enough for me to sit through that. High-risk/High-reward. As I continued tweaking my strategy, I reduced the swings in the P/L.

Figure 1: Forex Portfolio % Returns Since Inception (09/29/2015)

Starting in August 18 of this year (2016), my returns have been very stable, trending upwards (see Figure 1). It went from 144.49% return to 184.42% as of the last trading day in 2016. Last August, I made a significant chance to my strategy which led to stable returns trending upwards. I continue to tweak my strategy little by little until significant change is needed. Repeat.

Since inception (09/29/2015), I have returned 184.42%. In the second half of this year, I deposited more money into the account. In turn, the % returns you see in the pictures above and below, has a huge difference in nominal amounts.

Figure 2: Forex Portfolio Performance Since Inception

In 2015, I returned 117.48%. This year, I have returned 32.82%. Since the inception, percentage of profitable trades are 50.70%, with the average gain per trade 3.82 larger than the amount of average loss per trade.

Sharpe ratio is 1.13 (not good yet), with average monthly return of 11.01% and 33.79% standard deviation of monthly return. Compounded monthly rate of return is 7.22%.

I predicted Brexit and profited bigly off it. 30.77% of the profit came from pair GBP/USD. Thanks Brexit. How did I predict Brexit?

Predicting Brexit – 6 tweets
Figure 3: Top 3 FX pair P/L as a % of the total P/L

Largest loss was 5.21%, from pair AUD/USD. I don’t know what to blame except myself.

As to predicting Trump’s win, the profit was a fraction of Brexit profit, via other pairs than Mexican peso currency. The day after the election, the peso suffered its largest one-day drop since the Tequila Crisis of the 1990s. Too bad I did not have access to peso pair at the time. How did I predict Trump win? Tweet 12.

If you invested $1,000 in me at the inception, that money would have been worth $2,844.23 today.

You can still invest in me. Minimum investment is $1,000. Contact me for more details.

Thank you.

Update: “Equity/Commodity Portfolio Performance: Inception & 2016” article is posted.

Pressure Builds Up In EU Following Italy’s Shocking Referendum Loss

This article was initially posted on The Ticker, Baruch College’s (the college I currently attend) independent, student-run newspaper.


After a defeat in a constitutional reform referendum, Italian Prime Minster Matteo Renzi has resigned as he previously promised in case of a “no” vote to the constitutional revision plan. This referendum was meant to strengthen Renzi’s hand by stripping the Senate of its many legislative powers and speeding up the decision-making process.

With 59.1 percent of the votes being “no,” an anti-establishment political force took control once again, following the example of the Brexit referendum and Donald Trump’s election. Renzi, a centrist, was accused of failing to restart the country’s flagging economy, which has barely grown since adopting the euro in 1999.

The referendum raises questions about Italy’s ability to work efficiently. Since 1946, Italy has had 41 different prime ministers and has gone through repeated political turmoils.

In response to the referendum, Brexit campaign leader Nigel Farage, who is also a vocal supporter of Donald Trump, tweeted, “This vote looks to me to be more about the euro than constitutional change.”

Parallel to Brexit and Trump’s victory, the Italian referendum showed voters the rhetoric of populist parties like the Five Star Movement, which campaigned against the constitutional reforms.

Renzi’s collapse comes after the defeat of a far-right candidate in Austria. It is a blow to the wave of anti-establishment anger across the western countries. Norbert Hofer, a far-right candidate from the Freedom Party of Austria, lost by seven points to independent candidate Alexander Van der Bellen. While the far-right may have lost this election, the rise of populism is gaining the support of the Freedom Party for the next national election in Austria, set to be held before spring 2018.

Matteo Salvini, the leader of Italy’s far-right Northern League, tweeted, “Viva Trump, viva Putin, viva la Le Pen e viva la Lega!” which translates to “Long live Trump, long live Putin, long live Le Pen and long live the Northern League!”

In addition to supporting the Trump presidency, the Five Star Movement and the Northern League favor rougher immigration policies. Both parties have promised to hold a referendum on Italy’s membership in the eurozone and renegotiate Italy’s public debt.

Markets have mostly cooled off from the aftershocks of the Brexit and the Italian referendum results, but elections in several key European countries next year’s might not make recovery easy for investors. Renzi’s departure could lead to an early election.

Italy is now another country on the list of European Union members that are likely to hold a general election in 2017, joining France, Germany, Netherlands and the United Kingdom.

Italy’s election would be held in early 2017. The potential victory of the populist party will create uncertainty about the economic prospects of the eurozone’s third biggest member state.

Italy’s banking sector, currently with $4 trillion in assets, is suffering from low profitability, lack of economic growth, ultra-low interest rates and a surplus of bad loans. The FTSE Italia All-Share Banks Sector Index is also down 51 percent over the past year. A change in the government could mean further delays in solutions to the banks’ problems.

Banca Monte dei Paschi di Siena — the world’s oldest and Italy’s third largest bank — recently failed the EU bank stress test.

The bank’s stock is down 83 percent since 2007 as bad loans progressively increase. The bank is now desperately looking to raise capital and sell 28 billion euros in bad loans.

The only solution Italy has at this moment is to “rely on the EU to provide more fiscal rescue packages, to prevent Monte Dei Paschi from becoming insolvent,” said Kenneth Tjonasam, the director of portfolio management at Baruch’s student-run fund, Investment Management Group.

Italy’s debt as a percentage of its gross domestic product stands at 133 percent, second only to Greece’s 183 percent. Unlike Greece, Italy is so-called “too big to fail,” as it is also the world’s third largest government bond market.

The French vote is also crucial. National Front Leader Marine Le Pen called Brexit a “victory for freedom,” and her party is leading strongly in the polls. The two-step election for Europe’s second largest economy is scheduled for April 23 and May 7, 2017.

Even if the Five Star Movement and the Northern League win the election, they still have to hold a referendum on Italy’s membership in the eurozone and actually win it. If they do, “Italexit” and “Frexit” could be enough to destroy the entire currency bloc.

Around the same time, British Prime Minister Theresa May is expected to invoke Article 50, triggering a two-year countdown to Britain’s official exit from the European Union.

Even if the euro-skeptic parties fail to gain power, anti-establishment sentiments in the country will not go away.

“The Italy referendum ‘no’ vote is only a small speed bump to the ideal of a far-right movement that’s taking place across northern EU countries. The time frame to restore the Italians to path of stability, both politically and financially is uncertain,” Tjonasam added.