A Simulation of Current Market Conditions, from Alex Good
Just a follow up to see how this has tracked the past week to see if we're in a 'predictable' market regime. Sometimes when the media is flailing around saying markets are chaotic and unpredictable, I test to see if markets are behaving similarly to the way they have over the past 10 years or so. If not it can be prudent to reduce risk. I don't like taking risk down when vol goes up because my transaction cost to pnl ratio improves. How do other specs tend to size up/down? PNL? Market conditions?
I just broke into Ralph Vince's book (which came highly recommended from my mentor) because my position sizing feels fairly novice.
If a risk unit is a 10 vol targeted unit and weights were as of the 24th and total capital is 14 units:
spy 0.02
xlu 0.66
eem 0.42
fxi 0.40
vxx 0.20
ief 1.29
shy 1.69
fxe -0.27
fxb -1.10
fxy 1.24
gld 0.89
gdx 1.20
uso -0.87
ung -1.92
- so you'd be short 2 risk units of UNG, so a $240 position on $1000 of capital whereas you'd need $2,900 of 10 year futures for a 1.29 unit posi
- Hit Rate: 71%
- When right, made avg of 1.4%
- When wrong, lost .36%
- Portfolio return of .86%
- Qualitative bets: long Gold, Yen (+1%) vs Sterling -.25% = Actual return of .75%
So despite media complaints we've been in a predictable market.