Wednesday, 21 May 2014

Young's Modulus of Macro Managers

The new job has somewhat distracted me from writing for the past couple of weeks and, to that matter, trading too. Which all in all is probably a fairly good thing. The down side is that those pesky puts I bought for a Ukrainian pop have done what most bought options tend to do - expire worthless only for the next day's move to be in the direction you were looking for. C'est la vie d'options

I am beginning to wonder if 2014 could be rebranded the zero-sum year where nearly every move that has occurred due to positions being entered based on future macro expectations has eventually unwound back to where it came from. If the original move was positional and the unwind was positional (taking us back to the starting point) it does make you  wonder if there is any real non-spectultive business going on, or if it is naturally netting to zero. If so then perhaps we are at a proper equilibrium and the noise is a veneer of speculative positions waiting to reverse. After Zombie banks perhaps we have Zombie Markets and perhaps we should all go and join this wonderful event in a couple of week' time. No, It's not a macro manager's parade but it looks similar.

So the tension in the markets is palpable as general ideas and trades are not generally playing out made all the worse by a healthy dose of 'Meh' where what would have been market moving news events are, due to the anaesthetic of past performance of panic trades, yielding performance of zip. This is putting stress upon macro funds where returns continue to be dismal and I can only imagine that the pressures  might start creating behaviourally bias. Macro managers are feeling the stress of lack of performance and the strain of cost bleed and justifying their existance to their investors and CIOs so we could ask, referring back to schoolboy physics, "What is your Young's modulus?"

It would be wonderful to see an E measure appear as a behavioural input into a consultant's measure of a fund manager's investment process.

And on to lighter things - Did you hear the one about the banker, the consultants and the German client? The story is one of lines of responsibility being blurred by a bill for strippers which, though of course is an important issue it, will be probably be scaring the bejessuz out of many an institution if there is a chance that past client entertainment in gentlemen's establishments will deem subsequent deals Ultra Vires!

The backdating of current ethics to cover past histories rolls on.


Anonymous said...

Yes a bunch of speculative positions reversing on the margins due to the reversing of opinions surrounding what the largest speculator (fed) & rates would do. I give it until the ECBs nxt meeting before it changes course.

Geez, what's the statute on overdue stripper bills these days anyhow?

Mike said...

Not sure why I feel better knowing that I am not the only one getting screwed on the options. The loss in P/L is the same. I guess misery loves company. Being right on direction, yet getting screwed on the timing down to a day or two, makes me wonder if hedging is the only thing options are good for. I have turned off my brain recently and just throw darts at random, taking profits on things I would usually let play out for a lot longer. Works so far,but hurts my brain. Good to know you are still alive Polemic :)

Polemic said...

thanks mike and corey.. and good to know you guys are surviving too. Doesn t sound great on buy or sell side at the moment.

Anonymous said...

Sell vol then. Nothing could go whrong there, right?

Polemic said...

short vol go wrong? No of course not .. 2006/7 never happened.

I do wonder if short vol is becoming an enforced trade to counter lack of performance ( saw that in 2006 eg trading house sees volumes dropping as direction get listless so sell vol as a business hedge)

Falling vol is like carry creep.. its normally saw tooth . so perhaps a risk reversal on vix selling puts buying calls

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