ASX Stock Pairs Trade Journal

VSntchr · 3 June 2014

Just to add, I started pairs when I was still working full time. This meant that I was only ever holding 2 pairs max and also had a stable discretionary cash flow coming in fortnightly. Because of this I started with a pretty small capital base, but I was quite aggressive and was using leg sizes around 20% right up to 60% in some cases.

This worked for me, but with the experience I have had since increasing the capital and re-alining the leg sizing, I see that continuing to trade like that, without a source of additional funds to add upon a drawdown period - would almost certainly result in the account blowing up at some point along the line.

So I guess, while I do agree with SKC, I think there are a few other parameters to throw into your decision - how many pairs do you want to hold at any one time? Will this be your entire income, 30% of your income, or just an attempt to increase your current income? etc etc.

VSntchr · 11 June 2014

Hopped onto FXJ/APN this afternoon. Got a few FXJ at 0.92 then the market closed on me and I had to grab the rest at 0.925 in the auction. The market close also beat me to APN and only managed 0.795. I have been watching these for a couple of weeks and have been patient as despite this pair being successful for me in the past, the trade has often gone heavily against me early on.

Looked at AIO/TOL but passed on that unless it keeps diverging.

SilverRanger · 11 June 2014

VSntchr said:
Hopped onto FXJ/APN this afternoon. Got a few FXJ at 0.92 then the market closed on me and I had to grab the rest at 0.925 in the auction. The market close also beat me to APN and only managed 0.795. I have been watching these for a couple of weeks and have been patient as despite this pair being successful for me in the past, the trade has often gone heavily against me early on.

Looked at AIO/TOL but passed on that unless it keeps diverging.

I've got FXJ/TEN opened since last week, was looking extremely good but now under water, but decided to hold on for a break even.

Seen a couple of wild movements in the last 2 days, confession season, must tread carefully....

VSntchr · 12 June 2014

SilverRanger said:
must tread carefully....

Indeed, this trade has not started well (as per history with this pair..hmmmm)

skc · 12 June 2014

VSntchr said:
Indeed, this trade has not started well (as per history with this pair..hmmmm)

If that's the case you can consider adopting a delayed signal for this pair in particular. For example, may be you look for larger divergence in standard deviation terms. To use the PTF for this you can set the pair within a special grouping and set the parameters accordingly.

I don't really know why all the media stocks are being sold pretty badly of late (SWM, NEC, FXJ), yet APN and NWS are somehow not really affected

VSntchr · 12 June 2014

skc said:
If that's the case you can consider adopting a delayed signal for this pair in particular. For example, may be you look for larger divergence in standard deviation terms. To use the PTF for this you can set the pair within a special grouping and set the parameters accordingly.

I don't really know why all the media stocks are being sold pretty badly of late (SWM, NEC, FXJ), yet APN and NWS are somehow not really affected

Here I am thinking that I had already done so, I had been tempted to enter at a far lower divergence - and now thought that with a mean reversion target of approx 9% the time was right!

VSntchr · 12 June 2014

Not a good day for your FXJ/TEN pair Silver - I hope you've got a few other good ones to make it up.

FWIW I had a shocker today too, FXJ/APN off to a bad start and late yesterday I swapped my MND/DOW for MND/WOR...don't like playing in this sector too often but there are a select few that I trade with half (or less) my usual leg size. Got out of DOW at 4.80 so got a good chunk of the sell off, but could have ridden it a bit further - I really didn't expect that announcement to have such a profound affect on not only DOW but what seemed like the whole market MND hasn't played well and sitting at a decent loss at the moment.

Also in SPN/TCL taking a bit of a beating, I know TCL has a dividend coming up on the 26th but I didn't think the run would continue so strongly. FWIW, I think they are probably a decent longer term short based on macro interest rate environment and the hefty price they paid for QML. A good lesson to avoid the yield type plays anywhere near dividend season.

Glad I dodged a bullet by not taking the FLT signal a couple of days ago, the false up-move yesterday preceded another big fall today. I might start looking at it for my portfolio if it keeps going down at this rate

kefa · 20 June 2014

s&p rebalance on the close today. look out for some interesting moves.

VSntchr · 20 June 2014

kefa said:
s&p rebalance on the close today. look out for some interesting moves.

Thanks for the reminder kefa.

Options/futures expiry allowed for some good entries on the delayed open yesterday...pitty my account was pretty much at my self-imposed max number of pairs limit...some of the REITS are running pretty hard this week..IOF, CHC and FDC have all shot up a bit more than the rest of the pack.

kefa · 20 June 2014

VSntchr said:
some of the REITS are running pretty hard this week..IOF, CHC and FDC have all shot up a bit more than the rest of the pack.

I generally like trading REIT pairs. Most of the REITs have a distribution coming up next week, this always seems to generate some volatility leading into it.

notting · 20 June 2014

Remembering that NAB has paid it's dividend and that CBA is about to.
This pair looks attractive to me buy NAB 33.13 sell CBA. 81.42

VSntchr · 20 June 2014

notting said:
Remembering that NAB has paid it's dividend and that CBA is about to.
This pair looks attractive to me buy NAB 33.13 sell CBA. 81.42

This seems counter-intuitive to me?
I would think that an approaching dividend is a positive influence on the supply/demand of a given stock.

notting · 20 June 2014

VSntchr said:
This seems counter-intuitive to me?
I would think that an approaching dividend is a positive influence on the supply/demand of a given stock.

At first it may seem that way, however that has been priced in about 3 times over so it makes sense and you can leverage up pretty high with these because they are seen as safe. There is plenty of breathing space!!

VSntchr · 20 June 2014

notting said:
At first it may seem that way, however that has been priced in about 3 times over so it makes sense and you can leverage up pretty high with these because they are seen as safe. There is plenty of breathing space!!

View attachment 58415

Looking at that chart I'd assume your trading on a longer timeframe than I usually do. Im usually in and out within a few days, always less than 20.

Personally I like the idea of some longer term mean reversion trading, but I am yet to engage in any trades.

edman79 · 17 July 2014

Any thoughts on the AGK news today.
Would you pair trade it based on the news being applicable to all utility stocks?
Or is bad news bad news and just stay out?

skc · 17 July 2014

edman79 said:
Any thoughts on the AGK news today.
Would you pair trade it based on the news being applicable to all utility stocks?
Or is bad news bad news and just stay out?

I happened to hold long ORG and short AGK... My position has nothing to do with my view on the carbon tax, so sometimes the chips just fall your way thanks to ignorance.

When I read the news I closed my ORG long as quickly as possible, and I took some extra ORG shorts. I then slowly cover my AGK short, although I didn't capture the full percentage fall and left quite a few $$ on the table.

I wouldn't pair trade after the news however. It's a bit hard to know the full impact of the policy change, and how earnings might be affected. e.g. ORG might lose some from the electricity business but gain from their gas assets...

edman79 · 17 July 2014

The other utility companies (making up XUJ) don't seem to have been effected by the news at all...
But I will probably sit this one out.

kefa · 22 July 2014

where has the volatility gone?

haven't seen lots of opportunities over the last month. are others experiencing a lack of opportunities too?

skc · 22 July 2014

kefa said:
where has the volatility gone?

haven't seen lots of opportunities over the last month. are others experiencing a lack of opportunities too?

Down there some where...

The market has changed a lot since mid 2013. It's not the best market for pairs although it's still doable.
It's not an ideal situation where you go short volatility when it is at an all time low. But it's still profitable albeit with lower profitability.

I've been trading smaller divergences and taking smaller % profits. For instance, a good REIT pair trade 18 months ago could net me 3.5-4%. Now I put a trade on when there's 2.5-3% on offer, and close the trade quickly when there's 2% to be had. Given the bid/ask spread on some of these names can be 0.5%, this is barely better than pair scalping pips.

The volatility will return, and hopefully you are not holding too many pairs when the volatility does blow out!

kefa · 22 July 2014

skc said:
View attachment 58776

There is an aussie VIX too. The chart looks pretty much like the US one.

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