ASX Stock Pairs Trade Journal

[skc]

Looks like you gave back four days profit from the last week. That sucks but as far as disasters go thats a good one.

yes... 5 days to be precise. It's really quite a loss.. it's just that I've been trading out of my skin last month so the impact on the "time wasted" scale isn't nearly that bad. It could easily have been 2 months of P&L.

It just sucks because I was extrapolating my profits from last month... Moral of the story, as always, is that NEVER extrapolate. the market will smell it and smack some sense into you.

Pairs trading requires a lot of confidence. You have to be confident to take the short something that is clearly outperforming, and buy something that is underperforming. So something like this happens just makes me question my positions.

So the true test is actually how long it'd take me to recover and reach new equity high. I panic closed a number of trades that I don't have a good feeling about, so that's not a great start.

 

[Trembling Hand]

It just sucks because I was extrapolating my profits from last month... Moral of the story, as always, is that NEVER extrapolate. the market will smell it and smack some sense into you.

Oh you noticed that one too!!!

Its probably the biggest stopper of good process based trading.

So the true test is actually how long it'd take me to recover and reach new equity high. I panic closed a number of trades that I don't have a good feeling about, so that's not a great start.

And the rush to get back fast to new equity highs after a slip up is probably the next biggest danger. :cwm10:

Just saying....

 

[skyQuake]

Linear extrapolation is always fun

 

[craft]

Pairs trading requires a lot of confidence. You have to be confident to take the short something that is clearly outperforming, and buy something that is underperforming. So something like this happens just makes me question my positions.

So the true test is actually how long it'd take me to recover and reach new equity high. I panic closed a number of trades that I don't have a good feeling about, so that's not a great start.

**** happens.

Obviously I’m not very good with encouraging words but when I have suffered one of these hits that are inventible despite an overall profitable strategy this fellow SKC normally provides some insightful words. I would seek him out in a peaceful place and listen to what he has to say.

Cheers

 

[VSntchr]

**** happens.
Obviously I’m not very good with encouraging words but when I have suffered one of these hits that are inventible despite an overall profitable strategy this fellow SKC normally provides some insightful words. I would seek him out in a peaceful place and listen to what he has to say.
Cheers

You and me both Craft. In fact, in a troubled time recently for me SKC has done just that..
But cummon guys - who are we kidding....this was posted early afternoon...that red line is probably a third of the size by now given that SKC probably caught an afternoon move or two :

 

[skc]

And the rush to get back fast to new equity highs after a slip up is probably the next biggest danger.

Not rushing anything... just trying to proceed as usual. I don't know whether to call it a slip up.

It's just part and parcel of shorting any stock. Someone comes in with free money and pays a 40% premium.... what can you say to that.

**** happens.

Obviously I’m not very good with encouraging words but when I have suffered one of these hits that are inventible despite an overall profitable strategy this fellow SKC normally provides some insightful words. I would seek him out in a peaceful place and listen to what he has to say.

You and me both Craft. In fact, in a troubled time recently for me SKC has done just that..
But cummon guys - who are we kidding....this was posted early afternoon...that red line is probably a third of the size by now given that SKC probably caught an afternoon move or two :

Thanks guys. It really wasn't that bad. I am shakened slightly but not terribly stirred.

I traded some AZJ and QUB but missed out on TCL and MQA. Probably should have gone gun-ho on those and be square for the day. Unfortunately I didn't have the right mindset nor enough sleep last night to push it.

Linear extrapolation is always fun

 

[VSntchr]

IIN/TPM has widened a bit recently. Read a piece on AFR last night about a 3% investor saying he plans to vote No.
I haven't touched this one as the deal is a bit complicated with cash offer, scrip offer and the issue of franking credits to contend with...still watching though. With IIN now trading decently below 955 the temptation is getting bigger, but obviously the further below 955 we go indicates that the market is pricing in some doubts in the success of the offer.

On a side note, I double checked the scheme details to see if a position in IIN is entitled to recieve/pay the dividend, as the VOC/AMM merger actually worked out so that shorts in VOC missed the ex-date to due to the AMM netting off just in time Unfortunately, I don't think that this is the same case with IIN.

 

[skc]

IIN/TPM has widened a bit recently. Read a piece on AFR last night about a 3% investor saying he plans to vote No.
I haven't touched this one as the deal is a bit complicated with cash offer, scrip offer and the issue of franking credits to contend with...still watching though. With IIN now trading decently below 955 the temptation is getting bigger, but obviously the further below 955 we go indicates that the market is pricing in some doubts in the success of the offer.

On a side note, I double checked the scheme details to see if a position in IIN is entitled to recieve/pay the dividend, as the VOC/AMM merger actually worked out so that shorts in VOC missed the ex-date to due to the AMM netting off just in time Unfortunately, I don't think that this is the same case with IIN.

I think IIN is a great buy using real shares. $9.55 plus up to 26c franking credit... and all be done in about a month and a half. That's about 4% return. The risk of the deal not going through is pretty small, and there's always the consolation prize of MTU script.

You got to watch the 45 day rule though for the franking credits. It's getting close.

 

[VSntchr]

I think IIN is a great buy using real shares.

Especially for the SMSF with the franking....


Got hit with the PRY downgrade today
But instead of weeping, Im making lemonade. Doubled up on the SHL short on open. Wont cover the entire hit but better than nothing.

 

[SilverRanger]

Especially for the SMSF with the franking....


Got hit with the PRY downgrade today
But instead of weeping, Im making lemonade. Doubled up on the SHL short on open. Wont cover the entire hit but better than nothing.

Nice call on SHL, I also had double short on it too but closed early, also misplayed my BTT short, and should have been more patient I think the sell-off might continue tomorrow (as more mums and dads get their allocation) and present a buying opportunity though.

 

[skc]

Nice call on SHL, I also had double short on it too but closed early, also misplayed my BTT short, and should have been more patient I think the sell-off might continue tomorrow (as more mums and dads get their allocation) and present a buying opportunity though.

Got hit with the PRY downgrade today
But instead of weeping, Im making lemonade. Doubled up on the SHL short on open. Wont cover the entire hit but better than nothing.

The announcement by PRY was confusing... on the EBITDA line it's only a 4% downgrade on consensus. But the EPS downgrade was much worse (from guidance of up 5-12% to be down 5%). Reading the announcement it was due mostly to the high tax rate (of 39%). Otherwise it makes little sense for a 4% miss on EBITDA to translate into a 12% miss on EPS. I guess the market took a midpoint between the 2 financial metrics and marked PRY down ~8%. It remains to be seen whether the tax rate is just a once-off or something else funny going on. There were lots of accounting stuff in there that I couldn't quite assess.

I am surprised SHL got sold off so much. It had a pretty good run I guess... but PRY was citing GP visits below expectation which SHL has limited exposure. May be low GP visits lead to low pathology numbers. It was quite remarkable that the difference in % change between PRY and SHL at the end of the day was a mere 3.3%.

I was hit as well (do we all have the same trades ). But due to the SHL hedge (which I covered too early) the damage wasn't really that bad. But I did waste some money shorting HSO which didn't fall until after lunch, while the rest of my pairs performed like crap as well. So all in all a poor day for me

 

[VSntchr]

The announcement by PRY was confusing... on the EBITDA line it's only a 4% downgrade on consensus. But the EPS downgrade was much worse (from guidance of up 5-12% to be down 5%). Reading the announcement it was due mostly to the high tax rate (of 39%). Otherwise it makes little sense for a 4% miss on EBITDA to translate into a 12% miss on EPS. I guess the market took a midpoint between the 2 financial metrics and marked PRY down ~8%. It remains to be seen whether the tax rate is just a once-off or something else funny going on. There were lots of accounting stuff in there that I couldn't quite assess.

Agree, I took a deep breath last night and assessed the situation. My diagnosis (see what I did there), was an open around $5.00 or perhaps a bit lower with a bottom around 4.50-4.70 if things got nasty

I am surprised SHL got sold off so much. It had a pretty good run I guess... but PRY was citing GP visits below expectation which SHL has limited exposure. May be low GP visits lead to low pathology numbers. It was quite remarkable that the difference in % change between PRY and SHL at the end of the day was a mere 3.3%.

I did expect SHL to come back after excellent run it has been having, but certainly agree that the differential in price change was less than I expected by close - Once SHL went down 5% for the day and PRY was rallying I started to wonder if it might over-take!

I was hit as well (do we all have the same trades ). But due to the SHL hedge (which I covered too early) the damage wasn't really that bad. But I did waste some money shorting HSO which didn't fall until after lunch,

I had HSO ready to go but decided against it after remembering they sold the Aus Pathology business. But I ignored my own logic and took some CAJ shorts, which I obviously lost some money on too.

while the rest of my pairs performed like crap as well. So all in all a poor day for me

THIS! I have some gaming sector pairs on too which diverged today and ORI/CIM got further out - I think it's one of those ones that I should have trusted my gut and closed on the first day.

All in all I took 5.25% hit on PRY/SHL (after taking a 4.5% hit in June on the same pair), but made back ~35% directional trading. Frustrating, but not too bad.

 

[VSntchr]

Gee thanks Sonic for being second place with your downgrade...great timing guys

 

[SilverRanger]

Gee thanks Sonic for being second place with your downgrade...great timing guys

I closed my PRY long and was looking for SHL short to take-off, doesn't look like it's happening, guess the fall from the last few days were enough.

 

[VSntchr]

I closed my PRY long and was looking for SHL short to take-off, doesn't look like it's happening, guess the fall from the last few days were enough.

Yeah priced in I'd say and they also gave FY16 guidance at 20% which will give some hope. I've been watching the chart and depth closely today...despite opening down another 3%+, it has looked pretty strong IMO...which is pretty obvious now since the 1pm run....even if your still holding it's better than what it was on Friday

 

[SilverRanger]

Yeah priced in I'd say and they also gave FY16 guidance at 20% which will give some hope. I've been watching the chart and depth closely today...despite opening down another 3%+, it has looked pretty strong IMO...which is pretty obvious now since the 1pm run....even if your still holding it's better than what it was on Friday

Although trimming losses and making wins have the same effect on my P&L, it just doesn't feel the same..

I'm looking at EGP/CWN today, has all of that been priced in?

Edit: EGP decided to remind the market that this is a very good news!

 

[VSntchr]

Although trimming losses and making wins have the same effect on my P&L, it just doesn't feel the same..

I'm looking at EGP/CWN today, has all of that been priced in?

Edit: EGP decided to remind the market that this is a very good news!

I have taken both those trades, but rather than a pair I am trading them directionally with stops for both. EGP has run pretty hard and according to what I've heard was the front-runner - which makes sense given the situation of having 2 casino's in the one area. Still think it could have a bit more left in it so willing to give it a go.
Don't know about you guys, but my pairs portfolio is crap this month...alot of mid range losers and not many quick winners to offset. Lucky there has been some good directional opportunities to bridge the gap.

 

[SilverRanger]

I have taken both those trades, but rather than a pair I am trading them directionally with stops for both. EGP has run pretty hard and according to what I've heard was the front-runner - which makes sense given the situation of having 2 casino's in the one area. Still think it could have a bit more left in it so willing to give it a go.
Don't know about you guys, but my pairs portfolio is crap this month...alot of mid range losers and not many quick winners to offset. Lucky there has been some good directional opportunities to bridge the gap.

Some profit taking on EGP after the news, but I decided to hold on a little longer.

July is **** for me too, AIO ****ted on me on day 1, and now got to deal with a few big losers too, win rate for the month 55%, way below average...

 

[skc]

Don't know about you guys, but my pairs portfolio is crap this month...alot of mid range losers and not many quick winners to offset. Lucky there has been some good directional opportunities to bridge the gap.

It I take AIO out of the equation (I will take a page out of ASX management accounting and call that a one-off non-recurring loss, I hope), July has been pretty flat, but not terrible. I am actually doing poorly on the direction stuff this month...

I am closing most of my pairs now, and will keep any new ones small and quick. I will take some days off and get ready for a cracking reporting season. My aim is to be as profitable during reporting season as my usual pairs trading months. My daughter starts school next year so I need to start taking breaks during school holidays and not reporting seasons!

Remember, there's the Investa platform sale result soon this week and I really don't know how it'd impact any of the half dozen REIT stocks that may or may not be involved (CMW, CHC, IOF, MGR, DXS?, GPT?, other readthru?). So trade carefully.

 

[skc]

Dodged 2 potential hazards today...

I had a short BLD (long DLX) and BLD kindly offered a late trading update which looked like a reasonable earnings upgrade. Thankfully it didn't have much of an impact (not sure why).

I was very close to putting on a DUE/APA trade last week just before the trading halt. DUE unveils a big cap raising and now 5% below ex-rights price (and 20c lower then before). That would have been a full size positive so would have definitely hurt.

I should be all out of pairs by the close today. Looking forward to a slightly less intense period before things pick up i the reporting season.