How Far Will The Market Fall?

[gartley]

Does this all mean the Corona Virus is now dealt with and we can get back to normal ?
(Or was it just some desperate crap shooters (and shorters.) getting onto a roll ?)

Normal market or normal life? Strange thing about it is that more people may go bankrupt than actually die from this virus...

 

[wayneL]

Normal market or normal life? Strange thing about it is that more people may go bankrupt than actually die from this virus...

"Bail in" anyone?

Or.... How about having your deposits confiscated plus being in ICU as well?

Fun times ahead.

 

[hja]

Looking at past declines, this one looks more like 1929 than anything recent based on charts of indices that were around back then (eg the Dow was).

You've got a good memory, young fella! hehe
We haven't seen a small range day since the XAO was > 7000s... I can't find a 1929 chart to compare.

 

[Smurf1976]

Not based on any proper T/A but I'll say it here that the market does look as though we could be about to get the bounce.

I should clarify that I'm referring to the situation globally there since obviously we did get a bounce later today in Australia.

So global stock indices, bond markets, commodities - all a bounce away from the recent trend is my thinking.

 

[Smurf1976]

You've got a good memory, young fella! hehe
We haven't seen a small range day since the XAO was > 7000s... I can't find a 1929 chart to compare.

https://thegreatrecession.info/blog/wp-content/uploads/1929-Stock-Market-Crash-Daily-Chart.jpg

 

[macca]

https://thegreatrecession.info/blog/wp-content/uploads/1929-Stock-Market-Crash-Daily-Chart.jpg

The books I have read all suggested that it was those who were over leveraged that suffered the most.

Perfectly logical, nothing has changed, just the rule of mathematics and margin calls, all part of the challenge.

The thing I find unusual is that "some people" carry on about punters and gambling yet it seems it is OK to bet the house on the stock market.

This forum is without doubt, the most sensible market forum that I have ever found ( well apart from its predecessors where much the same posters were members)

 

[InsvestoBoy]

Using the co-ordinates of the peak=>trough and high of todays retracement (7202, 5350, 6037) as inputs to a Fibonacci extension gets you 4582 as the 0.786 extension and 4185 as the 1.0 extension.

Who knew at the time that 7202, 5350, 6037 would actually be the valid swing?

Anyway, looks like 4895, the 0.618 extension was tapped and closed for the bounce:


Who knows whether we'll hit the 0.786 or 1.0 extensions?

 

[hja]

https://thegreatrecession.info/blog/wp-content/uploads/1929-Stock-Market-Crash-Daily-Chart.jpg

Yeah I meant it's hard to find a daily showing the size of the daily bars to compare with the chart InvestoBoy posted above, he shows how different the bars look from the start of his dashed swing.
edit: Oops it is. They're just such squashed together so it looks like a line graph.

 

[DaveK]

Some graphical representations of this compared with 87.. also today’s bounce so far on the next graph. Source Twitter @GrogsGamut

 

[aus_trader]

so unless you can chance upon another retail trader wanting to take the opposite side, good luck getting a decent fill.

I have probably said this before, but will say it again in case there are innovative little companies like Selfwealth Ltd (SWF) and maybe the dinosaur brokerage firms that want to re-invent themselves are listening in...

The reason why there are hardly any retail traders in the ASX option market is it's freakin' expensive to trade options on the ASX. No local broker offers Options trading brokerage below $34.95 which is ridiculous compared to other developed countries such as the US that offer options trading at around US$5 per trade.

First hurdle in trading the ASX options market was broken thanks to the ASX that removed the contract size from 1000 shares to 100 shares a while back, so even I can buy/sell CBA(even the ridiculously high priced CSL) options if 2nd hurdle was removed. The 2nd hurdle of bringing down the options brokerage cost still remains. When it comes to brokerage, I think disruptive innovators like Selfwealth that offer CHESS sponsored share trading at Australia's lowest price at A$9.50 may eventually offer similar brokerage for ASX ETO (Exchange Traded Options) one day... Till then don't expect to find dumb clueless retail mum & dad investors/traders to offer cheap options on the market (to take the opposite side as you said).

 

[aus_trader]

Got a buy signal for this bounce off the 3hr chart and took it. Hit my take profit before I even had time to blink!!

Are you a day-trader? Or a very short term trader?
From your previous posts I thought you were looking at the long term picture and charts.

 

[aus_trader]

RBA's 8.5 billion might have something to do with it..... (and guess who's going to eventually have to stump up for that?)

Er… Tax Payers ?

 

[dutchie]

I have probably said this before, but will say it again in case there are innovative little companies like Selfwealth Ltd (SWF) and maybe the dinosaur brokerage firms that want to re-invent themselves are listening in...

The reason why there are hardly any retail traders in the ASX option market is it's freakin' expensive to trade options on the ASX. No local broker offers Options trading brokerage below $34.95 which is ridiculous compared to other developed countries such as the US that offer options trading at around US$5 per trade.

First hurdle in trading the ASX options market was broken thanks to the ASX that removed the contract size from 1000 shares to 100 shares a while back, so even I can buy/sell CBA(even the ridiculously high priced CSL) options if 2nd hurdle was removed. The 2nd hurdle of bringing down the options brokerage cost still remains. When it comes to brokerage, I think disruptive innovators like Selfwealth that offer CHESS sponsored share trading at Australia's lowest price at A$9.50 may eventually offer similar brokerage for ASX ETO (Exchange Traded Options) one day... Till then don't expect to find dumb clueless retail mum & dad investors/traders to offer cheap options on the market (to take the opposite side as you said).

Nice post aus_trader.

The main problem, as you have pointed out, with option trading is the cost to trade (absolutely ridiculous). The second problem is liquidity. Our option market is just not big enough.
At the moment the only place to trade options is the US market. The only people making money out of options, in Australia, are overpriced market makers and brokers.
The other problem you mentioned is the cost to trade shares. This again is price gouging, especially by CommSec (Commonwealth Bank). The cost of the paperwork etc that brokers perform is nowhere near $20, so its a nice little profit margin that they have. And don't start me on charging a brokerage fee as a percentage of the trade value!

 

[InsvestoBoy]

If you want to "trade" ASX options, good luck.

If you want to use ASX options as hedging instruments, get an Interactive Brokers account, you can trade options for 1AUD commission. I bought puts on STW in Nov last year and Feb this year with no problems to hedge my VAS longs.

 

[Sharkman]

First hurdle in trading the ASX options market was broken thanks to the ASX that removed the contract size from 1000 shares to 100 shares a while back

this change happened in 2011 but without the improvement in liquidity, volume and participation that it was hoped would follow on from this, it has been more of a nuisance than a help. on several occasions i'd be trying to work the spread and have an open order for something like 100 BHP or NAB contracts, only to have someone come along, take out 2 or 3 of my order, then the market moves and i have to adjust my order for the remaining contracts. not only does that incur another lot of brokerage as it counts as a separate order, but it's annoying from a record keeping point of view as now it's 2 (or more) separate parcels.

this has happened on numerous other occasions too, but what i've usually done is wait a few minutes to see if i can get the rest of my order filled at the same price to avoid the multiple parcels, only to wind up paying for it instead by seeing it slip a few too many ticks to their side of the spread and then it gets filled.

this sort of thing never happened back when it was a 1000 lot size.

100 lot size makes sense in the US as the prices of their stocks are huge, stock prices in the hundreds or even thousands of dollars are fairly common. whereas here off the top of my head it's just CSL, COH and MQG, and none of those 3 are particularly liquid as far as options go.

this wouldn't be an issue if there were better spreads and liquidity, but there isn't, necessitating having to "work" the spread to get decent fills (ie. start on your side of the spread, move it in a tick or two gradually until you get filled or you reach a price where you say forget it, this is not good value, i'll move on/come back later) and as a result you open yourself up to getting nibbled like above.

i can understand the rationale behind it, but it has been in place for years now and the envisioned improvements in spreads and liquidity do not seem to have materialised, in fact if anything they have grown worse than in 2011, with the exit of some MMs since then resulting in reduced competition. so in my view this has been a failed experiment.

i'd rather they go back to 1000 lot sizes to cut out the sort of irritating nibbling that i described above. they could introduce 100 lot size mini-options over selected dollar expensive stocks (CSL, COH, MQG, CBA, RIO) like in the US where they have 10 lot size contracts over things like Amazon and Google. but i really don't think 100 lot size works well for lower priced stocks like ANZ, QBE, WBC and especially TLS - what's really needed there is lower tick size, not lower lot size. 0.1c tick size on TLS options would make them much more tradeable than they are now.

 

[aus_trader]

If you want to "trade" ASX options, good luck.

If you want to use ASX options as hedging instruments, get an Interactive Brokers account, you can trade options for 1AUD commission. I bought puts on STW in Nov last year and Feb this year with no problems to hedge my VAS longs.

Interesting, and that would have served you well especially the Feb puts. As for myself I would like a local brokerage firm to take the lead to offer lower options trading brokerage. Especially in the current market where Aud/Usd is trading below $62, I am not going to deposit A$16,000+ to get a US$10,000 minimum requirement to open an Interactive Brokers account. If Aud/Usd goes up by a massive amount I will re-consider.

How expensive was it to insure your long holding e.g. in % terms (say it costs 1% of the VAS portfolio for a 2 months expiry) and were these puts at, in or out of the money when bought?

 

[InsvestoBoy]

Interesting, and that would have served you well especially the Feb puts. As for myself I would like a local brokerage firm to take the lead to offer lower options trading brokerage. Especially in the current market where Aud/Usd is trading below $62, I am not going to deposit A$16,000+ to get a US$10,000 minimum requirement to open an Interactive Brokers account. If Aud/Usd goes up by a massive amount I will re-consider.

How expensive was it to insure your long holding e.g. in % terms (say it costs 1% of the VAS portfolio for a 2 months expiry) and were these puts at, in or out of the money when bought?

I don't think there is any deposit minimum for opening an IB account anymore, I don't remember having one.

I can't remember the pricing for the March puts off the top of my head but in Feb I paid about 1.3% of portfolio value to hedge out till end of June at the money or very close to at the money.

 

[aus_trader]

I don't think there is any deposit minimum for opening an IB account anymore, I don't remember having one.

I can't remember the pricing for the March puts off the top of my head but in Feb I paid about 1.3% of portfolio value to hedge out till end of June at the money or very close to at the money.

That's not a bad premium paid to protect the downside for about 4 to 5 months out. Good timing !

I think the account minimums still apply, I'll have to contact them to double check...

 

[InsvestoBoy]

That's not a bad premium paid to protect the downside for about 4 to 5 months out. Good timing !

Pure luck that I caught it when I did this time. Plenty of other put buying excursions over the years that ended in evaporated premium.

 

[aus_trader]

Pure luck that I caught it when I did this time. Plenty of other put buying excursions over the years that ended in evaporated premium.

Yes, well done. It can really count to have some downside protection when a black swan event like this hits.