Our “Big Position” played out extremely well last night. Gold was indeed oversold and this was the first item to go as the market strengthened around fiveish. We sold 2/3rds of ours position at 1767 netting 12 points. At this stage we were very short risk, with a large FTSE short on, and considerably in the red as we saw her tick up to 5520 (our entry was 5491).
This did not spook us. Both in terms of fundamentals (which scream sell) and the technicals (the top end of a ranging market) I assigned about a 20% probability of our stop being hit overnight, expecting a small retrace and perhaps further strength today in which case we would re-evaluate.
This did not spook us. Both in terms of fundamentals (which scream sell) and the technicals (the top end of a ranging market) I assigned about a 20% probability of our stop being hit overnight, expecting a small retrace and perhaps further strength today in which case we would re-evaluate.
At 20:12 we closed our FTSE position at 5482, generating a small profit of 9 pts but given our size this has contributed to about 0.5% NAV. The market sold off, seemingly internalising the day’s horrors in rates and credit. Interestingly at this point the remaining Gold 1/3 was also in profit, indicating that the overall hedged trade was a winner (i.e. we picked the correct combination of assets to produce a return “no-matter-what”). Gold was up, FTSE was down.
Unfortunately, as per, the Yen had barely moved. We are still in the grey (lightly in the black..) showing a couple of points. Today we’re seeing a bit more action though. Having paid about 4bps per night on this trade so far (funding) I’m beginning to doubt it’s sustainability long long term.
Last but not least we got hit again down at 1755 in our fave metal. Repeat after me, the market will always buy here. It’s a no brainer. A put on the idiocy of the political cycle.
So this is where we stand:
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