Choosing a broker

... choosing one is not an easy task. It seems there is no good broker in this world.
After struggling to find rankings and reviews of brokers that met my requirements (which included good price-low comission fees & broad portfolio of products, leaving aside the a chart station) I came up with a final list of candidates, which are:

• FXCM
• MB Trading
• TradeStation, and
• Interactive Brokers.

These were the sources of information I found more valuable:

• Global Finance at GFMAG.com - Awards: World’s Best Foreign Exchange Providers
• Reviews at ForexPeaceArmy.com
• ranking - Barrons
• ranking - TickerPedia ?? ... I know, they are nobody, furthermore some of their scales are inverted some other not. I would't even bet they reverse those before getting the final score.

... and the winner is:

• Interactive Brokers.

So I'll switch from my current Spanish discount broker (interdin) to IB during July 2010.
I'll post my trades here; which hopefully will reduce the number of stupid decision I'll make, and who knows... we may even make mone:y!

Other options evaluated were:

- FXall.com and 360 Trading Networks.

FXall

360T Trading Networks

The swine flu opportunity

Let's recall the performance during the swine flu period of the spread between the pharmaceutical and the airlines' sectors.

The strategy would have been to buy pharmaceutical stocks during those early days, and sell short airlines stocks, as market underreacted to the news, as it already happened during the bird flu.

If missed the first opportunity, the second one is to wait until the gap is widened the most, until it is exhausted, and bet in the other direction (i.e.: long in airline sector and short on pharmaceutical).

--
"El primer caso detectado en 2009 se detectó el 28 de marzo, según la conferencia de prensa ofrecida el 23 de abril del 2009" translation: The first case was detected in March 28, according to the press conference given on April 23, 2009. spread Pfizer-United Airlines-American Airlines (April 23)

... the chart can not be uploaded properly. So feel free to use the dates given to check it out yourself!

Pairs-Trading Strategies @ personal portoflio

I have made some changes recently in my portfolio because I think we have to be prepared for uncertainty in the financial markets.

As a consequence of that, my strategy is almost market neutral.
These are my positions (for a 1700 eur power purchase) :

POP.MC - 600 @ 6.75 e
ACX.MC - 270 @ 14.11 e
MT + 123 @ 24.7 e
NOK + 400 @ 9.13 e

portfolio
--
I think Arcelor Mittal will outperform Acerinox. The last one have not dropped so much during the downturn in the financial markets, and that is just because it has fewer liquidity / # trades.

Secondly, Nokia makes good cellphones (Does Customer Satisfaction Translate to Excess Stock Returns?, the sector´s outlook is bright and the shares have underperformed the market and its sector recently. Certainly it is a risky proposition, since we do not know when the company will pick up again. But .... I like this moment to buy the stock, I think it may have been over-sold.

On the other hand, the Spanish bank, Popular will suffer from spain's PM.
Zapatero and his socialist ideas are not the best macro strategies to deal with the current recession. So the levered position of the bank in the spanish housing market has gloomy perspectives unless BIG! changes in public policy take place -diminishing the taxes, subsidies, government power, government cars, travels, # wages ... it is just not gonna happen.

Asset Allocation for personal portfolio

What if we had $100K to invest today for our own account? ... empirical simulation

The first thing we should do, is to establish the risk adversity we want.
Tough that is a personal decision, there is a pretty simple guide to do that:

% RISKY ASSETS = 100 – AGE (years).
… Bonds, T-bills and gold are good low-risk assets.

Since I am a follower of the Austrian School of economics, I find gold quite appealing, furthermore in such market (and policitcal) conditions.
But I think that a 10% allocation is in the highest range of alternatives. More than that is not an option: gold doesn't produce anything.

So … If we were 40 years old, we’ll end up with this proportions:
Risky assets: $60 000
Bonds / T-bills: $ 30 000
Gold: $ 10 000 (preferably in spot, rather than in financial products. Otherwise... we never know whether we will have it when it is more needed)

- RISKY ASSETS [leveraged]:
- Currencies: $ 20 000
aud.usd - 0
cad.usd - 28 (buy, wait)
chf.usd - 27 (BUY)
eur.usd - 18 (buy, wait)
gbp.usd - (neutral)
jpy.usd - 25 (inverted) (SELL if it is around 1/103 - BUY if it is around 103)
... so as June 19th, we start a position: CHF/JPY (at around: 89)

- Stock markets: $ 40 000
Hedge strategies: $ 20 000 [$ 100 000] : mt.acx / acn.ibm? / gas.oil /
Moving averages crossovers: $ 5 000 [x]
New maximums - New minimums hedged system: $ 5 000 [x]
MACD R2: $ 5 000 [x]
Seasonal trading opportunities: $ 5 000 [x] (1st month) / Options / Volatility / Option wRiting strategies (risks) ...

Trading Volatility / Writing Options

--> the title of the post is a link to a video of a fully developed strategy on option writing. video at fma.org <--

Suggested chart to work with options:
http://tiny.cc/kRlgP
(value of the options: time + volatility + spot _underlying asset)

Let's go to the point:

On a regular basis, we should rather write (sell) options, than to buy them.

The best moment to sell options is when the VIX is peaking / has already peaked.
That is, when it is coming down after a rally (moving averages crossing down).
Thus, the best Options to use are PUTs, never CALLs in such conditions.

On the other hand, the best moment to buy options is when the VIX is in its lowest levels. Consequently we'd rather buy PUTs than CALLs.
We can do it when the moving averages have crossed upward.
Sadly, with that strategy we can find a lot of different occasions when they have just crossed up for a short time of time, coming down afterwards. Such occasions will not provide good results, but among those... there will be the good ones!