Some thoughts on tick data for long to medium-timeframe trading

1/n

First, let's get the facts straight.
Other timeframe traders (investors) can be visible on micro timeframe data but micro timeframe traders(locals) cannot be visible on other timeframe data(>daily)

So obviously if you have the access then the logical choice is using micro-timeframe data (tick).
Theoretically sounds great but practically if you're hunting for a pattern that goes beyond days or weeks in tick data then it requires huge data to evaluate such patterns.

The workaround is to compress the tick data based on information gain rather than transforming the data based on a fixed timeframe like 1 m 15 minute and then do the evaluation.

Remember the timeframe is just for our convenience so we can read the market induced information. There is no magic timeframe and if it exists then it most likely a curve-fitted one. Ofc that's my own observation and not a ground truth

/1 on the advantages of replacing high leverage margin swap/futures positions with options

/2 have heard anecdotes of participants losing large parts of their crypto holdings by chasing the bull market with mistimed leveraged longs and see thousands of nameless participants in the billions in notional that are liquidated on any material move in the markets.

/3 there are two enormous costs to engaging in this behavior:

1) poor traders tend to chase, margin longing after significant price moves up have already happened. combined with high leverage, this means they manage to lose money by being liquidated (force sold) on pullbacks.

This results in somehow losing money longing in a bull market.

2) Derivatives exchanges charge a maintenance margin when you are liquidated to give them a buffer to close losing positions prior to the bankruptcy price.

Any excess goes to the insurance fund. This excess necessitates that margined positions do not capture their full EV.

The dominant narrative around the $gme story is that some weirdos in their mom’s basement are manipulating the stock market.

That’s is so, so wrong.

[thread]

A prominent user of the #wallstreetbets community has been publicly posting about their position and positive outlook on $GME since September 2019. #YOLO

They didn’t pick the stock randomly. There are reasons to like GameStop. Google “Ryan Cohen” for more on that.

[2/?]

So, many on #wallstreetbets already liked $GME since late 2019.

Then, someone realized that there was a lot of money shorting that stock, essentially betting that the stock would go down.

And, I mean A LOT of money!

[3/?]

Shorting a stock, in simplest terms, is borrowing shares of a stock for a fixed amount of time, and immediately selling it at the current market price.

When the stock price goes down, you buy it back at the lower price, pay the lender back and pocket the profit.

[4/?]

There are lots of legitimate uses for shorting a stock, like hedging your risk, which is sort of like buying an insurance policy.

However, that’s not what the impacted hedge funds were doing. They were making a big risky bet that GameStop’s stock was going down.

[5/?]

THREAD $FB
I see a lot of flippant bearish FB tweets. Typically they are politically motivated or lack data. I love hearing the other side, but haven’t seen a thoughtful bear case so I thought I’d try build it myself.
Summary: 1) Users Fall; 2) Competition; 3) IDFA; 4) Opm% fall.

1) Despite the popular narrative I see of “I don’t use FB anymore and neither do my friends,” unless you think FB is flat out lying about their User #s, the data doesn’t support this. FB Blue DAUs have been going up every year World Wide and in the more mature NA market.

Note, FB reports MAUs/DAUs for Facebook blue app, and only recently started reporting the FB Family of apps in aggregate (Facebook, Instagram, Messenger, WhatsApp) which has ~2.54bn DAUs vs. FB Blue at 1.82bn.

But NA Users DID FALL sequentially in 3Q20 (after robust additions during the earlier periods of COVID) and have been fairly stagnant since 2018 when the Cambridge Analytica news hit (3Q17-1Q19, over 6 quarters FB only added 1mn net DAUs and the stock was down over this period).

NA is 10% of FB users but 50% of Revs so it is a key geo to watch for. Admittedly, at 195mn DAUs in NA and 255mn MAUs, there likely aren’t a lot of users left to acquire. If you’re not on FB now, you probably won’t be in the future (unless you’re a teenager and you “age up”).

The largest wealth transfer in history.

Time for a thread 👇👇👇

Today’s mix of monetary and fiscal policies are having a very different economic impact then we saw post the GFC.

Back then, deflationary forces were exacerbated by a brutal wealth loss problem.

Especially the lower classes.

They lost over 84% of their net worth from '07-'11.

This time we are seeing the complete opposite.

Lower classes just increased their wealth at the highest annual amount in the history of the data.

In fact, the bottom 50% net worth not only increased but is now 77% higher than it was at the peak of the housing bubble.

If we zoom out, this is what the prior chart looks like going back to the 90s.

Dealing with Losses.

Perfectionists are often motivated by avoidance. The need to avoid unpleasant emotional experiences. Traders who seek the perfect system are also likely to be motivated by the need to avoid unpleasant experiences.

With trading losses, the only pain that you will suffer is the emotional reaction to a loss. If you concentrate on avoiding losses rather than on maximizing your overall gain, you are unlikely to succeed at trading.

Traders may all incur the same loss but suffer vastly different emotional responses. A lot depends on their past experiences not only while trading but in the broader arena of life.

More competitive u are, More uncomfortable u are about taking loss. From an early age, we programmed to compete, to win, to accomplish, to be top of the class, to always be right & to succeed at whatever we set out to do. Losses are equated with losing to be avoided at all costs.

Newcomers to trading often start off with a string of positive experiences. Unfamiliar with the basics of money management, they are often over-confident and prepared to bet large amounts of their capital in the expectation of further gains.

1/

This whole thing is SO shady for so many reasons.

GameStop shares continue their rapid fall back toward earth, along with AMC Entertainment and Express

2/

A Reddit forum has played a big part in this.

Let's start there.

How r/WallStreetBets gamed the stock of GameStop

3/

🇨🇳
February 2019

"Chinese tech giant Tencent now plans to lead a new Series D funding round for Reddit, the social news forum plagued by controversy over the past decade."

Tencent Buys Stake In Another U.S. Social Network -- Reddit

4/

🇨🇳
Tencent, the world's largest video game vendor, invested in a company, Reddit, which is *banned in China*?

Weird.🤔

Reddit, Banned in China, Is Reportedly Set to Land $150 Million Investment From a Chinese Censorship Powerhouse

5/

These guys that are under investigation.

🇨🇳
U.S. government reportedly looking into 'League of Legends' owner Tencent's gaming stakes

Threat 1/ 👇: One of the characteristics that differentiate good investors from bad investors is the ability to identify OPTIONALITY in companies and their discipline to either get it for free or pay very little.

2/ Think about it as buying out of the money options, if you pay too much for something that has very small odds of happening you lose money. This is what happened in the 2000's crash, people bought internet stocks based on illusions, very few of them had any real business.

3/ The markets assign "perceived" higher valuations to some businesses and lots of investors scream how expensive everything is. Some are, but a lot are not, and not being able to identify the optionality of some businesses can destroy your opportunity to have outsize returns

4/ Estimating the odds of something that does not exist or it is very small to succeed and grow is very hard. For something new to work it is needed: The technology, the infrastructure, and the distribution, then new ideas can come which use those, they'll have + odds of success.

4/ Optionality gets "cheaper" once you find the above characteristics as the odds of a company with a new idea/project are higher. The thing is that anything that will come from the new ideas/projects won't be reflected in the financials, but that is where the opportunity lies

Thread: Bull Case on $FSRV

$FSRV is a great investment due to strong balance sheet, incredible growth in both earnings and revenue, and serve a competitive niche within this fintech market. I am very excited to be apart of this, undervalued, long term investment opportunity:

What does Katapult do?

They’re a fintech lending, e-commerce focused, service that allows nonprime customers to borrow money and purchase durable goods such as: Fridge’s, Tables, Couches, etc

Why they are competitive?

Some consumers with little to no credit often times don’t get approved, and it can be costly. Katapult leverages AI and ML to allocate money to them CHEAPER and faster than ever before.

Has this been profitable?

They have both grown revenue AND EBITDA at astounding rates. They hit profitability this year and grew 171% YoY. They project they will have a CAGR of EBITDA and Net Income at 75% 🤯🤯

This is a profit and growth monster, an investors dream!

Can they maintain this growth?

Lending isn’t a new service, and neither is leveraging AI/ML. But Katapult’s customer segment is niche, as nobody else wants to do it. They stand in their own quadrant, providing a long runway for niche growth.

Traders often overlook the SHORT STRADDLE due to its simplicity.

It remains the TOP strategy to make money when the market is not trending.

Here's how you can make money using only the short straddle
in various market conditions

⬇️ A comprehensive thread🧵

A short straddle is the most basic neutral options strategy.

Where a call option and a put option are sold at the same strike price.

Max profit = Total premium received ( call leg + put leg )

Max risk = Unlimited

(using SLs would be wise)

Upper breakeven = Strike price + Total Premium received

Lower breakeven = Strike price - Total Premium received

Essentially short straddles are initiated when the trader is confident about the market staying in a certain range (between the breakevens of the straddle)

Long-term short straddles usually require fewer adjustments since the range is wide.

Since unlimited loss is a component of the strategy, the trader has to adjust the strategy to increase profit/ mitigating risk

If you are in the top 10% of the income distribution,

and you are a Rightwing Free Market Libertarian

(you want *zero* government enforced wealth redistribution)

the probability you are motivated by real ideological conviction is low...

...the probability you are motivated by sheer self interest is high.

People are not trustworthy witnesses as to what their own motivations are.

If you ask a rich person who wants zero government enforced wealth redistribution (Socialism) why they want this, they are likely to give you Free Market Libertarian rhetoric about some 'Non-Agression Principle'.

The truth is much simpler; they care a lot more about their ability to NOT pay taxes, than they do about poor people's ability to access free stuff in the form of government services.

Starting to collect important questions for 2021 and beyond in this thread.

Please send questions you are interested in too!

1. Will demand for compute continue to double every few months? Tons of implications for semiconductor design and manufacture.

2. What will be the next major use of mRNA vaccines? What will our new understanding of protein folding lead to?

3. How will better data and workflows improve our health care system (prediction, prevention, price of care, outcomes, compliance)?

4. Will we fully unbundle undergrad and graduate school into the information/learning component (which should be a fraction the cost for multiples the quality) and the networking component?

5. Digital art creation and collection make sense to me, but how will digital art be displayed?

Support MSME

The Australia China trade war has resulted in China seeking support for import of of iron ore from Africa. Africa is building its iron or system which will take nearly the next five years to develop completely till then China is looking at India for its import.

This is a very crucial time for the Indian market to understand its own local and domestic needs and fulfill it before exporting the much-needed iron and steel raw materials to China.

This will in turn result in increasing prices of iron and iron materials in China and therefore India can capitalise this opportunity to export and products made of these important commodities at much higher prices.

The Indian Steel market has been under great pressure due to skyrocketing prices as the after effects of the covid-19 lockdown still persist increasing the ever growing gap between the huge demand and the shortening supply.

The manufacturers have not been receiving their pending payments due to which they are not able to procure enough raw material to make the products.

Last year I co-founded Selva Ventures, a CPG-focused VC firm, as a solo GP

This week I’ve been reflecting on our first year in business and wanted to share some of the lessons learned in building a small investment firm
Thread 👇

1/ As a solo GP I wear 2 hats

Investor: Always challenging but familiar. Same thing I was doing before

Entrepreneur: Incredibly ambiguous and scary, but also the greatest source of fulfillment

2/ Early on, seemingly simple decisions took an eternity: naming the firm, designing a logo, choosing a fund admin partner to name a few

I was so scared of getting these things wrong, but it was so important to be excited about those decisions to build early momentum

3/ Fundraising could be its own thread, but in fund 1 narrow focus is everything

Build a narrative that can get people excited and DO NOT stray from it, even though it can be tempting

Anything that doesn’t fit? Use an SPV or let it go

4/ Starting out I knew nobody else doing this, but the content about this growing field of “Solo Capitalists” has been both educational and therapeutic

@nbt’s substack (below), @Samirkaji’s podcast (Venture Unlocked) and @oper8rio really stand out

@RaoulGMI 1/ Ari is mostly right. The @grayscale vehicles provide an amazing way to get exposure at a fraction of the publicly traded price of these vehicles.

Let's start with $LTC.

The $LTCN NAV is $9.97. This is where LP's get to purchase.
The stock is trading at $329.48

@Grayscale 2/ If you put $100,000 into the trust, you get back close to 10k shares of $LTCN.

So immediately your $100k is worth $3.3m approx. Not a bad deal.

BUT, you have to hold it for a year. (the risk)

BUT, how big is that risk? How low would $LTCN have to go to lose money.

@Grayscale 3/ You don't have to be a genius to understand that the price of $LTCN would have to drop by 97% or so in order for you to lose. Those are my kind of odds.

Keeping this in mind, if $LTCN went down by 80% in a year, and $LTCN was $65, you would STILL make over 600% on your money

@Grayscale 4/ I am not going to say this is truly a case where the rich can get richer, but it certainly favors the accredited investor in a huge way.

You can repeat this with $BCH ($BCHG), $XLM, $XRP, $BTC, $ETH, etc.

Now, history tells us that the premium decreases over time as LP's..

@Grayscale 5/ get liquidity. However, using $ETHE as a barometer, while premiums were high initially, they eventually normalized in the hundreds of % points and when the big liquidity push came and investors unlocked it came down around 40%. NOW, with interest revived, back to 200%.

What does the Trade and Cooperation Agreement mean for the UKs #extradition arrangements with the EU27?

Lets take a quick look

Thread

A reminder of the respective positions of the UK and the EU in their negotiations that the UK Government considered a 'UK WIN'

As rightly said by @StevePeers, the reality is that the Agreement appears to be closer aligned to the EUs objectives, particularly given the EU wins in relation to dual criminality, ability to determine applicability for political offences and surrender for own nationals. EU WIN?

To begin with, as per previous arrangements, #extradition is referred to throughout as a 'mechanism of surrender'. Unlike the Council Framework Decision on the European Arrest Warrant, the surrender arrangement does not appear to be based on mutual trust and recognition

Despite the UK Governments negotiating position of not seeking participation in the EAW scheme, the Agreement provisions on surrender closely follows the wording of the Framework Decision on the European arrest warrant

Worried about the stock market?

Is this really the top?

Pull up a (virtual) chair and let’s chat 🪑

👇

So. Things are getting a little crazy out there.

TikTokers are spewing financial advice.

Carole Baskin is peddling penny stocks.

Everybody’s like “OMG my mom’s-best-friend’s-cousin made so much money in the market, c’mon it’s so easy!”

Makes you feel a little like this, right?

(couldn't resist the Zoolander reference)

Anyways,

Your portfolio is up, but Wall Street is throwing around the b-word (bubble) and you’re afraid it’s about to pop.

What do you do now?