Friday, December 26, 2008

More GE

I mentioned the volatility skews typical of thinly traded days . . . like today. although these skews present some great scalping opportunities, the other side of the coin is that there tends to be considerably more technical "noise", false starts and head fakes for us daytrader types than in otherwise "normal" days where volume is not 2 or 3 SDs away from the 10 or 20 day moving average.
Apparently not a lot of folks showed up today since, as of 13:00 total volume in the Qs is 9M and GE is showing 14M.
So much for the small talk.
GE still managed to produce a nice little payday with only an hour's exposure and the setup closely followed the pattern I have detailed many times in the past.
This will be the last of the GE/NYAD divergent trade posts . . . read the GE/NYAD archives to bulk up on the trade rules, which you will probably refine to fit your own trading style. For my part I intend to program this setup into TS and run it in auto-trade for a while to see how it pans out. So far, every time GE and NYAD have diverged for over 8 minutes, this setup has produced a net profit. When I first started these setup posts the net yield was approximately $ .01/minute of trade exposure. In more recent trades, we've seen that return diminish considerably. That may be the product of overall market volatility, which, as measured by the VIX, has retreated from the mid 60s to the current mid 40s. I've mentioned before that a least one large prop shop and several commercial trading firms focus on these arbitrage type GE trades using vast sums of capital and that the only reason this trade works for an average retail trader now is precisely because of the high VIX conditions. . . so milk this thing while you still can.
Today's trade stats:
Time in trade: 10:26 - 11:00 = 34 minutes and 10:26 - 11:32 = 66 minutes
Trade gain: 16:10 - 16:02 = .08 and 16:10 - 15.92 = .18 for a total of $ .26

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