Hi @andreas, thanks for sharing this! I am quite new at using the GEX to add/reduce positions (and I have been through the explanations on the hedging of the delta-dollars and second-order sensitivity :)). Still, I'm trying to understand how it impacts the liquidity vs the liquidity drainers (USO, UUP & TNX--X).
Today, for instance, liquidity drainers look ok - only USO is showing relative strength & trend, UUP & TNX--X are weak). Can you maybe elaborate a bit more on how they correlate on liquidity ? Thanks
I cannot share the GEX Signal logic I developed via Back testing, so much I can say: This right now is not a big pitch situation like around October 30 2023 or 4/22.
How I read it: Tons of traders are long calls right now and the dealers are hedged (they already bought the underlying to protect themselves), so not much short-term (not long term, I do not expect a crash at all!) swing fuel left to the upside.
This can change fast, but we need a little drawdown to reset the flow.
This is all pretty new; you watch a developing trader. So far, my framework covered -->
Liquidity (fine for investors, it should be up for the rest of the year, so investors with a good stomach can stay long) + Quads 1-2 (which is the case now) --> Long
My Learning is --> Liquidity up --> Gex Signal (for early ETF and SVIX Trades) --> Quad 1-2 --> choose the strong areas of the market (for this I now watch 35 Systems with different factor combinations every day (High beta, beta neutral, value, growth, small caps, mid-caps, big caps). [The Nasdaq system I choose this week is the strongest right now, but I am late (last big pitch signal was on 4/22] to the game (GEX high), so I am carful].
So far, I tried to combine different systems with different factors in one book, but back tests show, this is o.k., but not optimal… even within the small caps space one small cap system can be up for 70% in one year, while the other is only up 20% (I was not aware of that, was hidden in the book) with a terrible cap curve. Same with big cap or mid cap systems.
All systems I build are based on the best 4 trending factors (higher beta / neutral beta, relative strength, cap size, long term reversal), so if the cap curve is strong with relative strength the signal (derived from the CAP Curve, you could say I build my own ETFs) is very valid, 100s and 100s of hours of backtesting went into it…
Let’s see how it plays out, but I think I am on to something… I will document my trades here (ETF, SVIX, Stocks out of the systems with buy and sell points…) I live from trading, so I got skin in the game, but I am not a high roller yet, so again you watch a developing trader (hopefully with a soon enough break through ;-)
Thank you and best regards Andreas
I missed the 4/22 GEX trade (was still backtesting), so I wait for the next big signal.
Thanks a lot Andreas for the detailed answer and the precisions. I am also currently a lot of backtesting to "quantify" the GEX effects on the breakouts depending on some factors like high betas etc. First results may not as conservatives as the lower line of the white box you published earlier on X - but it probably because I doesn't trade for living so risk approach is as well different :)
sure! Yes, there are great trades at GEX low, low extremes (if Liquidity is up for the year --> reference Crossborder Capital). In that moment it is very easy to spot relative strength --> XHB SMH for exampe end of October 2023. Also (esp. higher beta) systems that held up well gave good entries... but usually bases have not been build, they come later --> when gex dips (like SMCI, NVDA around 4 Jan). But yes, still backtesting, looks promising...
Hi @andreas, thanks for sharing this! I am quite new at using the GEX to add/reduce positions (and I have been through the explanations on the hedging of the delta-dollars and second-order sensitivity :)). Still, I'm trying to understand how it impacts the liquidity vs the liquidity drainers (USO, UUP & TNX--X).
Today, for instance, liquidity drainers look ok - only USO is showing relative strength & trend, UUP & TNX--X are weak). Can you maybe elaborate a bit more on how they correlate on liquidity ? Thanks
Hey Florian,
I cannot share the GEX Signal logic I developed via Back testing, so much I can say: This right now is not a big pitch situation like around October 30 2023 or 4/22.
How I read it: Tons of traders are long calls right now and the dealers are hedged (they already bought the underlying to protect themselves), so not much short-term (not long term, I do not expect a crash at all!) swing fuel left to the upside.
This can change fast, but we need a little drawdown to reset the flow.
This is all pretty new; you watch a developing trader. So far, my framework covered -->
Liquidity (fine for investors, it should be up for the rest of the year, so investors with a good stomach can stay long) + Quads 1-2 (which is the case now) --> Long
My Learning is --> Liquidity up --> Gex Signal (for early ETF and SVIX Trades) --> Quad 1-2 --> choose the strong areas of the market (for this I now watch 35 Systems with different factor combinations every day (High beta, beta neutral, value, growth, small caps, mid-caps, big caps). [The Nasdaq system I choose this week is the strongest right now, but I am late (last big pitch signal was on 4/22] to the game (GEX high), so I am carful].
So far, I tried to combine different systems with different factors in one book, but back tests show, this is o.k., but not optimal… even within the small caps space one small cap system can be up for 70% in one year, while the other is only up 20% (I was not aware of that, was hidden in the book) with a terrible cap curve. Same with big cap or mid cap systems.
All systems I build are based on the best 4 trending factors (higher beta / neutral beta, relative strength, cap size, long term reversal), so if the cap curve is strong with relative strength the signal (derived from the CAP Curve, you could say I build my own ETFs) is very valid, 100s and 100s of hours of backtesting went into it…
Let’s see how it plays out, but I think I am on to something… I will document my trades here (ETF, SVIX, Stocks out of the systems with buy and sell points…) I live from trading, so I got skin in the game, but I am not a high roller yet, so again you watch a developing trader (hopefully with a soon enough break through ;-)
Thank you and best regards Andreas
I missed the 4/22 GEX trade (was still backtesting), so I wait for the next big signal.
Thanks a lot Andreas for the detailed answer and the precisions. I am also currently a lot of backtesting to "quantify" the GEX effects on the breakouts depending on some factors like high betas etc. First results may not as conservatives as the lower line of the white box you published earlier on X - but it probably because I doesn't trade for living so risk approach is as well different :)
sure! Yes, there are great trades at GEX low, low extremes (if Liquidity is up for the year --> reference Crossborder Capital). In that moment it is very easy to spot relative strength --> XHB SMH for exampe end of October 2023. Also (esp. higher beta) systems that held up well gave good entries... but usually bases have not been build, they come later --> when gex dips (like SMCI, NVDA around 4 Jan). But yes, still backtesting, looks promising...