Wed 20th

NAV 120.2

Gilts
Some nice fills of 2 GTC orders in gilts to start the day :

sell 5 at 115.95
sell5 at 116.45 (!!)       now short 40.

The market spiked up on the headlines about King voting for more QE, only to end the day down 0.22. Now short 40 G H3, and working a single bid for 5 at 114.25 (GTC).

GBPJPY
Although I think they're wrong, the market is taking a stick to GBP. I suspect the GDP data is rubbish and the employment data is telling the real story, but I'm not fighting it yet, so cut the gbpjpy position (again)

sell 0.5m gbpjpy at 143.062. Now flat

Tha's the second buy high/sell low that I've now done in gbpjpy, which tells me I should stop trading this cross for the moment.

Gold
Having said previously that I now had 100% of the position I wanted in gold, I think that exiting the gbpjpy trade makes room for a little more. A rather sloppy piece of execution after the Fed minutes, selling down $45 on the day. I should have been patient and waited for a better level tomorrow as everyone calms down.

sell 2 gcj3 at 1559.5. Now short 15.

T-bond futures
Same as the gold trade. Appalling execution, selling down on the day after the FOMC minutes. A true D-.

Sell 2 USH3 at 142-27. Now short 15.

I think both of these trades (gold and t-bonds) will be fine in the end, but the contrast with the execution in gilts where I sold the high tick of the day is pretty stark. Sure enough, both these trades ended the day in the red, whereas my average sale in gilts today closed almost a point in the black.


BIG PICTURE

The Fed is starting to think about the exit, and their discussions will be on this topic. This is toxic for the assets which have gained from QE, so we should be trading bear markets in yen (already largely complete, with a 20%+ collapse since November), gold, followed by long dated treasuries and finally eurodollars. Perhaps we trade a range in equities too (after all, the reason the Fed can even think about exit is because the economy is in reasonable shape, which is not the stuff of equity bear markets. Besides, I don't think the positioning in stocks supports a real bear market here, unlike gold, treasuries and EDs).

Tues 19th - nothing to report. NAV 117.9

I'm increasingly convinced that the correct trade is to replace a yen short with a short in gold (both against usd). Gold trades as though the stampede for the exit is just beginning - the trepidation is almost tangible in the price action - whereas in yen I'm starting to find myself buying highs and selling lows, which tells me the trend is faltering and it's entering a range for a while. Time to head to the exit on gbpjpy and usdjpy then.

New trades, Monday 18th

NAV 114.9

 I'm now short 20 of the Simex Nikkei 08Mar13 11500 calls, which doesn't make any sense given that I'm bullish nikkei and that expiry is right ahead of fiscal year end (this is what happens when you leg out of call spreads : stupid), so this gets closed out :

buy 20 NIH3 Mar13 11500 calls at 215

Also I felt as if the yen was going to make a serious assault on the barriers above 94.50 now that G20 is  out of the way, so reset a long there :

buy 0.5m gbpjpy at 145.80
buy 0.5m usdjpy at 93.955

Took a painful drawdown on Friday ahead of G20 and reduced positions, which was a mistake in hindsight. Friday trades :

Sold 1m gbpjpy at 142.623
Sold 20 NIH3 11000 Mar calls at 371
Sold 10 G H3 at 114.72
Sold 3 USH3 at 143-13

The last 2 trades re-established shorts in gilts and T-bonds, albeit at a very poor level in gilts (quite oversold).

The gold trade look more compelling the more I think about it. Price action was awful on Friday obviously, and the market has broken through an uptrend from 2008. It could bottom and recover, but the environment looks hostile to gold to me for all the reasons discussed before. The price rallied from 682 post-Lehman to 1921 in late 2011. Obvious 38 and 50% targets for a healthy pullback would therefore be 1450 and 1301. Since it feels like kicking on an open door, I'm taking a risk and betting that we won't have the squeeze back into the old range (above the trendline mentioned earlier), and so I'm increasing my gold short to full size right here :

sell 3 gcj3 at 1619.3

sell 10 gck3 may 1700 call at 11.0 (expiry 25Apr13)
buy 10 gck3 may 1560/1510 put spread at 10.0

buy 30 gcq3 1400/1350 put spreads at 3.7 (expiry 25Jul) - cheap, but 12:1 for a real collapse over the summer.


Fri 14Feb13 NAV 111.6

Filled on gbpjpy bid :

bought 0.5m at 144.07

Now working 2 GTC offers :

0.5m GBPJPY at 146.93
0.5m GBPJPY at 144.93

Separately, got filled on the GTC bid for 5 more gilts, and decided to cut the JGB short (BoJ will eventually extend to 5yrs or longer. Probably we're going back to the all time high from Jun03 in JGB futures. In the meantime use the disappointment from the BoJ's decision today to close the position) :

bought 5 G H3 at 114.85
bought 10 JGBH3 at 144.04

Gold sold off again. It's starting to look terrible on the chart. Sold another 4 last night :

sell 4 GCJ3 at 1642.1

so now short 7 altogether.

NAV 114.8. Ouch.

NAV 13Feb13 117.6

So much for range trading gilts. Got hit on the GTC bid at 115.95 earlier today, only for them to crash out through the bottom of the range. Still have 5/6 of the position though, next bid is 114.85 for another 5. Hopefully will get hit late in today's session, and be able to sell them back out on a bounce tomorrow as everyone reconsiders. I still want to be short gilts for another 15-20bps ideally.

Other trades today :

1. Got hit on a bid for 5 ush3 at 142-16, taking profit on 1/3 of the bond futures I'm short. Now short 10 ush3. Working nothing at the moment, but should probably cover some more another point lower.

2. Added to Sirius (SXX.L). It traded down 13% this morning on a story about delaying the detailed feasibility study for their potash mine and the resignation of one of the senior staff. Looking through the details, it seems to be a storm in a teacup, so added another 25,000 at 25.25. Total position now 250,000.

3. GBP is getting whacked because of King's comments (ostensibly). I think it's more likely that what's happening is that the flight to safety positions from the EUR are now stopping each other out, aided and abetted by a decent short base from fast money. The data doesn't seem so bleak : rising house prices at last, and strong private car sales. On top of which, there's been a dramatic easing in financial conditions in the UK since November, which won't be visisble in the data yet, but should start to appear in 4-6 weeks time. With Cameron's leadership how can we go wrong ? Anyway, added another clip of gbpjpy :

bought 0.25m GBPJPY at 145.35

Next stop 144.07 for 0.5m, GTC

4. After cleaning out the ESH3 15Feb covered calls I bought 20 ESH3 outright. They've rallied about 8 points (a nice start), so take a little profit and add some time decay by selling covered calls against these too :

sell 20 ESH3 15Mar 1540 calls at 9.00

That's a 33 delta. If we get there by expiry, then the Mar28 1520/1570 call spread (on ESM3, currently 1514) will be making a lot of money, so no regrets involved in being exercised if it happens. And if it doesn't then I have an extra 9 point cushion on the downside.