9 December 2011

Took profits on BEL and LR at the open, selling at 4.84 at 9.5 respectively. These were decent gains.

People think the European Summit will end up causing a big move (either up or down) in it’s wake. If so, then being long or short over the weekend depends on one’ s opinion of how big such a post-summit move would be, and the probability of each outcome happening.

Let’s say a 10% medium-term move in either direction is what is at stake. In my opinion, the probability of a negative outcome from the summit is 70% – 80%. That’s 75% on average.

(10% x TP x 25%) + (-10% x TP x 75%) = -5% x TP

where, TP = total portfolio.

I don’t think the above is an accurate representation, because there’s probably a “long tail” of disaster possibilities on the horizon. Nonetheless, in a very primitive way, it captures how I think about the European debt crisis.

Being long the stock markets AT PRESENT may or may not pay off, but is very likely a negative expectancy bet. So I’m happy to have a 100% cash position.

Happy Weekend, Traders!

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2 Responses to 9 December 2011

  1. noob says:

    Take care, Bear!

  2. abitrade says:

    Thanks! You too. 🙂

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