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Strategies & Market Trends : Ask Vendit Off-Topic Questions -- Ignore unavailable to you. Want to Upgrade?

To: Gush who wrote (8131)	4/23/2005 12:56:52 PM
From: Walkingshadow	Read Replies (1) \| Respond to of 8752

Yes, I think so. The beta for QLGC is 3.9. I don't know what it is for QQQQ, but probably it is about 2 or so, maybe somewhat less. If I am interpreting this chart correctly, I believe it is saying that price movement in QLGC is currently about 105% of that of QQQQ, which would agree with what you say. stockcharts.com[w,a]daclyyay[dc][p][vc60]&pref=G If you go to trading QLGC, up till now I would have used larger position size on short positions for two reasons: first, the medium-term market trend was down, and second, only 5% of the float is held short. Now the medium term market direction is up, but likely not sharply up. And since the long-term trend in QLGC is up, I would probably use larger position size on the long positions now compared to the short positions. This should favorably affect overall risk with the strategy, but it would be really nice if there were more shorts in QLGC. That would simplify the strategy re position size. Keep in mind that there is a disadvantage to trading QLGC in place of QQQQ. First, you expose yourself to much greater risk from company-specific events/news. And also, options pricing takes into account current volatilities, so you'll tend to pay more per contract, the spreads may be more treacherous, and the moves required will have to be correspondingly greater to achieve the same profit. So I view that as a wash, although there may be options pricing inefficiencies that can be exploited from time to time. If you want to tweak the returns from QQQQ, you might consider trading leveraged mutual funds, which don't have as much leverage as options, but they also don't expire as options will. That strategy, maybe combined together with trading the underlying (QQQQ) to more precisely time the market inflections, may be a better way to go that will burn you less since you are trading an index that will move in pretty orderly fashion most of the time. One other thing---although as you point out QLGC has moved in lockstep (with about twice the volatility) with QQQQ lately, this has not always been the case, as you can see from the above chart. So QLGC is not that good of a surrogate for QQQQ, even though it has been over the past several months. This will likely change in the not too distant future. T