How to Become an Instant Swaps Trader (and impress your friends)
Corona Del Mar, CA
Hey Friend,
Swaps are what the big boys trade.
Instead of being traded on the open market, it's an agreement between two parties to swap cash flow.
There's over a half a quadrillion dollars of these agreements right now.
Instead of boring you with theory, let's learn by example...
Here are the holdings of the ProShares -2X inverse ETF (SDS): |
Notice they spread their risk between eight of the largest banks in the world.
Chances are you already traded this product, or one that's similar?
There are over 100 million ETF traders worldwide, so odds are my dart is hitting the target.
SDS has $1 billion is assets under management (AUM), so they use swaps to reduce the slippage they'd get if they were trading in the open market.
Slippage = bad fills.
Give me a billion bucks and I could take everyone's offer in the E-mini, and throw a helluva party for an hour or two.
What a lot of traders don't realize is that they are creating a metric shit ton of slippage in the ETF markets.
They are considered "dumb money."
The smart money (banks & large funds) is trading swaps after all.
Check out all the mispricings in SDS (anything that's not zero is a mispricing):
If you squint, you'll see that the fund was mispriced by -0.2% a few weeks ago.What did I say the AUM was?
Oh yeah, $1 billion.
So that means the fund was mispriced by $2 million compared to its holdings.
To big banks, that's just a rounding error.
To you and I...well, I'll let you think about it.
But that's not the whole story.
These mispricings tend to signal washouts.
After the -0.2% discount, SDS went on to rally 7.9% over the next four days.
Whoa!
Now swaps are interesting aren't they?
More from me soon...
In the mean time, here's your reading assignment:
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Wondering how to get started?
Step 1: Looking for more consistent profits?
Get a free copy of my book: Artificial Intelligence, Real Profits here >>
Step 2: Want to build a trading strategy in under 10 minutes?
Watch this free training video >> (Scroll down the page)
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Step 5: Additional Resources
The Relaxed Investor (The simple strategy proven to work since 1926. Downloaded by over 200,000 readers)
The Ghost of Bernie Madoff is Not Yet Dead (Is your broker on the naughty list? Many traders have no idea they're being sold out)
The Ultimate Crash Detector (The strange weekly report that helps predict crashes. LIVE trading signals since 2006)
Portfolio Boss User Guide (Our flagship strategy building platform User Guide. See what it can do to help you on you quest for F U money)
Trading With Other People's Money - Coming Soon!
Bit-coin for Busy People (How to get started with Bit-coin in under an hour without the complicated new exchanges, high fees, and complicated wallets)
Disclaimer: The results listed herein are based on hypothetical trades. Plainly speaking, these trades were not actually executed. Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not actually been executed, the results may have under (or over) compensated for the impact, if any, of certain market factors such as lack of liquidity. You may have done better or worse than the results portrayed.
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