AIB & BOI - 16/2 to 13/3

Hanley

Disclaimer: Yes, I know Irish banks are as reliable as public transport, but I figured since there was a lot of volatility in the market at the moment I'd have a route thru some figures and see what came out in the wash

So, I decided to do a big of digging thru the movement in AIB and BOI's prices over the last month. Here's what I came up with;

AIB
Opening price at 16/2 - 68c
Closing price at 13/3 - 51c
Decrease - 25%

BOI
Opening price at 16/2 - 48c
Closing price at 13/3 - 28c
Decrease - 42%

No surprises there. However, digging into daily trends, things get a bit more interesting.

If you were to buy in when the market opened each morning, and close out at 12.30pm each day, you'd be looking at a daily gain of, on average, around 3% for both banks. That's a 50% return over the course of the month for AIB, and 52% for BOI. In spite of the share prices declining by 25% and 42% respectively.

The funny thing is, if you were to wait til the end of the day, your gain of 50% and 52% drops to a loss of 10% and 36% respectively!! On average, from 12.30pm to close of business, the price per share declined 66% of the time.

The majority of the gains noted above have happened because of the small rally we've seen in the last two weeks, the previous two had seen mostly losses on the criteria abov

Basically, my question to all you guys is, am I getting too bogged down in stats, or is it worth having a small punt over the next few weeks using the method outlined above to see how true it holds? Or would any gains be eaten up in fees?

Also, as I don't have a brokerage account, what should I do? Spread account of some sort?

strmin

Remmember about broker commissions and stamp duty. You need to gamble with really large amount of money to make profit on 3% increase in share price. Potential loss is much higher than profit.

Mikel

That is interesting, I wouldn't be able to judge how statistically significant it is.
It could be just a random pattern that shows up for a while, or maybe there's an actual underlying dynamic at work.

Let's say it's not just noise and there is something to it, it might kind of make sense.
Most people buying banks are going to be short term speculators looking for a quick bounce, so maybe if they make a return with leverage early in the day they get out.
Probably not a good idea to keep the position overnight.

Maybe most of the 'news' over that time frame came out early in the day or overnight, making most of the price action in the early part of the session.

What would be interesting would be to see the correlation over a longer time frame, and see if the volatility is higher in the first few hours.
I'd guess it probably is, most investment decisions are probably made at morning meetings and the like.

So given that the trend was upwards in the sample you looked at, if you were to trade it you'd have to make a call on the direction over the next couple of weeks.

Trading the shares would be a waste of time with comms etc, you could use spreadbetting or CFDs.
You'd have to make the spread first, I don't know how wide it is on AIB at the moment, but in % terms it might be more than 3%.

Check Delta Index, see what the spread is, then leverage that baby up!
You understand leverage right?:pac:

Compak

3% would be eaten by fees even if spread bet

Mikel

Compak wrote: »

3% would be eaten by fees even if spread bet

L-E-V-E-R-A-G-E

Compak

ALBK : Share Price: 0.52 Bid: 0.55 Ask: 0.49
Spread: -0.06 Spread as %: -10.91%

How in Gods holy name does leverage help for 3% gain on a 10% spread when inc buying and selling??

Would be fine for stocks trading in the hundreds of cents, these stocks too low for favorable %spread

Im sure better spreads can be got but to make profit it has to be less than 3% spread despite each cent being 2%. I dont know anyone thats offering better than a point spread each way (4%) and typ much higher as above

Mikel

Compak wrote: »

ALBK : Share Price: 0.52 Bid: 0.55 Ask: 0.49
Spread: -0.06 Spread as %: -10.91%

How in Gods holy name does leverage help for 3% gain on a 10% spread when inc buying and selling??

Would be fine for stocks trading in the hundreds of cents, these stocks too low for favorable %spread

Im sure better spreads can be got but to make profit it has to be less than 3% spread despite each cent being 2%. I dont know anyone thats offering better than a point spread each way (4%) and typ much higher as above

10% spread? Larf.
You know what spreadbetting is right?
Delta Index quote the close on Friday in AIB rolling as 51.4 - 52.1.
So 0.7 of a tick is what about 1.4%.

So using those numbers if you got out with a 3% gain you'd be selling at 52.94 which is + 1.6% on what you paid.
I don't know what the margins are at the moment, probably 20 - 30%.
So you could leverage it up 3 or 4 times.
Which gives around a 6% return a day, assuming the strategy works.

Just thinking though Hanley, you're assuming you can buy at the open.
I don't know the mechanics around getting orders filled in opening auctions.

Maybe you could buy just before the close the previous day, but then you've got the overnight risk.

Hanley

strmin wrote: »

Remmember about broker commissions and stamp duty. You need to gamble with really large amount of money to make profit on 3% increase in share price. Potential loss is much higher than profit.

Well I wouldn't do it thru a brokerage.... if I was going to do it, it would be thru spread bets.

I haven't worked out the actual economics of it, but I'll dig a little deeper, and watch for a week or two longer and see if the pattern holds true.

Of course the danger at the moment is patterns probably don't mean all that mcuh!

Compak

Mikel wrote: »

10% spread? Larf.
You know what spreadbetting is right?
Delta Index quote the close on Friday in AIB rolling as 51.4 - 52.1.
So 0.7 of a tick is what about 1.4%.

So using those numbers if you got out with a 3% gain you'd be selling at 52.94 which is + 1.6% on what you paid.
I don't know what the margins are at the moment, probably 20 - 30%.
So you could leverage it up 3 or 4 times.
Which gives around a 6% return a day, assuming the strategy works.

Just thinking though Hanley, you're assuming you can buy at the open.
I don't know the mechanics around getting orders filled in opening auctions.

Maybe you could buy just before the close the previous day, but then you've got the overnight risk.

yeah good luck with that. Margins are 3% in system I use by the way.

Hanley

Mikel wrote: »

That is interesting, I wouldn't be able to judge how statistically significant it is.
It could be just a random pattern that shows up for a while, or maybe there's an actual underlying dynamic at work.

I vaguely remember reading something about quants that basically said if you look at a set of figures long enough, and thru enough equations, a pattern will develop somewhere. It might not actually be statistically significant, or indicative of anything, but you can usually find one!!

Let's say it's not just noise and there is something to it, it might kind of make sense.
Most people buying banks are going to be short term speculators looking for a quick bounce, so maybe if they make a return with leverage early in the day they get out.
Probably not a good idea to keep the position overnight.

I looked at the figures, and then tried to work out reasons why they appeared as they do, you've hit on what I was thinking too.

Maybe most of the 'news' over that time frame came out early in the day or overnight, making most of the price action in the early part of the session.

Exactly. I know someone else said that good news from the US tends to come overnight, giving a small rally in the morning before people cash out at a small profit instead of risking the hold.

Of course, if this holds true for stocks other than banking ones, it might work out that shorting at lunch and buying at close is another viable option.

What would be interesting would be to see the correlation over a longer time frame, and see if the volatility is higher in the first few hours.
I'd guess it probably is, most investment decisions are probably made at morning meetings and the like.

I don't know how reliable a long term analysis would be at the moment because of the volatility of the market. I'm tempted to take a random period of 4-6 weeks in the last 3 years and see if it holds tho.

So given that the trend was upwards in the sample you looked at, if you were to trade it you'd have to make a call on the direction over the next couple of weeks.

Therein lies the problem. Over the last 4 weeks, the first two have seen average losses, the latter 2 have seen gains that outstrip the previous losses. The pattern would obviously say 2 weeks down, 2 weeks up, 2 weeks down (I say obviously because if you were to believe only statistical analysis, that might be what you could conclude). I guess over the next few weeks things will become clearer.

I doubt with at the stage where there's going to be massive rally's where share prices return to stable higher levels any time soon, so it gives a bit of time to sit, watch and wait.

Mikel wrote: »

10% spread? Larf.
You know what spreadbetting is right?
Delta Index quote the close on Friday in AIB rolling as 51.4 - 52.1.
So 0.7 of a tick is what about 1.4%.

I'm not all that familiar with spreads, but aren't rolling positions more expensive? Or at least the spread is larger? Could be totally wrong there!!

So using those numbers if you got out with a 3% gain you'd be selling at 52.94 which is + 1.6% on what you paid.
I don't know what the margins are at the moment, probably 20 - 30%.
So you could leverage it up 3 or 4 times.
Which gives around a 6% return a day, assuming the strategy works.

Ok totally over my head.... care to explain the mechanism of that??

Is it that assuming I get a 1.5% return on capital after spread costs, I then leverage it so I've effectively "invested" 4x my capital, increasing my gain, but obviously increasing the potential loss too?

What sort of cash do you're reckon we're talking I'd have to put up to make this worth while? Would a couple of hundred be worth it while I was watching to see how things go?

Just thinking though Hanley, you're assuming you can buy at the open.
I don't know the mechanics around getting orders filled in opening auctions.

Maybe you could buy just before the close the previous day, but then you've got the overnight risk.

Don't really understand overnight risk... Presumably it's the risk of bad news coming over night and the price shifting adversely at the open? I would think any shift would be irrelevant as the figures above are calculated off the closing price of the previous day being the followings open.

So if there's good news and the price jumps, happy days cos you're up all ready. But if there's bad news and the price drops you've effectively bought it for more last night than you could have the following morning. But like I said, the calculations are based off the opening price, so any shifts early in trading shouldn't change the results?

Buying right before close might be an idea tho. I assume there's some function on igindex or delta where I can fill in an order slip for execution at opening? And if it doesn't kick in straight away, it should get in quick before any major swing takes place??

Compak

Hanley wrote: »

Well I wouldn't do it thru a brokerage.... if I was going to do it, it would be thru spread bets.

I haven't worked out the actual economics of it, but I'll dig a little deeper, and watch for a week or two longer and see if the pattern holds true.

Of course the danger at the moment is patterns probably don't mean all that mcuh!

It wont last. I used to run it for AIB where between 12.30 daily it would hit the low and recover after America opens. Was quite consistent for a while.

As someone who has actually done this. Let me advise you for a 3% spread and to leverage you risk getting heavily heavily burnt. If you do and make some money stop when you are ahead.

Its a bigger gamble than Cheltenham and even with stops in place you could lose it all in two minutes

Compak

Mikel wrote: »

10% spread? Larf.
You know what spreadbetting is right?
Delta Index quote the close on Friday in AIB rolling as 51.4 - 52.1.
So 0.7 of a tick is what about 1.4%.


.

I apologise. Jsut checked my CMC account has even tighter spreads.
Trust me these vary considerably through day and to risk these margins and leverage with bank volatility I think someone is asking to get burnt heavily

Hanley

Compak wrote: »

It wont last. I used to run it for AIB where between 12.30 daily it would hit the low and recover after America opens. Was quite consistent for a while.

As someone who has actually done this. Let me advise you for a 3% spread and to leverage you risk getting heavily heavily burnt. If you do and make some money stop when you are ahead.

Its a bigger gamble than Cheltenham and even with stops in place you could lose it all in two minutes

I appreciate the input... I would absolutely be trading off patterns only, I openly admit that! So any actual system that is in place will only work for a finite period.

The 3% gain is a daily one, so compounded it's a pretty decent possible return like? Of course as you said, one bad day could wipe you out quite quickly.

I LIKE to think I have enough sense to know when enough is enough, but no-one can really say with absolute certain that they can beat their own greed until they stare it down!!

Incidentally, I made two bets in Cheltenham - both off tips. First one came in, second one didn't. Was up €75 quid on a tenner at that stage, and tempting as it was to keep going, I resisted. So hopefully I could bring that discipline to trading too!!

As an aside, do discernable patterns give a good basis to trade off if one can recognise when they work, and when they stop working?

Mikel

D'oh missed this.
I'm not a big believer in patterns, they might well be there but like you say if you look long enough you'll probably find something.

Hanley wrote: »

I'm not all that familiar with spreads, but aren't rolling positions more expensive? Or at least the spread is larger? Could be totally wrong there!!

They're broadly similar, it varies across markets but the contracts that expire at 3 mth intervals may have a tighter initial spread but if you want to keep your trade going when the expiry comes up you have to basically sell the one you have and buy the new one so you pay the spread again.
On a small position it won't make much difference

Ok totally over my head.... care to explain the mechanism of that??

Without leverage say you risk 100 and make 10%, them your profit is that 10%.
If you're trading on margin and you only have to put up 10% of the bet, you deposit 10 and you make 10, profit 100%.
Very simplistic because if the market goes down 5% say, that's a fall in your position of 5 so you have to deposit 5.
So in reality you need cash put aside to cover a large ish down move which you would be tying up, so in reality your profit is 10/(margin + buffer cash).

Margins are probably much higher than 10% now, financials are probably around 30% because of volatility.

Hanley wrote:

Is it that assuming I get a 1.5% return on capital after spread costs, I then leverage it so I've effectively "invested" 4x my capital, increasing my gain, but obviously increasing the potential loss too?

In a nutshell yes

Hanley wrote:

What sort of cash do you're reckon we're talking I'd have to put up to make this worth while? Would a couple of hundred be worth it while I was watching to see how things go?

You'd need a couple of grand to open an account but that doesn't mean you have to put it all at risk.
It all depends on your risk appetite, you could easily lose it all very quickly, it takes a lot of discipline

Hanley wrote:

Don't really understand overnight risk... Presumably it's the risk of bad news coming over night and the price shifting adversely at the open? I would think any shift would be irrelevant as the figures above are calculated off the closing price of the previous day being the followings open.

That's what I mean by ON risk, be careful with opening and closing prices though. Just because it closes at 100 doesn't mean it will open there, even if there is no news.
If there is news overnight that will bump it up from 100 to 110 there is an opening auction for the market makers and the first price you will be able to trade at might be 110

Hanley wrote:

So if there's good news and the price jumps, happy days cos you're up all ready. But if there's bad news and the price drops you've effectively bought it for more last night than you could have the following morning. But like I said, the calculations are based off the opening price, so any shifts early in trading shouldn't change the results?

If you can get the opening price, it might be worth watching it at the open to see how likely it is. Given the small moves your'e looking for you'd be quite sensitive to a tick or two.

Hanley wrote:

Buying right before close might be an idea tho. I assume there's some function on igindex or delta where I can fill in an order slip for execution at opening? And if it doesn't kick in straight away, it should get in quick before any major swing takes place??

I don't think you could leave an order to buy at any price, you'd have to specify a price on it.
You can risk as little as a euro or two a tick, and work out the logistics of it while risking very little

norming09

Hay I was wondering could anyone give me some advise.

I have bought some Bank of Ireland Shares purchased at around .60 and .30, but i have say 5k, to play around with which i would like to invest.

I am absolutely cutting my throat that I didnt purchase the shares at .12 , will they drop that low again does anyone recon? and would it worth investing 5k in them if they did? or are they on the increase now?