- Two links to support this article:
Now that I’ve said too much about the dangers of shorting UGAZ, let us move on to how I plan to protect my account. I talk in circles a lot, get over it; I’m thorough. There are two major dangers to protect against, getting a margin call (not having enough funds to hold on to a short position when it goes backward), and the broker taking the shares back because the owner of them must have them back to sell them. These dangers are equally damaging and can both leave you “holding the bag”…. Am I saying that right?
In this post I’m sharing the data for the example I’ve been working on; Holding short from Dec 21, 2017 to Jan 3, 2020. I’ll get to the Margin dangers in the next couple of posts. I swear I have an outline in my head, it just keeps changing.
Something I hadn’t noticed before, this example shows 371 days to go backward, then 371 days to make a profit. As a summary, you needed roughly $53,000 to hold on to a short worth $9944. That is a position worth 18-19% of max pain. After 371 days of survival, the trade goes on to make roughly 86%, or very roughly 13-14% gain on the account after incurring (assumed) interest charges to short for that long a period.
The focus here is: By never exceeding more than 18% of my original account balance on a short position, I could have survived this trade.
First step, plot the UGAZ short. With Tradingview I can load the UGAZ daily chart and export what I have on the screen to a CSV file. I have daily OHLC all ready for me to manipulate and build the first Chart. Yippie.
I found the time to get the first chart generated. And here it is.
The image may be difficult to see. Good thing I am sharing the document itself for you to look at the chart and the data yourself. I have shared it here, at google sheets. It will open in a new window and you don’t need a google account to view the document. It is a downloadable Excel file if you want to make a copy and change it up any way you like.
So there you have it. Starting on Dec 21, 2017, immediately heading into a loss, recovery, near catastrophic loss, and finally the road to success. I will continue to use this example from Dec 21, 2017 to Jan 3, 2020 for the next few examples. This example is the best of historical moves to test protecting my account. I will eventually test other moments in UGAZ history. I hope to get the next section posted tomorrow. It should be fairly simple; I plan to manipulate some of the data for this chart to show how easy it can be for me to improve risk management and maintain or even improve profits at the same time. Till next time