13 July 06: GOOG / BRCM Arbitrage? Or Am I Just Crazy?
Due to the market’s recent vascilliations, I’m left in the somewhat unusual position of being long BRCM and short GOOG at the same time. Now that may sound like some oddball way to arbitrage the volatility difference between these two, but that’s not at all what it is. And it’s certainly not an attempt at a straddle. I’d need a really long inseam to avoid those barbs!
My positions are in complete compliance with Da Rules. Rule #1 (or 3, I forget) is to always be aware of your time frame. I’m a firm believer that changing time frames after a trade is entered is one of the biggest pitfalls in trading, usually because it’s done out of the subconscious need to find a way to avoid being proven wrong.
I’ve used the example before that it’s perfectly alright to do a daytrade short sale on a stock that’s in a strong long-term uptrend; the two timeframes have nothing to do with each other. Trade within the appropriate time frame. Move with the groove. Work your mojo, grasshoppa.
The short on Google is based on a weekly chart, with position sizing and stop to match. The long on Broadcom is based on a daily chart, ditto ditto ditto.
Will these positions make me rich? Hell if I know! All I know for sure is exactly how much I stand to lose if/when I’m wrong, and that it’s an amount I’m comfortable with. Mandatory before entering any trade, you see. I’ll flip either of ‘em in a heartbeat if the chart tells me to.
Cheers. If gas goes up much more, it may be cheaper to pour Jack Daniels in my tank!!