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DEEP RESEARCH · PERSONAL PENSION STAR 50

[Personal Pension Investing] China STAR 50 Index Premium/Discount, Trading, and Volatility_2024_10_12

A review of domestic China STAR 50 ETF premium/discount gaps, short-term trades, and volatility tolerance

Published: 2024-10-12 · Personal pension trading review · Naver Blog

Investment decisions are your own responsibility. This material is research and is not a recommendation to buy or sell.

0. Bottom line first

I invested because of FOMO, but the volatility of the domestic ETFs and the premium/discount gaps were beyond imagination. After the index fell below the 3-day line, I cut the position and bought again; I am now holding the China STAR 50 index again while waiting to see whether it rebounds early next week.

Entry

FOMO buying

The starting point was FOMO and expectations for a Chinese market rebound.

Trading

Premium/discount arbitrage

The gap among three ETFs made arbitrage-style trades possible.

Now

Holding again

After cutting the position below the 3-day line and buying again, I am holding it again.

1. Why there were many trades

I invested because of FOMO, but the volatility of the domestic ETFs was beyond imagination and the premium/discount also widened more than expected. After several trades, I am currently holding the STAR 50 index again.

Interpretation: Because it fell below the 3-day line, I cut the position and bought again, and I am now waiting. In the end, the total account value has returned to the amount before the purchase.

China STAR 50 ETF trading history screen

2. Premium/discount gaps and arbitrage

Official fact: The original post says there are three domestic ETFs tracking the STAR 50 index, and the premium/discount differences among them were large enough to make arbitrage possible.

The reason for the large number of trades was this gap in premium/discount levels. I made fairly good profits, but the account has now reverted. Today, I bought in expectation of Chinese government stimulus and took a fairly large loss.

Trading decision flowBased on the original review
FOMOInitial entry
Premium/discountGap among three ETFs
3-day lineCut when breached
Policy hopesWatch stimulus response
It may not be suitable for pension investing, but I still think Chinese equities are tradable.

3. Current balance and next condition

The current holding balance is tolerable, even after accounting for some volatility. I bought on 10/8 and am holding, but if there is no rebound early next week, I may cut the position. If there is a rebound, I plan to keep holding for a while.

China STAR 50 current holding balance screen

Interpretation: Because the index had been neglected for such a long time before rebounding, I think the upside could be fairly large if the rebound continues. However, because Chinese authorities were less aggressive on stock-market stimulus than expected, I may sell if it falls again next Monday.

4. For reference

Please refer to this for work.

Sources

Naver original