My initial attraction to investing was not to create a balanced, conservative portfolio, but rather excitement of day trading. I wanted to amass large sums of money without getting up from my chair, and who doesn't? It is hard to admit failure, but a few months and losses later, I realized the error of my ways. Like most, I was simply not wired to day trade. One who excels at day trading not only possess a great analytical ability, but also a superior understanding of physcology and reaction to certain high pressure situations. Realizing my failure, I began focusing solely on long term investing and using options to compensate for my reluctance to "time the market".

One of the more conservative options strategies I utilize has its roots in the efficient market hypothesis. This hypothesis states that all available information is currently priced into the stocks. According to

As an avid golfer and gear-head I can say from experience that Callaway (ELY) is not the same company it was in the past. In many ways, Callaway became complacent with its position at the top. For much of the last decade, Callaway manufactured the best selling woods, irons, and putters in the game of golf. Callaway consistently earned a profit and had millions of loyal customers. Recently Callaway has stopped marketing aggressively and reduced spending on sponsorship of PGA & LPGA tour players. Many customers no longer find Callaway's equipment exciting or cutting edge. Today Callaway's products lack the cutting edge technology and marketing appeal of its major competitor Taylormade (Adidas AG ADS). In this article I will examine both Callaway's products and financials to prove my investment thesis.

Products:

Callaway sprung on to the scene in a major way with the

Over the last two decades, inflation has been largely a non-issue. Sure, there were times when inflation crept up a little over 5%, but even that is a far cry from 12% we saw in the late '70s. You may ask, why has inflation been tame as of late? I can tell you one thing, it is certainly not hawkish sentiment from the Fed. Over the last three years alone the Fed's balance sheet has more than tripled to over $2.8 trillion! Not to mention that the benchmark interest rate has been below 1% for four years and is currently at 0.25%.

So why have prices of goods not risen? Recently the answer has been quite obvious: We have been in and recovering from one of the greatest recessions in history. As you learned in Econ 101, a recession can cause deflation due to less demand for

The VIX (CBOE Volatility Index) is a measure of the implied volatility in SP 500 options contracts, and investors are now able to trade this index by buying options on this index. One can only buy options on this index because there is no underlying security to purchase, as the VIX is just an index based on calculations. Keep in mind that these options are cash settled, and are European style in that you are not able to exercise them until the day of expiry.

Since the VIX options are European style, pricing of these options is not based on the Black-Scholes method of pricing, but rather based on what will likely happen. For example if the VIX is at what investors believe to be an abnormally high level, the price of calls (bullish bets) will be quite cheap, while the price of puts (bearish bets) will be expensive. This

Back in October, few saw a rally coming; the consensus view on Wall Street was more along the lines of the world as we know it was ending and a prolonged double dip recession was on the horizon. The SP500 at 1400 seemed to be like wishful thinking rather than even a remote possibility. So as the rally began, many investors sat on the sidelines, remaining in cash as the SP 500 (SPY) rose over 27% from the lows seen on October 4th. Now 5 months later, Investors are much more confident in the market as some stability has been achieved in Europe and consumer sentiment is showing signs of improvement domestically. The question remains, what should investors that missed the rally do? In this article, I have outlined stocks that missed the rally or are at historically low prices, but I feel that they are still

Most investors are mystified how top hedge funds can consistently beat the market year after year. Granted, hedge funds have access to some of the greatest minds in the world, the most advanced equipment money can buy, and greatly reduced transaction costs. Regardless of these advantages they do in fact employ genuine alpha creating strategies many individual investors can also follow.

One of these strategies is the analysis of catalysts when purchasing a stock. When a retail investor purchases a stock many times they will buy it because they feel it is a good value which is not indicated by its price, in other words it is trading below its intrinsic value. The fact much of the information available about the stock has been priced into the stock. For example, I can create a portfolio stocks with P/E ratios less than 7 that I feel are trading below their intrinsic

Currently interest rates, government bond yields, and borrowing rates are at all-time lows. This provides a puzzling choice for publicly traded corporations. Do they reward their investors with a dividend which could be a much needed stream of income, or keep the profits as cash reserves and reinvest it in the business?

The case for paying dividends:

In a low interest period, investors seeking a steady income flow have very limited investment options. Currently two-year government bonds yield a measly 0.21% and a two-year bank CD will yield a slightly better 1.15%. While corporate bonds may be a viable solution for long term investors willing to hold the bond to its maturity, they are not ideal for shorter term investors because of their long maturities. For example, a 5-year bond issued by General Electric (GE) is currently yielding 2.24%. If one invests in the bond for two years

In my previous article Implementing Dividend Arbitrage: Verizon Wireless I discussed a strategy known as dividend arbitrage. This strategy consists of selling options on high yield stocks to both reduce risk and increase yield. Dividend arbitrage investors do not concern themselves with making gains in appreciation of stock price, but rather gains are achieved by collecting regular dividend payments.

Problems were inherent in implementing dividend arbitrage on Verizon Wireless (VZ), as Verizon is a low-beta stock, which means that the premium on the options that were to be sold was minimal which increased the risk that the option would be exercised before the ex-dividend date. Additionally, the open interests for the deep in the money options was quite minimal, making the trade hard to execute and illiquid.

Conceptually, dividend arbitrage can work on any stock with an above average yield, but in practice the ideal stock for

In 2011, two Quantitative Easing packages, a Federal Funds rate of 0%, and great uncertainty on the state of the global economy all came together to propel the 10-year Treasury yield to record lows. U.S government bonds were one of the few investments with big winners in 2011, with investors snapping up every maturity and further depressing the short end of the yield curve.

There are some in the investment community who believe that the United States will enter into a period of sustained low interest rates, similar to Japan. I personally do not find this to be logical, as the savings rates in the US are far lower than in Japan. I think in the next 3 to 5 years we should see the 10-year Treasury north of 4% and occasionally touching 5%. Inflation will also be much higher, as it will have been over 5 years of easy

It is no surprise that American automakers are back with a vengeance. After almost 30 years of losing market share to their Japanese, German, and Korean rivals they are finally beginning to gain some of it back. American manufacturers -- in particular Ford Motor Company (F) -- are coming out with fresh, innovative designs with increased technology and build quality at many times more competitive prices than rivals Toyota Motor Corporation (TM) or Honda Motor Co. (HMC).

Not only are Japanese manufacturers suffering from supply chain disruption due to the earthquake, but their products are facing greater resistance from American consumers. A prime example of this is the new Honda Civic. The Civic, normally the bread and butter of the small car segment, is facing stagnant sales, forcing Honda to release a new model for 2013. Consumers complained of low-quality interiors, bland styling, and the car's "light" feeling

Over the last 10 years gold has been on a seemingly unstoppable rally. The effects are everywhere, in cities across the country strip malls have been invaded by a swarm of “we buy gold” stores, the infamous Tupperware parties of suburbia have been replaced by gold buying parities, and a whole new crop of illiterate investors are buying gold. We have seen a resurgence of the gold bugs who have come out of the wood work to preach metal to all who will listen.

Those who are bullish on gold have a few key phrases they use to justify the rise in price. They include: gold has never been worth zero; in a time of crisis gold will retain value; and all investors should hold gold as a hedge. All of these statements fundamentally lie on one assumption, when panic arrives and the forecasted doomsday happens people will want gold.

My favorite trade for low interest environments like those found today is dividend arbitrage. Dividend arbitrage is the process of buying fundamentally sound high yielding stocks and selling deep in the money covered calls. Selling deep in the money calls effectively doubles the amount of shares you can purchase, meaning 2x the dividends, without the use of leverage, and virtually eliminates your possibility for loss. In this post I will show you how you can implement dividend arbitrage on Verizon Wireless (VZ) common stock.

The first step of dividend arbitrage is identifying a fundamentally sound high yielding company. If the company is not fundamentally sound the company may cut or reduce its dividend and worst of all their stock may lose enough of its value that it will deteriorate your initial capital. I believe Verizon Wireless to be a fundamentally sound company for a variety of reasons. As