Seeking Alpha

Dr. Terry Allen

 
View as an RSS Feed
View Dr. Terry Allen's Comments BY TICKER:
Latest  |  Highest rated
  • A Timely Test Of The Ultimate Hedge Against A Market Crash [View article]
    I wouldn't sell puts on VXX because it historically tanks over time. Jan-14 puts would be especially bad to sell. The portfolio I suggested is far better because it makes a small gain over a large range of possible stock prices (including a drop of over 10%) yet offers huge gains if the market does seriously tank.
    Nov 10, 2012. 04:18 PM | Likes Like |Link to Comment
  • The Ultimate Protection Hedge Against A Market Crash? [View article]
    Yes, you buy them outright. Covered calls are like covered stock - there is some other offsetting value. When you own stock and sell a call against it, it is called covered stock because the stock (a long position) is covered by the short call (a short position).

    An uncovered call is just the same as just owning a call - there is no offsetting other call like there would be in a calendar, diagonal, or vertical spread (all of which have one long option and one short one).

    I understand that this whole thing is confusing. Buying stock is like playing checkers and investing in options is like playing chess - you can study it for a lifetime as I have done and still have more to learn.
    Nov 10, 2012. 04:13 PM | Likes Like |Link to Comment
  • The Ultimate Protection Hedge Against A Market Crash? [View article]
    I have not calculated the interesting number that you ask about. The graph shows that if VXX doubles like it did last summer when the European crisis hit (a crash really didn't come but fear escalated), the portfolio would have more than doubled in value. So it would have made about $4500. If you had a $45,000 and the market fell 10%, that gain would offset your loss. In this crude comparison, the options portfolio would cover 10 times as much as money as the stock portfolio. Not bad.
    Nov 10, 2012. 04:06 PM | Likes Like |Link to Comment
  • A Timely Test Of The Ultimate Hedge Against A Market Crash [View article]
    I agree that bonds are due to drop but I don't think I'm smart enough to guess when it will happen so I have stayed away from trying. I will check out TBT however.
    Nov 9, 2012. 11:28 AM | Likes Like |Link to Comment
  • A Timely Test Of The Ultimate Hedge Against A Market Crash [View article]
    TZA is a little too low in price to get decent options spreads off. Since the options are more important to me than the underlying, VXX works better for me.
    Nov 8, 2012. 03:34 PM | Likes Like |Link to Comment
  • A Timely Test Of The Ultimate Hedge Against A Market Crash [View article]
    In the linked article I give all the exact positions. I have since sold 4 Nov-12 45 calls against the uncovered Jan-13 45 calls just to pick up a little premium. I think it is unlikely that VXX will get over 45 by next Friday.
    Nov 8, 2012. 03:30 PM | Likes Like |Link to Comment
  • A Timely Test Of The Ultimate Hedge Against A Market Crash [View article]
    I have only a single put butterfly, long 141s and 135s and short 2 138s. I never let assignments take place. Tomorrow for the weeklys I will sell the 141 puts and buy back 2 138 puts (each spread) and not bother with selling the 135 puts because they will be trading at less than the commission would cost.
    Nov 8, 2012. 10:23 AM | Likes Like |Link to Comment
  • The Ultimate Protection Hedge Against A Market Crash? [View article]
    I have been a college professor most of my life and in the academic world the Dr. is used. By the way, I don't have a Ph.D. - it is a Doctorate in Business Administration.
    Nov 5, 2012. 04:53 PM | Likes Like |Link to Comment
  • The Ultimate Protection Hedge Against A Market Crash? [View article]
    I didn't hide anything - all the spreads are there in the article. I understand that it looks horribly complicated but it was the best way I could figure out how to get coverage in both directions.
    Nov 5, 2012. 04:52 PM | Likes Like |Link to Comment
  • The Ultimate Protection Hedge Against A Market Crash? [View article]
    I agree with you perfectly.
    Nov 4, 2012. 09:37 PM | Likes Like |Link to Comment
  • The Ultimate Protection Hedge Against A Market Crash? [View article]
    A couple of things. First, I hope you won't hold my PhD against me. I'm embarrassed enough having it myself.

    Second, while my little strategy is convoluted, it does two things you deny. First, it provides insurance that doesn't cost anything (like your put purchase would cost). Second, it isn't a perfect hedge. If VXX falls more than 14% it starts losing money. I can live with that possibility.

    I am not a contrarian or otherwise. I accept the fact that I have no idea which way the market is headed. So I put some of my money in a hedge that will pay off big time just in case the market does tank. It helps me sleep better at night.
    Nov 4, 2012. 09:36 PM | 2 Likes Like |Link to Comment
  • The Ultimate Protection Hedge Against A Market Crash? [View article]
    I totally agree with you, and have most of my money is on a big AAPL bounce. Still, it doesn't hurt to have some protection in case there is a general market meltdown, especially when the protection will probably make a little at the same time.
    Nov 4, 2012. 09:31 PM | Likes Like |Link to Comment
  • The Ultimate Protection Hedge Against A Market Crash? [View article]
    I would be interested to see what strikes and time periods you might use, and also whether the positions would make a gain if VXX fell by as much as 14% or moved higher by any amount and also provided substantial gains if VXX moved substantially higher. My experience with put diagonals is that the upside is severely limited.
    Nov 4, 2012. 11:59 AM | 1 Like Like |Link to Comment
  • An Options Play For The Upcoming Apple Earnings Announcement [View article]
    I'm sorry it doesn't work for you. It works on my computer and most others.
    Oct 25, 2012. 08:14 AM | Likes Like |Link to Comment
  • An Options Play For The Upcoming Apple Earnings Announcement [View article]
    Yes.
    Oct 24, 2012. 04:22 PM | Likes Like |Link to Comment
COMMENTS STATS
218 Comments
104 Likes