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  • Forget About Timing The Market [View article]
    Recent study by DALBAR shows that investors consistently underperform the broad markets by significant margins. For the 30 years ending 12/31/2013 the S&P 500 Index averaged 11.11% a year. A pretty attractive historical return. The average equity fund investor earned a market return of only 3.69%.

    Fidelity Investments conducted a study on their Magellan fund from 1977-1990, during Peter Lynch’s tenure. His average annual return during this period was 29%. This is a remarkable return over the 13 year period. Given all that, you would expect that the investors in his fund made substantial returns over that period. However, what Fidelity Investments found in their study was shocking. The average investor in the fund actually lost money.

    My comment with link to article explaining why this is happening was deleted by SA (so much for freedom of speech), but you can google it "Dalbar steadyoptions".
    May 17, 2015. 11:55 PM | Likes Like |Link to Comment
  • Apple To $140 By End Of May: It's A Mathematical Problem [View article]
    No matter how bullish you are on the stock, predicting short term prices is not very smart. To me, even 6-12 months is short term. Can the price go to $140 by the end of May? Sure. Everything is possible. But predicting that it will do it in 2 weeks is simply foolish.

    Nobody can predict short term direction of stocks or the markers, but there are two types of investors/traders: those who say they can predict the short term price movements, and those who fully admit they cannot do it. First type makes fools of themselves time after time.

    Personally, I belong to the second type. When you are aware of your limitations, you can use them to your favor. Since I know I cannot predict the direction, I play it non-directionally. This is the options trade I made few days ago. It has a pretty wide profit range (123-132) and will make 20-25% in 2-3 weeks if AAPL remains in the range. If it doesn't, we will adjust to stay in the game. The trade is already up 5% in 4 days.

    This is how we structure all our trades. Not predicting anything. Just playing the probabilities.

    btw, 8.7% move in 2 weeks = more than 2SD move. There is less than 2% chance for it to happen. So probabilities are not exactly in your favor I would say. But definitely a nice headline and a smart way to get few extra clicks. Not my favorite way of making money of course.
    May 17, 2015. 03:24 PM | 1 Like Like |Link to Comment
  • This Time It's Different [View article]
    There is a new Niederhoffer today - Karen the super trader.

    Same strategies. And Tom Sosnoff from tastytrade promoting her.
    Apr 30, 2015. 10:49 PM | 2 Likes Like |Link to Comment
  • This Time It's Different [View article]
    Generally speaking, I believe that options tend to overprice the risk, so options sellers should have an edge over time. I like trading iron condors and calendars on indexes like RUT and SPX, with pretty good success. The key is risk management. Those trades have high probability of success, but it's absolutely critical to make sure that one big loss doesn't wipe out months of gains.

    The only time I buy options is straddles before earnings, to take advantage of increasing IV before earnings. You can read about it here -
    Apr 29, 2015. 10:10 PM | 1 Like Like |Link to Comment
  • The Drawbacks Of Apple's Cash Hoard Are Starting To Show [View article]
    In trading, "always" is not necessarily 100%. Last cycle was an exception, not the rule (6% move up).

    Trading is a game of probabilities. If a pattern happens even 51% of the time, what's the point to bet against it? In case of AAPL, the stock went down 7 out of 12 last cycles day after earnings. And when it went up, only twice it went up enough for the calls to make money. That's 83% probability against you.
    Apr 29, 2015. 08:01 PM | Likes Like |Link to Comment
  • This Time It's Different [View article]
    Yes. One of the strategies we implement is buying long term puts and financing them by selling short term puts at certain ratio. Take a look:
    Apr 29, 2015. 04:48 PM | Likes Like |Link to Comment
  • The Drawbacks Of Apple's Cash Hoard Are Starting To Show [View article]
    AAPL has always been a classic case of "buy the rumor sell the news". Yet all Apple fanboys seems surprised each time it happens. And they continue buying calls ahead of earnings, while it has been proved again and again that buying AAPL options before earnings is, on average, a losing proposition. Amazing.
    Apr 29, 2015. 03:54 PM | 3 Likes Like |Link to Comment
  • This Time It's Different [View article]
    One way not to worry about all that stuff is trading options.

    This is what one of our members posted today on our forum:

    "With earnings trading, I don't really watch the index and I don't care. I am only looking at my straddles and calendars. This has been a big change for me when I moved to exclusively trading earnings and nothing else and its really nice to not worry about everything that can go wrong in the market."

    If you still want to hold your long positions, there are many ways to hedge them with options, with minimal or no cost.
    Apr 29, 2015. 03:39 PM | 1 Like Like |Link to Comment
  • This Time It's Different [View article]
    "The four most dangerous words in finance are 'this time is different."

    "Those who fail to learn from history are doomed to repeat it"
    Apr 27, 2015. 11:46 AM | 2 Likes Like |Link to Comment
  • Get Ready For The Dow 30 Rebalance [View article]
    Good article Bill.

    Why they still insist to keep this absurd price weighting is really beyond me.
    Feb 25, 2015. 03:22 PM | Likes Like |Link to Comment
  • Tesla: In Need Of A Little Adult Supervision [View article]
    Right.. so is Mercedes, BWM, Audi, Lexus etc. for thousands of dollars less.

    And if you have $100M, I assume you will buy something like Rolls Royce.
    Feb 15, 2015. 10:50 AM | Likes Like |Link to Comment
  • Tesla: In Need Of A Little Adult Supervision [View article]
    Frankly, I have a hard time to understand who in his right mind would pay 80-100k for a car with less than 10 years history, unproven technology and limited driving range, when you can buy a Mercedes, the best car in the history, for tens of thousands less. It's definitely a nice car, and I would probably buy it if it was maybe 40-50k.
    Feb 15, 2015. 09:15 AM | 2 Likes Like |Link to Comment
  • Tesla: In Need Of A Little Adult Supervision [View article]
    Most people trying to buy the dip, sell the top, make all kinds of evaluations, read balance sheets etc.

    We are making money on TSLA stock each cycle with non-directional options strategies.

    Last 6 cycles trades returns: +28%, +31%, +37%, +26%, +26%, +23%
    Feb 13, 2015. 06:07 PM | Likes Like |Link to Comment
  • SPY-TLT Universal Investment Strategy 20 Year Backtest [View article]
    I backtested the strategy using OTM bull put spreads for SPY and TLT with deltas of ~35 of the short puts. It made money every year except 2008, and the loss in 2008 was less than using SPY only. I think it's a solid strategy. Of course no strategy will make money 100% of the time, but negative correlation between SPY and TLT was very consistent in the last 7 years.
    Jan 18, 2015. 10:26 PM | 2 Likes Like |Link to Comment
  • Steady Options 2014 - Year In Review [View instapost]
    Jan 6, 2015. 10:14 AM | Likes Like |Link to Comment