SteadyOptions'  Instablog

I'm pleased to announce that SteadyOptions has launched a new portfolio called "Anchor Trades". This is a stocks/options portfolio tailored for longer term conservative investors. It requires much less monitoring than the current SteadyOptions portfolio while still targeting positive returns in all market conditions on an annual basis.

How does it do that?

Step 1 - Stock selection
Step 2 - Fully hedge
Step 3 - Earn back the cost of the hedge

The strategy went "live" using real money on March 30, 2012 and produced 22.3% return since then, compared to 11.0% return of S&P 500. Here are the backtesting results for 2007-2012:

Strategy return: 109.2%
S&P 500 Return: 14.7%
Difference: 94.6%

You can read more details about the strategy here.

Like the SteadyOptions service, the Anchor Trades service comes with a 10 days trial period. If you decide to continue, the service priced at only $59 per month - this is a limited time introductory offer. SteadyOptions price remains the same for now - $99 per month. You can take both in a bundle at $125 per month (21% discount). There are also 3 and 12 months terms available which allow you to save up to 37% on both services. The prices for both services are expected to increase later this year.

The Anchor portfolio will be managed by Chris Welsh, our long time contributor. Chris is a licensed investment advisor in the State of Texas and is the president of a small investment firm, Lorintine Capital, LP which is a general partner of two separate private funds.

If you are interested to try the service, please go to the Subscription page, create account and choose one of the subscription options.

Thank you,
Kim Klaiman

Please find below the April 2013 update from SteadyOptions.

1. Performance
April was an excellent month for SteadyOptions. We closed 16 trades in April, 13 winners and 3 losers. Total gain in April was $2,032 based on $1,000 allocation per trade. Assuming maximum of 6 trades open (the average number is lower), that's 33.9% non-compounded gain. Most Fund Managers don't make those returns in a full year.

The YTD non-compounded ROI is 58.7% based on the same 6 maximum trades. Check out the Performance page to see the full results. Please note that those results are based on real fills (excluding commissions), not hypothetical performance or "profit potential".

2. Expanding the trades scope

We continue expanding the scope of our trades beyond the earnings trades. We closed three VIX trades for ~30% gain each. We also closed three pre-earnings calendars (AAPL, IBM and NFLX) for double digit gains. Those trades provide nice balance to the portfolio in periods of lower IV. The earnings straddle/strangles performed very well too, including AMZN, CMG, QCOM, SNDK and RVBD. GLD straddle was the only sizable loser - we just held it for too long. We also started trading VXX. We will continue refining those strategies to get better results. This gives members a lot of choice and flexibility. I also encourage members to trade what they feel comfortable with.

3. Limited new membership
The membership is now open to new members for a limited time. I invite you to join us.

Kim

Despite a healthy beat and dividend hike, shares of Apple (AAPL) are slightly down in after hours trading. They have lost now almost half of their value in the last 6 months.

During 2012, I warned several times that Apple has gone up too far too fast. When the stock was going up almost every day for no visible reason, I asked a simple question: what do we know today that we didn't know a month ago?

I won't go into models, forecasts, P/E ratios, DCF analysis etc. I'm sure there will be enough gurus doing just that. Most of this mumbo jumbo stuff is useless anyway - the markets will do what they have to do and will usually laugh at your analysis. Instead, I would like to offer some analysis how you could see the warning signs and what are the lessons from the American darling's crash.

Warning signs

When the stock has risen to $705, you could find plenty of warning signs. For example:

1. Apple's value was more than 4% of the U.S. GDP.
2. Options Implied Volatility jumped from 19% to 41% in a matter of few weeks with no significant news.
3. You could make almost 50% in one week trading a delta neutral butterfly spread. Those returns are possible only with highly speculative stocks.
4. Pretty much everyone was bullish on Apple. If everyone is bullish and already has purchased the stock, who is left to support further stock increase?
5. The market was pricing the good news only and ignoring all the bad news.
6. According to Forbes, some of Apple's insiders dump the stock.
7. The positive sentiment reached extreme levels.

The Forbes article is especially interesting. The columnist argues that:

"Apple cultists may want to take notice that the top brass of Apple clearly does not believe that Apple stock going to $1000 is a sure thing. Blind faith is the hallmark of cultists. "

It also quotes an email from an Apple's cultist:

"You are wasting your time here……. Other analysts on AAPL are all silly? You are smarter? A nuclear physicist, so what? Apple will be above $1000 soon, no matter what you said……. You took profit at $360 and $525, shame on you."

Please note the definitiveness of Apple going to $1000 in the above excerpt.

Some people argued that the stock will get more support from dividend funds that were restricted to own it till now. I personally doubted it then and I doubt it now. The stock often moves up and down more than the entire year's dividend in just a few minutes. Most of the dividend funds don't want to own that kind of volatility.

History lessons

Unfortunately, in most cases of parabolic moves, those who join the party late buy the shares of those informed traders and investors who have already made significant gains and are ready to move to the next target. When they decide to sell part of their remaining portfolio, then the late comers, who are usually weak hands, panic and try to sell at break-even or just below that.

The recent crash also shows the dangers of over-concentrated portfolio. Many people went "all in" with Apple thinking that the stock will just continue going up $100 month after month. Obviously they were proven wrong. No stock deserves more than 20-30% of your portfolio maximum, and AAPL is no different.

Market history is filled with moves that defy logic as the charts "go parabolic." Those moves usually have 3 things in common:

1. They go further than one would expect.
2. They never last.
3. They usually end really, really badly.

What now?

AAPL price action simply proves that there is no such thing "cannot go any lower". Is the stock cheap? Yes, some would say ridiculously cheap. But it was cheap at $500 too. Would I buy it now? The answer is no. I learned the hard way not to invest in stocks without some kind of hedge, no matter how cheap they seem. Personally, I'm implying non-directional options strategies that are designed to make money in every market. Since joining Seeking Alpha four months ago, I shared quite a few Apple trades with my readers. Here are some of them:

• The Bull Credit spread from December 13, 2011 produced a 42% gain in 6 weeks.
• The Iron Condor from January 10, 2012 produced a 28% gain in 2 weeks.
• The Long Butterfly from March 19, 2012 produced a 35% gain in three days.

Since Seeking Alpha discontinued the Options section, I cannot write options articles anymore. However, I still share the trades with my members - my last AAPL trade was a calendar spread just a month ago which made 25% in two weeks (the stock was down 5% during that time).

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.