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The Deliberate Trader

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  • 3 Options Strategies For A Volatile Market [View article]
    Yes, long strangle....sorry.

    The BAC example is a good one. If it is a situation where you expect option IV to remain high or even increase higher, you can try to do the option purchase. You just have to watch it more closely than a situation where you are buying the puts and calls at a low level of volatility to begin with. Option implied volatility has a way of leaking silently like the air in a punctured tire.

    Enjoy the weekend.
    Oct 7 10:48 AM | Likes Like |Link to Comment
  • 3 Options Strategies For A Volatile Market [View article]
    Good article, but we either disagree about the use of a “long straddle” or it requires additional clarifying explanation.

    Generally, we want to SELL volatility. We do not want to be doing a trade involving the purchase of multiple options (long straddle) when option implied volatility is already high..........UNLESS we believe that volatility may go even higher, or is otherwise sustainable.

    We understand your point about the proclivity of price to move violently during times of high volatility; however, we believe that the long straddle is most effectively employed BEFORE a spike in volatility, not during or after. Of course, the trick is to accurately anticipate the spike. Typically (and as you have mentioned), we try to do this just before an earnings release, or before the release of some other major news announcement.

    We also like an additional strategy....writing cash secured puts below support during periods of high volatility. This is more a method of accumulating quality stock at low price than it is a method for making money on options. However, we find that if we don't actually acquire the stock at our price....we merely make money. We either win......or we win. Not too shabby.

    Thanks for the article.
    Oct 7 06:54 AM | 1 Like Like |Link to Comment
  • Surprisingly, Optimism Is Still Out There [View article]
    We've been selling puts on and off for two months and buying selected stocks. Traders always wait too long to buy puts and when the VIX is over 40 we are there to accommodate the buyers.

    Sell volatility.
    Oct 5 06:42 AM | 2 Likes Like |Link to Comment
  • Potash: World Class Growth At A Bargain Basement Price [View article]
    We really like selling the December 42.50 puts for 4.25 or better. If assigned, you own this great company at 38.25. That's well below Fibonacci support and below the gap at 38.44. You can also do this with half a position and buy the stock with the other half. If you do it that way, you average entry price if the puts expire is about 38.10. If the puts are assigned your average entry price is 40.30...a bargain either way.
    Oct 4 10:56 PM | 7 Likes Like |Link to Comment
  • Revisiting March Silver Exit Decision, And Generating Yield With Puts On Gold [View article]
    We'd be very happy to own the metal in the $17 - $20 range....however, it will likely take six months to a year to get there. That's just a guess.

    Meanwhile, you won't find much higher option implied volatility than in AGQ. If you have a gambling streak, we think that selling AGQ October 60 puts for 1.25 is a reasonably safe bet.........for a gambler.

    You're in the market less than 30 days when the option time clock is ticking fastest. Therefore, unless AGQ goes quickly to 60.00, the time value will bleed out of these like a stuck pig.........and you'll end up with a 25% annualized return..............or AGQ. Want more risk and more premium? Sell a higher strike price.

    Good hunting.

    ....oh, just to add to the excitement, we understand they are splitting AGQ shares mid-October.
    Oct 1 08:43 AM | Likes Like |Link to Comment
  • Germany, The U.S. And The Fall Melt-Up Of 2011 [View article]
    Good article. Long EWG at 18.05 since September 14th and short EWG October 18 puts at 1.30.

    After being long TLT from February, this may best the second best trade this year for both guts and glory.

    We have run relative strength point and figure charts for DIA against EWG, EWI and EWP; and then ran EWG against EWI and EWP. We also ran relative strength screens between those 3 foreign ETF's and both SPY and IYY.

    Presently, the DOW and S&P are out performing, but it is beginning to shift the other way in favor of the ETF's. The winner among the three (for the meantime) by a nose is........EWP.

    We have orders in to buy both EWP and EWI as well as sell their puts....very similar to the EWG trade.

    Thanks for the article.
    Sep 30 03:00 PM | Likes Like |Link to Comment
  • China's Debt Problems Will Amplify Global Woes [View article]
    Excellent insight.

    Thanks for this article.
    Sep 28 02:58 PM | 1 Like Like |Link to Comment
  • Time To Buy Schlumberger And Halliburton [View article]
    Good article, thanks.

    On a relative strength basis, the SLB chart is somewhat stronger than the HAL chart. Plus, we like the solid support band on the SLB chart at 58.50. However, HAL's put options are presently a "better value” to sell than those for SLB...perhaps because it is riskier for the reasons you mention.

    A reasonable risk trade here, taking advantage of high option IV would be to sell SLB October 60 puts for 2.55 or better. If assigned, you'll own the stock at excellent bargain.

    If the stock isn't assigned, well, you'll have to settle for 50% annualized return on your invested capital.....tough break. Then you can do it all over again next month.
    Sep 28 12:27 PM | Likes Like |Link to Comment
  • The Hyperinflation Meme Becomes A Nightmare [View article]
    Somebody made a mistake.....wouldn't be the first time.

    "Between 1999 and 2002, Mr Brown ordered the sale of almost 400 tons of the gold reserves when the price was at a 20-year low. Since then, the price has more than quadrupled, meaning the decision cost taxpayers an estimated £7 billion........"
    Sep 26 12:30 PM | 2 Likes Like |Link to Comment
  • The Hyperinflation Meme Becomes A Nightmare [View article]
    We agree. The fallout could be worse than fall 2008 for many retail investors who were looking for a "safe" investment.

    Sadly, the silver "cheerleaders" are going to tell you that the up trend line in silver has not been broken, that the world's problems have not gone away in a week, that "helicopter Ben" is still at the throttle, that the price manipulators are conspiring again, and blah-blah-blah.

    Meanwhile, we look for a stronger dollar over the next year, perhaps two; and we look for silver at $17 - $20.
    Sep 26 10:44 AM | 5 Likes Like |Link to Comment
  • Are Covered Call Options With mREITs Still Profitable? [View article]
    If CIM is a "great buy under $3/share" then we'd rather SELL the December 3.00 puts for .30.

    Implied volatility (and hence, the premium) for the puts is presently higher than for the calls. Therefore, your return is higher due to the inflated premium and the earlier December option expiration.

    Importantly, you don't risk having your stock called away......which, in light of your very favorable rationale for owning the stock is a distinct probability with a March call option expiration, if it goes up from here.

    While more capital is tied up to cover the put sales, if the stock is assigned to you, you'll effectively own it at 2.70.....where you say (and we agree) it is a "great buy".

    We've already sold the October puts for .30 (now worth .20).

    If CIM trades sideways for a few weeks, we'll get a chance to sell the December puts, although by then we're probably looking at January.

    Best wishes with your trade.
    Sep 25 01:51 PM | 2 Likes Like |Link to Comment
  • Long On Reinsurance Group Of America [View article]
    Thanks for the article. We really like the idea, but at the moment, we'd prefer a more defensive way to do it.

    Strong chart support at 45.00 but if it slips below it, there is another strong support band between 39.00 (a gap) and 43.00 (a 50% Fibonacci retracement).

    Option implied volatility for this stock is presently elevated, so we'd like to sell RGA January 45 puts for 4.00 or January 40 puts for 2.25.......and wait.

    If the stock is assigned in either case, the effective entry point is 41.00 for the 45's and 37.75 for the 40's. So take your pick, depending upon your risk appetite.

    If the stock consolidates and holds here, you can then buy the stock anytime between now and mid-January and pocket the premium. The annualized return on the January 45's would be over 25%. The annualized return on the 40's would be over 16%.

    Great idea. Thanks again.
    Sep 25 01:17 PM | 1 Like Like |Link to Comment
  • Revisiting March Silver Exit Decision, And Generating Yield With Puts On Gold [View article]
    "The drop of PM values is going to be brief."

    Is that a guarantee or a prayer?
    Sep 24 11:04 PM | 4 Likes Like |Link to Comment
  • Revisiting March Silver Exit Decision, And Generating Yield With Puts On Gold [View article]
    Great article. It's nice to see objectivity and a practical (not to mention profitable) way to trade an asset that is largely driven by emotion.

    We think that this is the first stop for gold; and we see GLD ranging down to 1250.00, but probably not within two months. So your puts are like money in the bank. Great idea.

    Thanks for doing this article.
    Sep 24 11:52 AM | 3 Likes Like |Link to Comment
  • Gold Gets Hammered [View article]
    Moon's "explanation" is irrelevant and even erroneous within the context of how best to trade gold........which is what this article is about.

    What's always curious to us is that an author like this can go to the trouble to put in the work to develop and present a workable thesis (in this case, for taking much of the emotion out of trading gold); and yet the comments are only focused on issues driven by emotion that have nothing to do with how to make a buck.......which is not a reason for holding physical gold in any event.

    So we say "thanks" to the author for writing such an informative piece, even though most of the gold bugs will come in here and grumble about how their "valuable" commodity is being diminished by the corrupt world banking conspiracy.
    Sep 24 09:44 AM | 4 Likes Like |Link to Comment