Eric Peterson

Eric Peterson
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  • Selling Puts And Calls: A Better Recipe  [View article]
    Hi Ken,

    Thanks for the explanation on the apparent discrepancy in the graph. It makes perfect sense, and I agree with it.

    I have been doing considerable research on the exact details of how the CBOE implements the PUT index, and found some very interesting things that answer my question posed below about the varying number of puts sold each month (Yes, it does vary). It may possibly throw a wrench in all the performance evaulation charts for your double strategy (although maybe it will still be a good strategy). I'm hope I'm wrong though!

    I'll post a comment down there instead of here.
    Nov 2, 2012. 05:16 PM | Likes Like |Link to Comment
  • Investing In Silver Is A Shining Move To Make  [View article]
    You should never hold AGQ or any 2x or 3x leveraged ETF for more than a couple weeks. Even if Silver goes back to the exact same price where you entered AGQ, you will have a loss. Silver today is down $1.30. Sorry.
    Nov 2, 2012. 03:33 PM | Likes Like |Link to Comment
  • An Argument For Gold 'Value' Of $1100  [View article]
    Debutant: I don't find articles to be meaningless. Even the articles that I completely disagree with are valuable because they force me to think about things that I might not have thought about by myself. If I disagree with an article, I write a comment. This forces me to clarify my own opinion in my head, and makes me a better investor.
    Nov 2, 2012. 10:42 AM | 1 Like Like |Link to Comment
  • Protect Against Inflation With ETFs  [View article]
    This seems to be an inconsistency in the article: The first half is all about the personal inflation rate, and how it can be very different from the usual official rates such as CPI. Then later you recommend TIPS bonds, which are based on the CPI!
    Nov 2, 2012. 10:18 AM | Likes Like |Link to Comment
  • Protect Against Inflation With ETFs  [View article]
    Very interesting article. I especially like the common sense ideas regarding a "personal inflation rate" (or even a personal deflation rate) which can be completely different from the usual inflation indices.

    I also like the idea of hedging for your own personal inflation rate. But I disagree strongly with your recommendation to do that with ETFs that own companies.

    For example, to hedge your personal food costs, you recommend MOO, which owns companies in the agriculture business. During the 2008-2009 market decline, MOO dropped from over 60 to under 30, a massive decline of almost 60%!! Food prices in the grocery store did not drop at all during that time period! So it is a horrible hedge for food prices, and is influenced mostly by moves in the stock market, not by food prices.

    To hedge food prices you can buy distant (one or two years out) futures contracts on soybeans, corn, wheat, cattle, coffee, etc. and hold them long term. Or find an ETF that buys futures contracts, NOT companies. (I am currently holding distant gasoline and soybean contracts as a personal inflation hedge, bought for prices much lower than the current prices of nearby contracts).
    Nov 2, 2012. 10:13 AM | 1 Like Like |Link to Comment
  • Waiting For The Fiesta! EUR/USD At 1.2940  [View article]
    All the quotes of analysts say EUR/USD is waiting for the election. But none of them say which way it is going to move if Obama wins or Romney wins. This makes me think people don't really know, and are just saying something because they have to say something!

    It's fairly clear from analysis of state-by-state electoral votes that Obama is going to win (only Ohio matters, and he's leading there in polls and betting sites). So I don't see a big move in the markets if Obama wins, because it's expected. Maybe a big move if unexpectedly Romney wins.
    Nov 2, 2012. 09:53 AM | Likes Like |Link to Comment
  • Selling Puts And Calls: A Better Recipe  [View article]
    Regarding buying options when IV is low and selling them when IV is high: Of course. But those are short-term trading tactics.

    Ken's strategy is a long-term buy-and-hold strategy that aims to beat just holding the SP500. It uses options to accomplish that, but it's not really related at all to trading options.
    Nov 2, 2012. 09:42 AM | Likes Like |Link to Comment
  • Charts: 10 Reasons to Expect A Year-End Stock Rally (Part 1)  [View article]
    Good article, thanks. Looking forward to more.
    Nov 1, 2012. 05:43 PM | Likes Like |Link to Comment
  • Gasoline Futures Catch Fire  [View article]
    “Gasoline jumped more than 5 percent as fuel suppliers bought November futures contracts to cover near-term delivery agreements after the biggest Atlantic storm in history closed terminals and pipelines”

    Note that individual investors can't trade November futures because we are subject to delivery at any moment. We must trade December or farther out, which are not nearly as volatile and did not jump 5%.
    Nov 1, 2012. 03:14 PM | 1 Like Like |Link to Comment
  • Selling Puts And Calls: A Better Recipe  [View article]
    Hi again Ken,

    I was reading up on PUT and BXY, and found something that is possibly disturbing:

    BXY: "Each month a new call 2% out-of-the-money is sold."
    PUT: The number of puts sold varies from month to month."

    So for BXY it's always one call, but for PUT the number varies according to the value of the PUT index (if it doubles, the number of puts sold each month would double).

    So I'm a little worried about calculating performance by adding these two indices together, because it does NOT seem to be a strategy of "one put and one call". It's a strategy of "varying number of puts and one call"!

    Unless somehow you know the number of puts being used in the PUT index and can normalize it out on a monthly basis.

    Nov 1, 2012. 03:04 PM | Likes Like |Link to Comment
  • Commodity Volatility Weighted Index Debuts  [View article]
    How often does this index change its weightings? Every 180 days, or more often? If it's constantly re-weighting, then an ETF that follows the index might have high expenses.

    But still, an ETF would be very interesting.
    Nov 1, 2012. 02:18 PM | Likes Like |Link to Comment
  • An Argument For Gold 'Value' Of $1100  [View article]
    I don't see any reason why the value of all gold in existence should be equal to the total currency in circulation! Why shouldn't it be twice as much, or half as much, or one-tenth as much? Why one-to-one? In fact, why should there be any ratio between those two quantities at all?

    I could just as easily say that all silver in existence, or all real estate, or all the stock of all companies should be equal to the total currency in circulation. Why are those any less logical than your argument?
    Nov 1, 2012. 01:41 PM | Likes Like |Link to Comment
  • Corn Time Spread Looks Good For Picking  [View article]
    What charting service do you use? It looks very nice to be able to chart IV30 IV60, etc.
    Nov 1, 2012. 11:16 AM | Likes Like |Link to Comment
  • Selling Puts And Calls: A Better Recipe  [View article]
    The reason I'm asking is because I am often long several E-mini SP500 contracts (I hold these instead of ETFs such as SPY for my basic stock market position, because I'm a futures trader). I'm considering substituting your "double sell strategy" for some of the E-mini contracts, and want to make sure that the proper ratio is one put+call per contract, and not 1.5 or 2 or some other number.

    Nov 1, 2012. 09:25 AM | Likes Like |Link to Comment
  • Selling Puts And Calls: A Better Recipe  [View article]
    Hi Ken,

    Another question, because I really like this strategy!

    When I sell one ATM put and one 2%OTM call, the net delta of the position is something around +0.2. Only if the stock market dives a huge amount during the month, would the delta of the position approach 1.0. So why are you saying it's a substitute for a plain long position, which always has a delta of 1.0? Wouldn't it be logical that selling 2 puts and 2 calls would be more equilavent to the underlying asset most of the time? But of course more risky during a big drop.
    Nov 1, 2012. 09:18 AM | Likes Like |Link to Comment