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Eric Peterson

Eric Peterson
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  • Gold Is Starting To Wake Up [View article]
    I rarely buy options, and most of my investing is selling options (on futures contracts rather than ETFs). Your point about the low volatility is well-taken though: It's not a good time to sell gold calls or puts. Have to wait until the volatility picks up a lot, then sell OTM options or straddles.
    Nov 29, 2012. 08:53 AM | Likes Like |Link to Comment
  • Daily State Of The Markets: Does It Really Have To Be So Complicated? [View article]
    David, like you, I'm evolving into a more big-picture kind of investor, and try to ignore the latest headlines, predictions on the fiscal cliff, Cramer hot stock recommendations, etc.

    Of course catching the big uptrends, or even just grabbing about half of each up-move, and avoiding the big drops, will make you rich. But the key is, how exactly to do that?

    Trend following systems get in too late and out too late, and rarely beat buy-and-hold. What timing system do you use to avoid big drops (and not get stopped out by minor pullbacks during rallies) and to be long for the big up-moves (without getting in during minor rallies in bear markets)?

    A nice story, but much easier said than done.
    Nov 29, 2012. 08:40 AM | 1 Like Like |Link to Comment
  • Gold Is Starting To Wake Up [View article]
    Adam, you should have been stopped out yesterday for a 50% loss, because the Jan 141 calls traded as low as 1.33, and your stop for this trade should have been at 1.38 (half of the 2.77 entry).

    Buying straight options is risky, you have to be right, and be right soon.
    Nov 29, 2012. 03:24 AM | 1 Like Like |Link to Comment
  • SPXL: The Best Way To Short The Market [View article]
    The problem I see with this strategy is that the "leverage decay" is already built into the price of the puts you are buying. That is, if you compare with some regular stock that has all the same parameters that go into option pricing (price, put strike, volatility), I think the put on the regular stock would be cheaper. So you can't capture the leverage decay because you are already paying for it when you buy the put.

    Another negative is that the bid-ask spreads on these extremely thinly-traded deep-in-the-money puts must be horrendous. After entering the position, you need a move in your preferred direction just to make up the bid-ask spread.

    I do however like the fact that buying the puts is much less risky than shorting the 3x long ETF, in case of a huge stock market rally.
    Nov 28, 2012. 07:10 AM | 1 Like Like |Link to Comment
  • China Aids Gold's Continued Rise [View article]
    Just a suggestion: When charting two different ETFs on the same chart, use a line chart not a bar chart!
    Nov 28, 2012. 06:16 AM | Likes Like |Link to Comment
  • Global Stocks Rebound [View article]
    Have you done any studies on the peformance the following week for the oversold and overbought country ETFs? Do oversold funds outperform and overbought funds underperform? Or do the funds follow momentum, and overbought funds continue to outperform the next week?

    That type of study is more important than just the data on which funds are oversold or overbought.

    But I see that Bespoke never writes any comments, so I won't get an answer.
    Nov 28, 2012. 06:08 AM | Likes Like |Link to Comment
  • Rising Won Has South Korea Worried [View article]
    Sorry, but EWJ and EWY are ETFs based on stock market indices, not currency ETFs. Movements in the Korean and Japanese stock markets are as large as, or larger than, the currency movements. So a spread between the two is more of a stock market play than a currency play.
    Nov 28, 2012. 05:31 AM | Likes Like |Link to Comment
  • Euro Wavers With Eyes On Eurogroup Meeting [View article]
    "A break above 1.3000 would open the way to the 1.3170 area".

    Well, the Euro broke slightly above 1.300 in Monday evening's futures trading, and promptly began declining through Wednesday so far. So much for "opening the way to 1.3170".

    Short-term predictions on Seeking Alpha are usually worth what you pay for them. :)
    Nov 28, 2012. 05:24 AM | Likes Like |Link to Comment
  • Japanese Yen: Next Week's Currency Loser [View article]
    "Japanese Yen: Next Week's Currency Loser"

    As of Wednesday morning, the Yen is the only currency I follow that is up this week! The others (Euro, Pound, Swiss Franc, Canadian dollar, and Australian dollar) are down. Should I use your articles as a contrarian indicator?

    Fundamentals, which your article is full of, have nothing to do with daily or weekly movements. Those depend more on sentiment, which at the moment is extremely negative towards the Yen. Hence the bounce this week so far.

    Fundamentals may predict movements for time periods of 6 months or a year, but have nothing to do with daily or weekly movements. Every FX trader should know that.
    Nov 28, 2012. 05:14 AM | Likes Like |Link to Comment
  • S&P 500: Sell In May And Come Back In November [View article]
    But yipwj, if you can get about 95% of the market's gains while being in the market for only 6 months a year, that's much better than buy-and-hold on a risk-adjusted basis. Total return is not everything. Portfolio volatility and draw-downs are also important.
    Nov 28, 2012. 05:05 AM | Likes Like |Link to Comment
  • S&P 500: Sell In May And Come Back In November [View article]
    Interesting article and charts. However as you mention, most of the extreme up-months and down-months are from the 1930's, so not very relevant to today's market. The more recent study, with the same charts, will be interesting.
    Nov 28, 2012. 05:03 AM | Likes Like |Link to Comment
  • Dollar View: November 26 [View article]
    1234gel, the fundamental arguments you present suggest the dollar will lose purchasing power. But UUP measures the dollar versus other currencies (mostly the Euro and Yen), not the purchasing power of the dollar. Do you think those currencies have better fundamentals than the dollar? Seems to me the economies and fiscal policies of Europe and Japan are in worse shape than the USA. Japan also has ZIRP. (Although I am currently long the Yen, mainly due to the extremely negative sentiment towards the Yen, which is overdone, in my opinion).
    Nov 28, 2012. 03:41 AM | Likes Like |Link to Comment
  • Gold Is Starting To Wake Up [View article]
    Thanks for the reply. Very interesting. I see that as volatility increases, the delta decreases, giving you lower profits on the spread.

    On the other hand, the time decay per day is a lot less for the spread than for the plain call. So you can wait longer to be right without losing as much money.

    For example, let's say GLD goes up to 173 and volatility increases 10% (as in your $27.45 profit example), but it takes 4 weeks to do that. I wonder if the call would have more profit than the spread? Considering the increased risk during a drop for the call than for the spread, the call would need considerably more profit in the 173/10%/4-week scenario to compensate the risk.
    Nov 27, 2012. 09:35 AM | Likes Like |Link to Comment
  • Jeremy Grantham Warns Of No Safety Margin From This Collapse [View article]
    "He advises targeting a 30% allocation to resources, with 15% in forestry, 5% in efficiency investments and 10% in "stuff in the ground."

    What are efficiency investments? I read a lot, and never heard that term before.
    Nov 27, 2012. 07:51 AM | 1 Like Like |Link to Comment
  • Will Natural Gas Change Direction And Fall? [View article]
    Sold some March Natural Gas 4.5 calls at $940 on Wednesday because I thought the rally was a little overbought. They are down to $810 so far. I keep the full $940 if Natural Gas is under $4.50 on February 23.

    I like selling options to other people. Risky, but wins in the long run by diversifying among many different commodities, and only selling calls after rally. Need discipline to close it out if it goes in the money, don't wait for a drop back down.
    Nov 27, 2012. 07:45 AM | 1 Like Like |Link to Comment