MILESCFA

WealthTrack: Why Jim Grant Is Bullish on the Recovery

Grant is brilliant, but also typically a bear. Thus I think people are confused by his "bullishness" on the economy. They think a good economy means a good stock market. This is not necessarily true.

Nominal GDP actually grows FASTER during secular Bear markets than it does during secular Bull markets. The reason is that often the secular Bear market experiences inflation, which artificially boosts NOMINAL GDP, but the inflation cause the market (PE) multiple to compress.

I have an instablog (my only one, in fact) that goes into greater detail on this issue, but if Grant is buying gold, it's fairly obvious he's NOT bullish on the stock market.

Opportunity Knocking in the Form of a VIX Spike

Fascinating concept, which makes me wonder... The shape of the yield curve can tell a lot, like the warning given by an inverted yield curve. Have you looked at what insight the term structure ("yield curve") of VIX tells you?

www.cboe.com/micro/vix...

FYI: I could only find VIX futures info on the CBOE website above. I have a hard time finding VIX futures quotes, being neither on my ThinkorSwim nor TradeStation platforms (futures "turned on" on both). Also, ThinkorSwim shows VXX as "hard-to-borrow", so while your concept is fascinating, where do you find it "not difficult to short anymore"?

Mitigating Gamma Losses

Gamma is easily ignored until it bites you on the ass. Once bitten, you begin to take notice. I try to take profits when they've "been made" but all too often I'm greedy for the last "nickle or dime". Gamma is what has finally taught me to "stop picking up the pennies" because too often those "not-so-elusive" black swans bites my gamma on it's ass!

5 Things to Consider Before Buying and Holding

Excellent article.... my one instablog makes the same point using charts and important referance material (CrestmontResearch.com). This is NOT a buy and hold market... but sometimes it is...

seekingalpha.com/user/...
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Readers Pick the Top 20 5-Year Horizon Stocks

That was an interesting popularity contest. However, we're in a secular bear market that is undergoing a strong (counter-trend) cyclical bull. I would not want to be initiating a 5 yr "buy and hold" here and my one instablog shows why :

seekingalpha.com/user/...

I urge you to at least view the first chart in my instablog, which is a 90 yr Dow chart showing percentage ups and downs. Volatility rules in a secular bear
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Think Twice: How People Are Fooled by Irrelevant Data

We've lost our math skills. I've read where 9 out of every 7 people can't do fractions!

:-)

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The Liquid Upside for Energy Recovery's Desalination Technology

I thought ERII sounded like a company with a great tehnology and presumably it is. The only thing is, I've lost a lot of money playing "great ideas". Great ideas don't necessarily make great investments. The reason is they don't occur in isolation. ERII "might be the one" but it might also be "one of many". (How many of you picked "the right" solar stock years ago, AND ONLY the "right stock"?)

The US Navy seemingly is a leader in desalination. Anyone know if ERII sells to them?...

www.chemistrytimes.com...

I also recently read of a new advancement in desalination but since I have already exited ERII I didn't bother to keep the article. Anyone know what's the leading edge?
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Option Players Aren't Buying the Rally

On Oct 02 03:56 PM Surly Trader wrote:
... Check out information about Max Ansbacher....
> ttp://ansbacherusa.com/files...
======================...
Thanks Surly. His strategy sounds a lot like what I do; however, whereas I use to sell naked straddles and strangles, as the market volatility went up dramatically, I began to "insure myself" by moving to iron condors and butterflies AND by pushing out (down) the put strikes I sell. The "cost of insurance" has been noticeable! Any thoughts?
BTW: As for the "excess put premium" research, I wouldn't mind a study to two, or a clue as to a "good google search term" to find these studies.

I don't suppose the Ansbacher index is available on the web anywhere, is it?

Lastly, on an options related message board, a (supposed) hedge-fund programmer hinted at a similar index he used. The index was based on the ratios of OTM strikes and brought to mind "a spider chart" (or like a coiled piece of metal used in a wind-up toy). He measured the "compression" as an indicator whether the market was headed up or down (I think as it "coiled" tighter and tighter, he expected a move, but I'm not sure it was also directional). Interestingly, he said the "ratios" between strikes exhibited Fibonacci ratios. Do you know this indicator (any references?)?

ISM Numbers Point to a V-Shaped Recovery

Steve Hansen disagrees... (see point#4)

seekingalpha.com/artic...

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Option Players Aren't Buying the Rally

Surly, There seem to be a lot of buy-write funds these days, although I'm not sure when they "surged in presence". I've seen studies that say put buying is mostly a professional hedging strategy and that index options have thus had a historical "put skew". Thoughts or references to the impact of proefessionals?

Similarly, the put/call ratio use to be a good contrarian indicator, which might seem to imply that the skew indicator would ALSO be a contrarian indicator. Any thoughts?... or any recent "academic" studies that you can point me to for more info (a net search proved ineffective).

Collapsing Volatility: ETF Opportunity

ChrisMck - if volatility been 25% back on 3/9 then the call would have sold for $45 rather than $75 (an approx. 36% drop in value due to the change in volatility)...

but the caveat is that you typically don't want to be buying options when volatility is really high (unless you expect higher volatility).

I went long out-the-money vertical call spreads using LEAPS around the March low and discovered one thing missing in MOST option articles - liquidity. My LEAP trades were fairly illiquid and I have to "give in" when trying to close them. Several of the ETFs in the list above have options that "trade by appointment", so ALWAYS be aware of option liquidity.

Invest in Lowe's with LEAP Options

Paul, I'm not disputing your calculation, I'm just trying to "put" the comparison on an apples-to-apples basis and this is the calculation all my option books show.

BTW: On my NOV buy-write, in my acct with portfolio marginning, the return is 828% annl.... :-)

and oh! You can buy the convertible funds using margin too!

Invest in Lowe's with LEAP Options

I use to cover Lowes as an institutional retail analyst and it's a solid company with decent fundamentals; however, I don't think we're in a buy-and-hold market (see my one instablog comment).

1) With LEAPS, there is LIMITED LIQUIDITY. The +-60c spread in this $25 put does't seem outlandish, but you're going to sell near the bid and pay near the ask until we get a lot closer to maturity. So this is a "buy and hold" play on LOW.

2) The best method for calculating a return on a put like this is "what's your net investment vs the current price" (ie, you might call it the "time premium capture"). The current price is around $21.10 and your net investment is $18. This works out to a 7.0% annl return, not particularly attractive to me in this knid of market (again, I urge you to see my instablog). You could buy the stock and sell the 1/2012 $20 call and obtain an 8.9% ($21.10/$16.40). This is also evident by the "volatility skew" in the 2012 options, where the at-the-money calls are selling at a greater implied volatility than the puts (40.7% vs 36.2%); note the SPX options are "skewed" toward the puts side due to the fear in the market (approx. 2-3% greater for puts). In option selling, a main concept is "selling high volatility" (the puts are the low volatility).

3) LOW's is one of those stocks that has numerous strikes at very small increments (mostly $1). If you did a NOV $20 buy-write, your return is in excess of 20% AND you would get the 1.7% dividend yield AND you could keep rolling the calls at whatever strike you want. And you could change your mind without the liquidity issue.

If you think we're "out-of-the-woods" in this market, I would first urge you to see my instablog. If you're still attracted to this trade, I would point out that there are convertible bond funds by the "reknowned" convertible bond manager Calamos Funds (CHY, CHI) that YIELD 9-10% (or use ETFconnect.com to search for others). If we're out-of-the-woods, these funds will continue to climb as default risk declines, plus you collect the high dividend.

Equity Market Bulls: History Is Not on Your Side

On Sep 23 09:19 AM Gary Griswold wrote:

"> I beg to differ. History is on the bull side,....."

Gary, if you read the one instablog I have written, you will see that Rosenberg is right and you are wrong. I have a 90+yr schart of the Dow broken down into bull and bear markets. We're in a major secular bear and you have to understand that as Roseberg points out, high PEs do not make for good stock market performances.

I also have a couple of book references there that were probably NOT part of your Series 65... they should be!

Putting the Equity Rally in Perspective

Nominal GDP does not matter. See my Instablog respsonse to this article.