Fred Ruffy

Friday's Options Recap

Sorry, formatting mistake. It copied some of the bearish/IV info from Thursday's recap.

My apologies.

Have a nice weekend.

Tuesday's Options Recap

Typo. sorry, should be 42.72.

Learning About Options (Part One)

In the past, the "investment education" biz seemed to be dominated by private companies selling expensive courses and seminars. Brokers didn't bother educating investors because, well, they want investors to believe that they really need their broker's expert advice! Many investors still want and need advice.

Larry McMillan's "Options as a Strategic Investment" became sort of a "bible" for options traders, but beyond that, there wasn't a lot of information on options trading available to individual investors.

The internet changed everything. The web sites you mention are examples of free education and many online brokers have also stepped up efforts to educate investors--especially when it comes to trading options. Many offer free live courses and webinars. Some offer coaches and mentors. Others offer the ability to paper trade online with live quotes.

There are a plethora of tools out there, but there is also a lot of misinformation and a large number of dubious companies pitching options education today.

Great idea for a series of articles Bill and great suggestions so far. I look forward to reading the rest.

Tuesday's Options Recap: Risk Perceptions Fall Sharply

Thank you for the comments. Sounds like the KIE calls are working out well for you Rayman.

One clarification to the comment: "something like 80% or more of all block option trades are delta neutral".

Delta neutral implies that a position is perfectly hedged. For example, 100 shares of stock, which have a delta of 1.00, can be hedged with two puts that have negative deltas of -.5. This results in a position delta of 0 or delta neutral.

Over the 15+ years I have been active in the options market, including on an institutional trading desk, I can tell you with certainty that 80 percent of block options trades are not delta neutral. Options trades are initiated by buyers and sellers for a variety of reasons--sometimes to hedge, sometimes to speculate. True, a lot of the activity is tied to shares, but it is often on positive or negative deltas.

We monitor the activity throughout the day and write about the most interesting and noteworthy activity. Whether or not you feel it has predictive value is up to you, but consider a recent example from Friday--a surge in call activity in Schering Plough that occurred before the takeover announcement Monday. This was not a coincidence.

If you want to find out more about the tools we use and how we track the activity, we have a FAQ section on our web site that addresses many of those questions.

Good trading!

Fast Money Recap - HSBC Is Falling off a Cliff (1/12/09)

The bulk of the trading activity in HBC Monday involved a customer purchase of 75,000 March 45 puts that traded along with the purchase of 650,000 shares at $47, 12,500 March 35 puts at $1.35, 12,500 March 40 puts for $2.45, and the Sale of 50,000 March 50 puts for $4.30. All these traded at the same time by same customer. It could be some rolling of positions. The March 45 puts saw the biggest increase in open interest.

Blogs, Profanity and Editorial Integrity

"Do most serious people today find these examples objectionable?"

No. And, most people don't find the female breast objectionable, but when Janet Jackson shows hers to the world at the Super Bowl halftime show, it is objectionable to many people because it breaks the "rules". It spreads through the media like a virus because, while it's only a stunt, "how can she do that... in front of all those innocent children????" It's all about the context.

"Should profanity still be considered over the line in every situation in print?"

If you, the editors, want to make your lives easier, avoid making decisions on "gray areas". A blanket policy to remove all profanity is widely accepted and will upset few readers. Most experienced financial writers understand that using profanity in article submissions is a no-no.

At the same time, if you want to separate SA from mainstream media, and really give writers an opportunity to voice strong ideas and opinions, allow some profanity. Like the show SouthPark, which regularly exposes viewers to words like dildo and dumbass, it will probably upset some readers; but that's the price you sometimes pay when creating viral content. It's supposed to ruffle a few feathers. And, if someone won't visit the web site or read the content because of a few swear words, f&#@ em.

Five Options Ideas: Chesapeake Energy, CIT Group, Commercial Metals, GLD, Campbell Soup

Thanks a lot for the feedback. It helps.

This column (The Top 5) will be updated weekly.

Sentiment Review: Bullishness Rising

Thanks for the feedback. As has been pointed out by others, capital from many sources including a shift out of commodities or bonds. Also, according to the latest data from the Investment Company Instititute, there is more than $3 trillion sitting in money market funds. Private equity funds and mergers are another source.

As for VIX below 20 because of the holidays, maybe. But, it is also interesting to note that it was hitting multi year highs of 37.5 exactly one year ago Friday.