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  • You Just Got $1 Million. Now What? [View article]
    When you take on a client in these situations- which can easily happen with professional athletes- let them "blow" a small amount, otherwise most will fall victim to much larger temptations.
    You also need to foster an attitude of 'giving back' via charitable tools. This is part of a larger strategy to "manage the brand." Even Livermore had a trust that prevented him from exhausting his massive winnings.
    And, as a money manager, I think you start with somewhat conservative strategies- of course, the state of the market at the time will dictate much in this regard. Also, you need more interaction than having the accountant send out quarterly reports. But whatever the starting point, the "game" is to preserve and grow.
    Finally, I can't say enough about budgeting. A person with uncontrolled impulses can piss away millions, destroy relationships and ruin their lives. It happens far too often.
    Nov 18, 2015. 11:30 AM | 9 Likes Like |Link to Comment
  • Terrific Tuesday - G20 Fixes Everything [View article]
    Machines don't live lives of quiet desperation. They don't fall upon the thorns of life and bleed. It's not that 'all news is good news'- a machine can make millions of hedging decisions before your organic body chemistry can impart a rudimentary 'feeling.' And by the time you can contemplate and ruminate, and ponder how your emotions register some sort of urge or motivation to 'do something'-well, the machines are already light years ahead of you. In short, the 'market' of the 20th century exists only as a quaint memory. (Just look at the price action of WTI the last 48hrs.).
    Nov 17, 2015. 11:57 AM | 4 Likes Like |Link to Comment
  • Housing market index comes in below expectations [View news story]
    So it's only logical that ITB would be up-I just noticed that ITB has, once again, made it to the 27.50 regurgitation mark.
    I went back and examined some old charts-if ITB had been around when Newton set forth his laws of the universe, I'm sure the consistent orbit of homebuilder stocks would have garnered his attention.
    Of course, after 9-11 the second home market exploded. Should one anticipate a repeat? Perhaps-but to a much lesser extent. I plan to short ITB if/when it arrives at 28. I think it better than even money to hit 28, so I'll lay in the first round then.
    As I've indicated numerous times, this is the magical gift horse.
    Nov 17, 2015. 11:31 AM | Likes Like |Link to Comment
  • How This Options Trader Shorts Netflix [View article]
    The way to think about it is along these lines: if you've caught the initial downdraft of the stock fairly quickly, say with a LEAP put, what are the odds that the stock continues to fall? If the stock is now simply churning, your long put mimics the stock, and will do so for quite some time. In essence, the money has been made. What is the optimal use of the current structure? Selling a weekly or monthly OTM put may be the best tactic- and repeating the strategy until you approach expiration.
    I currently do this with DE, for example, as I bought LEAP 87 puts when the stock was above 90. Of course, 'only the rocks live forever' so expect change at some point.
    Nov 16, 2015. 02:06 PM | Likes Like |Link to Comment
  • How This Options Trader Shorts Netflix [View article]
    One of the best articles, as well as comments, I've ever read on SA. I respect specific courses of action, along with rationale.
    I like the idea of being prepared to double/ triple down on positions. Most would consider such a move as throwing good money after bad, but if done pursuant to a plan, the odds are actually better.
    One quick thing to consider is where you find your put position deep ITM with months to go, I.e., your put delta is 1, you might look at selling a shorter-term OTM put against the winning long put. Why? Because the now OTM put is priced much higher- due to gamma, etc- and the odds of further accelerative declines in the underlying have likely lessened substantially. So, the value of the long put is stable relative to the decay associated with the short, OTM put.
    Nov 12, 2015. 09:52 PM | 1 Like Like |Link to Comment
  • How Leverage Affects Portfolio Optimization [View article]
    Way to go!
    Nov 12, 2015. 09:22 PM | Likes Like |Link to Comment
  • Kohl's beats by $0.06, beats on revenue [View news story]
    My first order of business this morning was to sell KSS calls.
    Nov 12, 2015. 11:50 AM | Likes Like |Link to Comment
  • How Leverage Affects Portfolio Optimization [View article]
    To add a bit more to your thoughts, the 'surplus' cash you would allocate to a short-term bond fund might be partly used to hedge the UPRO ETF. And part of that strategy, i.e. hedging might be used to create income via selling calls. Note that one wouldn't have to sell calls against UPRO, but rather could sell calls against SPY, where bid-ask is negligible. The calls against SPY aren't economically 'naked' but would be treated thusly as 'margin wizards' aren't that sophisticated. The solution would be to add an out-of-the-money long call to create a bear call spread.
    If the bear call spread runs against you, then UPRO is running faster in your favor. There is no risk with a UPRO assignment, and the SPY spread can be rolled out and up. Of course, UPRO can go up AND the short option can still expire worthless-creating a nice return.
    But be sure to donate some $ to the Humane Society. It remains a trifle paradoxical that in a land of 5% unemployment, an increasing number of our 'best friends' lack food and a loving home.
    Nov 12, 2015. 11:45 AM | Likes Like |Link to Comment
  • M&A talk lifts railroads [View news story]
    NSC and CP have a good working relationship.
    History points inexorably to a final chapter. Perhaps a fitting end to the "Manifest Destiny" facilitated by the iron horse.
    There will be two major rails in the final paragraph of an amazing saga. Who at Promontory Point could have ever envisioned the end of the story?
    Nov 9, 2015. 08:59 PM | 1 Like Like |Link to Comment
  • A Disingenuous Jobs Report? [View article]
    The over 55 is easy: just go to any golf course. Most of the staff is retired, but working part-time moving golf carts around, etc. Also, they need the extra cash to handle groceries and gas for the 25 yr old occupying the basement.
    The birth-death model is an impish ruse designed to both confound and placate all the half-wits.
    Incidentally, I'm sorry if I offended any half-wits- but then, if you're offended, are you not 'ipso facto' a few bricks shy of a load?
    But the good news is that the unemployment rate is down to 5%!
    Yes, well let's cue up Peter, Paul and Mary for "Puff the Magic Dragon"
    Nov 9, 2015. 02:51 PM | 7 Likes Like |Link to Comment
  • This Doesn't Make Any Sense...Is Ford Motor Dead Money? [View article]
    Yes-have to be patient with covered calls. The temptation is to sell ITM to generate more premium. But, that creates exposure to the glorious day when the stock spikes for no discernible reason. What you might do is set an option price objective for an initial round of selling, and then average that number. So, if the ATM strike is 1.00 for 30 days, you might place an order to sell x% at 1.10. You might then look at selling a 60 day option one stroke otm that nets the same or greater premium. The combined probability can now be assessed. If 10% of your outstanding shares are in Strategy A (selling 30 day at 1.10), you might now think about allocating 20% to Strategy B (selling the now greater premium derived from an otm option). If Strategy A might result in assignment, I can now roll into the existing Strategy B formation. Mean regression should add to the expected value here-but we can continue the game further, recognizing that we still have 70% of our shares to accrue gains or continue to average in.
    Just something to ponder on this November day in the year 2015.
    Nov 5, 2015. 03:30 PM | Likes Like |Link to Comment
  • This Doesn't Make Any Sense...Is Ford Motor Dead Money? [View article]
    F is a perfect stock to utilize option strategies that easily yield double digit returns. To wit, holding LEAP calls while selling 3:1 shorter term calls. The fact that the stock is stuck allows a much higher payoff for collecting option premium.
    If you own several thousand shares, there are many nifty plays that can generate substantial returns.
    Oct 31, 2015. 11:43 AM | 1 Like Like |Link to Comment
  • Being Bearish Is Not An Investment Strategy [View article]
    My approach is to maximize profit. Labels such as bull, bear, unicorn, trade, invest, gamble, etc have no quantitative rationality.
    In this regard, I seek optimal structures that conform to set probabilities over a given time period. Likewise, terms that incorporate "short-term, "long-term" etc are vague abstractions. Try this on a friend: pull out a piece of paper and ask him to depict a timeline (I label my points 'here' and 'eternity')- now ask him to mark the point where the 'short-run' transforms to the 'long-run'- you'll get arbitrary responses- even if you rephrase the question to relate time to average life-span, you'll likely note differing opinions.
    After a little thought, people generally conclude that the 'long-run' is but a series of 'short-runs'- see, for instance, your old micro-economics text which graphs numerous short-run curves, on a long run average cost curve.
    Oct 29, 2015. 03:01 PM | Likes Like |Link to Comment
  • Homebuilders lower after lame September sales data [View news story]
    My comments are generally for seasoned traders. It's safer to begin by buying a put option-that way you can't fall off a cliff.
    But you need to study options first.
    The other risk limiting strategy is to utilize what's called a "bear call spread"-selling an option with more premium than the long option used to 'cap' your exposure. Options are superior to ETFs-but again, we have to go to elementary school before we go to high school.
    Generally, when I short homebuilders, I use call spreads. I've been gaming homebuilders for decades now-in good times and bad. The intrinsic thing about residential building is that it's cyclical-more so than any industry I can think of-and like the tide, there is always a discernible ebb and flow. In essence, consistent and redundant constraints are the rule.
    Now, I've long been asked about just buying the dips. In theory, that works as well. BUT, if we ACCOUNT FOR PRESENT VALUE, an optimal move dictates we understand that it's easier to push a rock off a hill than to slowly roll it up the hill. And, since 70% of all options expire worthless, we also incorporate those odds when selling, not buying, options.
    But, again, if you have limited experience with shorting stocks, don't put yourself in a situation that can bite you. Have you ever watched someone milk a venomous snake?
    So, study, learn, observe-and paper trade. Then, and only then, do you start with a very small amount of capital.
    Oct 26, 2015. 06:01 PM | 1 Like Like |Link to Comment
  • Homebuilders lower after lame September sales data [View news story]
    If you shorted ITB like I suggested (over and over and over again)- you could buy a new house.
    Oct 26, 2015. 11:39 AM | Likes Like |Link to Comment