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convoluted

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  • How To Buy And Hold Leveraged ETFs: The Top 7 Outperforming 3x ETFs Over The Past Year [View article]
    Nibbling on that now. Can't loose at this point due to gains on shorting USO. In other words, the short profits are allocated back to UCO.
    Jan 29, 2015. 10:51 AM | Likes Like |Link to Comment
  • Smart-Beta, Small-Cap ETFs Could Outperform [View article]
    Yes- and TNA had a nice day today. Good call on small caps.
    Jan 28, 2015. 10:17 PM | Likes Like |Link to Comment
  • Today's 'Dip' Is A Warning---Get Out Of The Casino! [View article]
    I often refer to the option sellers as the casino owners. But, the mathematical reality is that almost any position can be "rehabbed" using option strategies. If this is true, then why the volatility. The answer is simply that most players lack the requisite skill set.
    In math and physics, the greatest minds to ever live have acquainted us with negative numbers, equal and opposite reactions, and a host of concepts to indicate that nature is not a linear proposition. Yet, it is truly astounding to witness the mortal grief and consternation exhibited so often when nature reminds us accordingly. I had a number of short positions that did quite well today- but I do have larger concerns that relate to this ongoing Great Recalibration. The expansive role of central planning, drug dependence, obesity, decline in education, increase in crime- and our leaders seem all but oblivious to the mutation of social fabric.
    Oh well, tomorrow's another day- do I continue to short USO? Chinese Internet stocks?
    Jan 28, 2015. 09:57 PM | 2 Likes Like |Link to Comment
  • How To Buy And Hold Leveraged ETFs: The Top 7 Outperforming 3x ETFs Over The Past Year [View article]
    Sure kg-as a basic premise, we want to sell an option when it hits the high point of its expiration cycle. (If you're buying an option, you obviously want to buy low and sell higher).
    But, our tarot cards don't always provide that info, so we have to utilize the SWAG method. Suppose that we sell a call against XYZ for 1.00, but some pundit comes on TV and swears that the stock is a steal at current prices. If our call jumps to 2.00, we are down-at least temporarily-100 bucks. Our reaction is to sell another call at 2.00. (Note that our 3x ETF has done it's job). Depending on the time remaining to expiration, we might throw another log on the fire, and perhaps we should, given our inherent cover.
    What happens so many times after a stock jumps, is at least some profit-taking. The knee-jerk response stabilizes. BUT ALL WE WANT IS FOR THE STOCK TO GO DOWN, DO NOTHING, OR EVEN GO UP A SMALL AMOUNT. THIS IS WHERE TIME DECAY WORKS IN OUR FAVOR.
    If you look at the p&l for each option, you'll notice that the first option might have lost money-or made a small amount, whereas the other 2 options did the heavy lifting and fueled the returns.
    If the underlying continued to go higher, you would roll out the options, and keep the 3x cover. The ultimate end result will result in more premium.
    Note: the margin software doesn't 'think' this way, so your account will reflect that you sold 3 naked calls. For large plays, I will add long out-of-the-money calls-just to preserve margin. This will cut into profit margins a bit, but, as always, it's a cost/benefit variable.
    Finally, note that averaging in with options is a different animal than with stocks-due to the decay factor.
    Hope this helps.
    Jan 28, 2015. 10:25 AM | 1 Like Like |Link to Comment
  • Daily State Of The Markets: Stuck In The Middle With You [View article]
    In between jokers and clowns- a time for straddles.
    Jan 28, 2015. 09:46 AM | 1 Like Like |Link to Comment
  • Profiting From Market Randomness [View article]
    Personally, I've long believed that an edge is created by adopting casino-like strategies. If I sell a call on a pre-set spike, my odds of collecting exceed 70%. I no longer have any interest in what any stock does, nor do I particularly care what the market does. These things are superfluous and peripheral to dynamic game theory. I don't think about investing or trading-those terms have no meaning to me. And, one has to be prepared to hit back. If I sell a short put, and it runs the wrong way, I will immediately short 500 shares for each short put. And as the drop tapers, I'll sell more puts (or maybe buy calls).
    How many people have had this thought: "Hell, if I'd just done the opposite of what I did, I'd be very wealthy!" You have to come to a fight fully armed. If you lack the fortitude to sell options or short, you might as well enter the ring blind-folded, and one arm tied behind you. Do you play golf? What would you shoot with a bag full of drivers?
    Jan 27, 2015. 04:24 PM | Likes Like |Link to Comment
  • How To Buy And Hold Leveraged ETFs: The Top 7 Outperforming 3x ETFs Over The Past Year [View article]
    I found some time ago that one can use a 3x to 'cover' 'ratio writes' on a 1x ETF. Traditional or textbook thinking is that one can sell 3 calls against 100 shares of a stock like T, MO,etc.
    Well, if a 3x ETF is supposed to deliver a factor of 3, then, in theory, one can sell a 1x ETF call for each 33 shares of the triple powered instrument. Thus, 100 shares should cover 3 short 1x calls.
    The reason to think about that relates to most bid-ask spreads. An ETF like USO has tight spreads (compared to UCO, e.g.).
    Of course, options work differently-much depends on the initial price, and the theta factor. As an option approaches expiration, and is now several strikes away from the money, the additional returns earned to expiration will not match the underlying (or 3x instrument). BUT, in this case, you've likely garnered a 70% return, and can close and reset the new short calls. Note, that you don't have to sell 3 calls at the same time. You can average in on the strikes, which is actually a big advantage.
    This is a very brief thought, and it would take too long to go into detail. Suffice to say, I like this strategy.
    Jan 27, 2015. 03:54 PM | 2 Likes Like |Link to Comment
  • Risk Reward Shows Market In The Toilet For 2015 [View article]
    Good point, but consider put ratio backspreads. It's a concept worth studying. B1asically, sell ITM puts and buy OTM puts in a ratio where the short put covers the cost of the long puts. !:2 is simplest to start with. But look also at others.
    I have these 'embedded' and one can basically not have to manage as it either decays-or pays off if the market drops quickly.
    Jan 21, 2015. 08:32 PM | Likes Like |Link to Comment
  • Consumer sentiment pops higher [View news story]

    "Hey Joe, how's it going?"
    "Doing just fine, Mike-how 'bout you?"
    "Man I'm feeling pretty good since I got some of that medical weed. Mix it with that anti-depressant stuff the doc gave me, and I'm on top of the world."
    "You know", Joe says thoughtfully, "I've gotten a bit partial to a little heroin-just a lil' bit, you know-I'm not hooked or anything."
    "I'm with you Joe. I haven't felt this good in 11 years. Ought to be a way we could tell folks how good we felt-you know, something like a sentiment indicator."
    Jan 16, 2015. 05:07 PM | 3 Likes Like |Link to Comment
  • We Will See $100 Per Barrel Crude Oil Prices Again [View article]
    If you've passed Trading 101, you just want oil to go up. Pick a number-it doesn't have to be $100. And then, you want oil to go down again. After that, you want oil to go up again, etc., etc., etc. I added more UCO. There will come a time to switch to SCO-or use options for various strategies.
    The lowest I ever remember paying for a gallon of gas was a whopping 16 cents. My first job paid 90 cents/hour. Who was it that sang that song...I Wish I was 16 Again? George Burns?
    Jan 16, 2015. 01:03 PM | 4 Likes Like |Link to Comment
  • U.S. Home Builders Hit By Growing Inequality, Inflated Prices, Collapsing Oil Market [View article]
    I would add student loans, change in demographics/ lifestyle to the mix. But w/o question median income loss is a pernicious problem.
    Jan 16, 2015. 11:36 AM | 3 Likes Like |Link to Comment
  • Homebuilder ETFs shrug off dour home sales report [View news story]
    Well, I shorted ITB at 27. All it takes is a few days in this business. How many times have I suggested that one should short ITB in the last year?
    I lost count.
    I've been shorting homebuilders since I was in the 3rd grade. The advent of ITB makes it a lot easier.
    Will it go up again? Sure. If you're long only, you can average back in. But, that's not an optimal way to make money. I'll be out of this trade within a few days-or sooner.
    Here's a perspective via analogy. Try rolling a 200 lb rock up a steep, 300 yard incline. How long did this take? Now, push the rock so that it races back down the hill. How long did that take?
    Jan 15, 2015. 01:35 PM | Likes Like |Link to Comment
  • Why Low Interest Rates Could Cause The Next Crash [View article]
    There's an interesting v-shaped spike c.1812. Was this related to the War of 1812? But, there are several such spikes culminating in the enormous leap in 1842.
    Yet, in the span of human history, this data is a relative nanosecond of activity. A chart going back to 2525 BC would be interesting; and perhaps we could extrapolate to the year 2525 AD. The biggest problem with this chart is that the "Summer of 69" isn't noted.
    At a glance, though, one would be hard-pressed to give the Fed any credit for maintaining a harmonious economic utopia.
    Jan 15, 2015. 12:30 PM | Likes Like |Link to Comment
  • Inside The December Retail Report: 'Disappointing' Isn't The Half Of It [View article]
    Cash for Clunkers ll-coming soon to a theatre near you.
    No, wait a minute-subprime is contained!
    Why won't the government sell me one of those gas-guzzling, old hummers, just taking up space at numerous national guard armories?
    Nope-they ship them off to be cut in half.
    "Why", I asked several officers.
    "Government is afraid of the liability", I'm told.
    "Aaaaaaaagh!"
    Jan 15, 2015. 10:06 AM | 2 Likes Like |Link to Comment
  • Biggest day for oil in more than two years [View news story]
    Sold more USO calls. UCO shares providing cover for option income.
    A game of martingales, chess and classic game theory.
    Jan 14, 2015. 06:06 PM | 1 Like Like |Link to Comment
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