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  • 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
  • Zillow And The Quest For Profitability [View article]
    There's been so much garbage to short that I've felt like a kid in a candy store. But, after shorting the spike, I left this one.
    I do know that their info can be dated by several years. Agents report changes to MLS, not Z.
    Jan 14, 2015. 05:55 PM | Likes Like |Link to Comment
  • Risk-Neutral Vs. The Real World: Wall Street Traders Really Are From A Different Planet [View article]
    Ito calculus and continuous time martingales-the music of math and money, inextricably linked to man's propensity to seek refuge with the herd. I would add, though, superimposed on all, the simple but elegant equation from the 2d Law of Thermodynamics:x>0.
    One of my risk neutral plays is named after the movie "Fermat's Room."
    Jan 14, 2015. 02:44 PM | Likes Like |Link to Comment
  • Boom Goes The Dynamite: Oil's Price Crash Is Going To Rip The Global Economy To Shreds [View article]
    Well, on one side we have the usual cast of pundits, pontificators, dreamers and hopers; on the other we have the rather unemotional profiteers.
    The former can't be helped, for their bias remains forever impenetrable.
    For the few that simply want to enhance their net worth-stay with shorting the 1x, contango screwy, USO (short calls), while slowly building an anti-matter position in the 2x UCO.
    I first suggested this weeks ago, and it has worked perfectly. If you know when oil will bottom, just wait and buy UCO. All I can say about that is we are inching closer to the bottom.
    I also suggested shorting TSLA months ago-using bear put spreads. That has also worked out nicely.
    My macro 2 cents is that the first wave of layoffs and 'reorganizations' that took place decades ago is directly connected to the events we witness today. But, the armchair post hoc sages are amusing-if not a bit pathetic.
    Jan 14, 2015. 11:24 AM | Likes Like |Link to Comment
  • Focus On Small Caps In 2015 [View article]
    Well, look at TNA today. Hit a high of 80 and now at 74.40. No complaints, though-easy money playing both sides.
    Jan 13, 2015. 02:34 PM | Likes Like |Link to Comment
  • At Last, The 'Experts' Wake Up To Oil [View article]
    In terms of forecasting, go back and read "The Judas Economy" or "The End of Work." Or, go back to Alvin Toffler ("Future Shock).
    The one alpha and omega signal for me was the first time I noticed a graph depicting the first decline in median income since WWll. This is not just the biggest elephant in the room, it's T-rex consequential. If I'm making less money now than 10 years ago (or working longer hours or two or more jobs)-I'm simply not content with life. And, I don't care about anything else.
    This captures the gut feelings of so many people that I've encountered over the past few years. It has sapped the core vitality of a hell of a lot of good people, and I gotta believe the crime rate is at an all time high-or the press makes stuff up every morning.
    This is nothing less than a seismic societal and cultural shift. It is a floating angst and sometimes a raw despair that I never noticed through the 60's to the present time. It is perhaps too early for sociologists to reflect on this age-but just look at the data regarding prescriptions for pain and depression. And, note the amount of illegal drug usage that has become pervasive. What about domestic violence? Bullying? Road rage?
    I went to a major mall yesterday (figuring I could get some calm assistance at the Apple store), and I was surprised that it was virtually empty. No place in the mall was busy-not even SBUX.
    And, why is everyone so damn fat? Hey, I'll be the first to admit that I can certainly spend more time working out-but I just can't fathom how some of these people (especially people a lot younger than me), are just bloated.
    What's that got to do with the price of oil? I dunno, but something's rotten in Denmark.
    Jan 13, 2015. 01:48 PM | 1 Like Like |Link to Comment
  • At Last, The 'Experts' Wake Up To Oil [View article]
    Agree that the present and future is more than a mere continuation of the past. I've used the term 'recalibration' to reflect a confluence of factors. Majority of opinion is speaking in an analogous 'middle English'.
    Jan 13, 2015. 12:59 PM | 1 Like Like |Link to Comment
  • This Isn't Investing...It's Russian Roulette [View article]
    Interesting comments from a cross-section of perspectives. The article is entitled "This Isn't Investing..." If we look at technology and apply recent enhancements to our lives, I simply find that I can now play the casino game from a beach, a coffee shop, an airport, etc.
    I think history will show that our technological prowess to be a type of benign amusement-but that the real 'brave new world' is approaching via volitional evolution. Man is decades, not centuries, away from controlling DNA. This will confront the spirituality that Michael Clark speaks of above, and will compel a fundamental re-evaluation of what it means to be human.
    So, my view is that we are in a 'pause mode', witnessing a variety of behaviors on our 'pale blue dot.' I think the systems in place basically survive intact over the next 50 years or so-but with varying degrees of modification. As far as the stock market, it seems to me that it's the easiest game to win. In what other game can you buy 100 shares of XYZ, hedge it with a put, and derive income by selling calls? There will come a time when we are capable of rational and unemotional processing of data. The downside is a loss of volatility. But I'll likely be in high heaven by then (or low heaven).
    Jan 9, 2015. 09:56 AM | 1 Like Like |Link to Comment
  • This Isn't Investing...It's Russian Roulette [View article]
    I was rational for most of the 1980's. I bought into the game. Now I know that rationality is beyond the grasp of mere mortals.
    Since treating the world as a casino, full of randomness yet with a degree of mean reversion, I've been much better off. And, every day that passes, just reinforces my agreement with Willy Shakespeare "...life is but a walking shadow, a poor player who struts and frets his hour upon the stage and is heard no more. 'Tis a tale told by an idiot, full of sound and fury, signifying nothing."
    Jan 8, 2015. 04:31 PM | 5 Likes Like |Link to Comment
  • The ARBS See Crude Oil This Way [View article]
    Sorry for confusion. The premium on selling the short put generates the effective basis of UCO-IF: oil continues to drop within the option period.
    So, if you follow my suggestion, you would own UCO at a price much less that it is currently trading.
    But, yes, if oil goes to zero, the loss would be $600 for each 100 shares. (What is the probability that oil drops to nothing?).
    My objective is to capture the option premium (on both UCO positions as well as short USO via bear call spreads). Remember also that I always try to beat the clock, and capture the decay. And, where we're dealing with a commodity like oil (as opposed to Enron), the odds favor bullish positions as we approach maximum panic and regurgitation.
    Once upon a time I got a lesson from a very seasoned option trader. I was short calls (naked), and the market was moving against me. His advice was to 'throw another log on the fire.' His explanation was that all fires eventually die out, and the greater the fire, the larger the pile of ashes. The lesson is to always start small, take a quick profit if you can, but be prepared to 'throw another log on the fire.' I've moderated this a bit by using hedges. In option trading, both directional bets and hedges can be profitable. A lot of younger traders don't like this type of trading-it's like watching paint dry to them. But, I don't need the excitement-just like to be right when it's time to count.
    Jan 8, 2015. 01:54 PM | 2 Likes Like |Link to Comment
  • Hedge Fund Clustering [View article]
    That's why I am 'following' your work. Having a hawk's perspective of the animals wandering around is quite useful.
    Jan 8, 2015. 10:27 AM | 1 Like Like |Link to Comment
  • The ARBS See Crude Oil This Way [View article]
    Peter, I think your conclusions are reasonable. Some traders gravitate to arb strategies, just as some golfers eliminate one side or the other. In my trading days, I was called "Mack the Knife" because of my arb propensity.
    Also agree with your comments re USO-that's why I have suggested shorting USO (bear call spreads) and averaging in with UCO. Yesterday, I suggested selling UCO puts (BEP=6/ so $600 absolute worst case if oil goes to zilch).
    I'm happy to move forward dragging one foot behind me-the cost of hedging. Yet, the enhanced returns can come at inflection points, and this is part of dynamic management.
    Jan 8, 2015. 09:53 AM | 1 Like Like |Link to Comment
  • How Are Housing ETFs Poised For The New Year? [View article]
    In between basketball games last night, I came across what might explain the salvation of the housing industry: tiny houses.
    C'mon man! No, I'm serious. These 'houses' are less than 300 sq.ft. Why not just buy an RV?
    Actually, there are some young folks out there that really want a house-just as much as their parents did. I've met some of them. And although I dearly love to short residential builders, I do tend to think that home ownership is a good thing.
    Jan 7, 2015. 03:08 PM | Likes Like |Link to Comment
  • Focus On Small Caps In 2015 [View article]
    FACT: When the market sells off, small caps get butchered. When the herd pauses to turn the other way, small caps recover (to a greater or lesser extent).
    Witness the action of small cap ETFs-especially the levered variety.
    There is, of course, some logic in ascribing to small caps some degree of immunity from the vagaries and nuances of currency disparities. Small caps are mostly 'domestic'-that's why they're small caps, and don't have international currency issues to contend with. On the other hand, 'no man is an island' and many companies are but derivatives of international behemoths. So, shrinking profitability with large caps can be expected to impact the smaller fish.
    But, why bother with 'textbook rationality.' I made my first trade in 1975. Since then, I've learned that the market is no better than a school of fish, always prepared to turn at minimal provocation.
    As a quick illustration, just observe the TNA 'school of fish' the past few days. To wit, TNA approached the mid-80's and then dashed off to the low 70's. What does this mean to a daydream believer, or a swing trader? I don't know about the daydream believer, but for astute swing traders, the small cap orbit is about as predictable as Haley's Comet-which allows them to net the little fish, going and coming.
    Jan 7, 2015. 10:20 AM | 1 Like Like |Link to Comment
  • Hedge Fund Clustering [View article]
    Yes, but what can we attribute this herd like behavior to? What about size variables?
    Large institutional money is likely satisfied with closet indexing, and large hedge funds have the same issue as large mutual funds, i.e. "hey, we did just as good as Harry over at XYZ last year."
    The entire risk on/risk off paradigm must have simultaneous congruence/ same propensity to execute similar decisions within same time span.
    So, now more than ever, one side of the boat gets over-loaded and capsizes. But, this is a 'continuous game' so we just launch another boat and start over.
    The contrarian intuitively sees this behavior, although he doesn't care who participates. In the final analysis, we are presented with an array of animals: elephants, goats, wildebeests and so forth, which will always run with their herd. The amusing thing is that they simply run from one side of the plains to the other...'over, and over again...'
    Jan 6, 2015. 01:37 PM | Likes Like |Link to Comment
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