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convoluted

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  • Seeking Alpha Contributors Top List Of Best Performing Financial Bloggers [View article]
    Yes- my option strategies for 2014 generated enormous returns. I suspect only a few really took advantage- but that's life.
    Jan 6, 2015. 09:08 AM | Likes Like |Link to Comment
  • Wall Street Heathens: How Their Greed And Gambling Became The Axe Of Statist Policy [View article]
    Actually, one shouldn't incur a loss-unless the position/strategy is closed at the wrong time.
    But, it's a bit more nuanced, and the odds are adjusted as oil moves down.
    For instance, I sold the USO bear call spreads over several months, recognizing that the JAN spread could handle a short ITM call, while outer months created an equivalent premium by sliding to ATM and slightly OTM. This just recognizes that there is more premium for longer-dated options.
    The counter-balance is, as you note, long shares of UCO. But at what ratio?
    Well, simply stated, one would 'nibble' at UCO, and buy increasing amounts as oil dropped further. Note also that the long OTM USO call already hedged the spread (in and of itself). This piece wasn't entirely necessary, but allowed smaller nibbles initially.
    My USO bear call spreads (JAN 17) are already at max profit (there will always be a small amount of time value until expiration); and the longer-dated USO spreads are profitable as well.
    My USO gains exceed the decline in UCO (double long oil), but this is a function of assuming that oil would continue to decline and not being in a hurry to go long. However, even if one 'over-matched' the UCO piece, the differential is a function of time, and is not a terminal issue. In other words, the basis of UCO can be adjusted by simple martingale approaches. It doesn't really matter that Joe bought a 1,000 shares of UCO at 12, and Harry bought 500 shares at 12 and another 500 shares at 10 (assuming they are short USO by the same amount)-Joe can still catch Harry by simply waiting longer (for oil to rebound), or double down at a price of, say, 8 (if UCO gets that low).
    When the bear call spreads are closed, profit is 'realized'. In a sense, this lowers the basis of UCO. The question to consider is whether to reload with USO shorts, or possibly consider buying puts on SCO. I don't know that I would sell calls on UCO, as oil goes lower-although, the reduced basis in UCO allows one to sell ITM calls. This consideration requires an assumption as to whether/when oil spikes back up. The holy grail of the strategy, is to arrive at a net neutral play (worst-case). Once the break-even point is in the bank, the end result has to be profitable. But, net neutral may be too conservative. In a commodity like oil, I really don't have a concern with a temporary paper 'loss' anyway.
    Hope this helps anyone that may be interested in the strategy.
    Jan 2, 2015. 06:39 PM | 3 Likes Like |Link to Comment
  • The Oil Price Crisis: What Is The Economic Cost To The U.S.? [View article]
    Sensitivity as contemplated also is a function of perception-which feeds into decisional utility. This variable, is in turn, time dependent.
    Fairly specific assumptions are achievable only where price is predictable. The greater the degree of variance, the greater the conjecture. Longer term behavior will reflect the equilibrium price of oil-but for decades now, the price of oil eludes stability. History would be different if the geographical location of oil had been different-and that history has produced a skew reflective of higher volatility.
    At a future point, historians will write about the fossil fuel era-much like we send archeological teams to unearth and study pre-historic civilizations. And yet we write our observations on cave wall equivalents, profoundly proud of our prescient prowess.
    Dec 29, 2014. 11:45 AM | Likes Like |Link to Comment
  • My Volatility Outlook For 2015 [View article]
    Congrats on your strategy. But, I wouldn't be unduly concerned about shorting volatility (e.g. shorting VXX). It's easy enough to hedge a short position by buying an out-of-the money call. This will allow one to calibrate any downside, and will also preserve margin.
    I routinely sell calls against VXX that hit pre-determined spike points. I tend to base the spike targets on historical data-and typically I also set another round higher (to double down). You can also replicate an OTM long VXX call by buying x amount of TVIX. (Depends on your total holdings).
    One can also mix/match positions by combining TVIX with a wider short call spread-this allows cheaper long/hedge options, or allows selling ITM VXX options for more potential premium.
    Dec 29, 2014. 10:14 AM | Likes Like |Link to Comment
  • An ETF Leveraged Pairs Strategy That 'Works' (But Would Still Be A Terrible Investment) [View article]
    Of course, another issue relates to 'optimality.' Is it more efficient to sell option spreads against the leveraged construct? Options offer their own leverage and cost savings. For instance, if I sell a call and use the proceeds to buy a put, I've 'replicated' shorting 100 shares-and I don't incur either borrowing costs or ETF management fees. Over t(n) time the graph of the savings is staggering.
    And, this approach is precisely advantageous to a smaller account. (There is an opportunity cost associated with selling a call that's not otherwise covered-this can be substantially mitigated by purchasing an out-of-the money call. This cost might be netted out where the 'anti-ETF' is played accordingly).
    Dec 28, 2014. 09:45 AM | Likes Like |Link to Comment
  • An ETF Leveraged Pairs Strategy That 'Works' (But Would Still Be A Terrible Investment) [View article]
    Seems that shorting TVIX/XIV=shorting 1(x) TVIX; or, just changing or converting a 2x ETF to a 1x ETF, and then shorting it.
    In any event, a trade destined to arrive at a net neutral destination would succumb to management fees over time.
    Dec 28, 2014. 09:07 AM | 1 Like Like |Link to Comment
  • Aerie: A Brilliant Future, Derisking In Progress, And The Making Of A Major Ophthalmic Pharmaceutical [View article]
    Quite an education- better than football game I just watched- sending to my ophthalmologist.
    Dec 23, 2014. 09:38 PM | 1 Like Like |Link to Comment
  • FXE: An Excellent Addition To Your Portfolio, No Matter Which Way The Wind Blows [View article]
    Sell a longer term put and a short term call.
    Dec 23, 2014. 05:54 PM | Likes Like |Link to Comment
  • Russia, Gold, Oil, And Interest Rate Extremes [View article]
    Good idea-
    Dec 21, 2014. 10:52 PM | Likes Like |Link to Comment
  • Russia, Gold, Oil, And Interest Rate Extremes [View article]
    I typically sell options on leveraged ETFs- The option pricing methodology gets 'high jacked'. Theta inconsistencies abound/ bid- ask spreads bizarre-
    But, great idea to sell options on SCO ( short calls)- very sharp casino operators are pitted against you.
    Example of what you might find: an option several strikes OTM should be worth less than an option much closer to the money- a normal decay probability situation- but one can find the opposite. This would not happen with SPY or a FB.
    Dec 21, 2014. 10:48 PM | Likes Like |Link to Comment
  • Why You Should Not Sell Your Oil Stocks At A Loss [View article]
    To everything there is a season-a time to cast away stones, a time to gather stones, a time of war, a time of peace, a time to embrace, a time to refrain from embracing...
    A time to gain, a time to lose-a time to every purpose under heaven.
    Like some of you, I don't like 'paper losses.' But, I don't accept the inevitability of wasting time waiting for someone else to come along and push values up once more. I play both sides of the street. I seldom own stocks, but I do sell puts. So, if I'm short puts on some energy stock, I don't just scream in pain and agony, I will double or triple short the underlying stock. I will cover the short positions, and roll the short puts down and out.
    Paper losses are psychologically real-people have blown their brains out over 'paper losses'-notwithstanding IRS rules. Learn to take advantage of volatility. Make an oath today that you will learn to play this game-learn to win whether the market moves up or down.
    Dec 16, 2014. 04:43 PM | 1 Like Like |Link to Comment
  • The Saudi Oil War Means Structural Sea Change; Risk-Off Turmoil Fuels Long Bond Strength [View article]
    What's the best way to short the Canadian housing bubble-other than shorting canadian banks with mortgage exposure?
    Dec 16, 2014. 03:06 PM | Likes Like |Link to Comment
  • State Of Crude Oil Lacks Color And Form: A Reporting [View article]
    Wouldn't worry about ovx/vix disparity-convergence follows digestion.
    One of my plays for making money is to buy UCO (the bullish levered oil fund), and sell call spreads on USO.
    The reason for using two instruments is that bid/ask on USO options is substantially more favorable than UCO. This adds up in implementing spreads. One can view the USO spread (e.g. short the JAN 22 CALL and buy the same expiry 26 CALL)-as a hedge. BUt, note that UCO will run at 2x USO. Thus, if the USO spread runs against you-meaning that oil has spiked back up- both the UCO shares and the 26 long call will create more profit.
    If oil continues to drop, or does nothing (or moves a little)-you collect on the USO spread. Take the profits from the USO spread and buy more UCO at a lower cost. Re-establish the USO spread on spikes.
    No charge-just donate to your local humane society. Or better yet, adopt a pet.
    Dec 10, 2014. 12:37 PM | 1 Like Like |Link to Comment
  • The 21st Century Will Belong To America - And Commodities And Emerging Markets Look Awful [View article]
    Gibbons (and others) have the date as 476 A.D. for the approximate fall of Rome.
    So far, the US has benefited from extraordinary technology and a refined common law system of jurisprudence. That in turn is somewhat attributable to the Protestant Ethic, and the circumstances surrounding the events of 1776 and subsequent years.
    In modern times (say at the end of the depression and Pearl Harbor), Einstein's letter to FDR led to the Manhattan Project-which led to a more concise and expeditious end to WWll-which led to Bretton Woods, and the emergence of the US as the global financial and economic power. The benefits derived from the aftermath of the second world war are as vibrant as ever. No doubt, the US has made numerous miscalculations-but when the chips were really down, and the free world was at the crossroads-the US stood up when no other nation would, or could.
    Popper has noted that politicians must be kept in check-so as not to do any serious damage. Thus far, the US has not been sabotaged by a Caligula (except that Carter did have lust in his heart), or deviated from its core values and culture.
    There is no perfection-and there will never be a utopia. Yet, I see new US citizens almost everyday. They hail from Central and South America, China, Russia-even Iran. Indeed, there is much room for improvement. The journey is far from over. But, I think the evidence suggests a continuing convergence in the types of institutions governing most advanced societies. Future historians, writing some centuries from now, might conclude that any reasonable person looking at the journey of man, would be forced to agree that there had only been one journey and one destination.

    Dec 9, 2014. 10:06 PM | 5 Likes Like |Link to Comment
  • Why Buy-And-Hold Doesn't Work For Investor Wealth Builders [View article]
    Peter, you touched on the roadblock for the vast majority-a quasi-religious/cultural brainwashing that's on par with the piety of the Middle Ages.
    DO NOT SQUANDER TIME, FOR THAT IS THE STUFF LIFE IS MADE OF.
    Time is THE factor with every strategy I establish. But, I differ a bit in that I combine the odds of mean regression with option expiration. An example that I have currently is short TNA 76.50 DEC 20 puts. I figure I have even money that those puts will expire worthless-yielding about $3,000 for each 10 pack. IF the market panics, I'll simply roll out and down to the next time period, and reset the game clock. (I'm also short TZA puts that go out to a longer time period-and I figure I've got even money on that play as well). But, 'even money' is just an initial determination. I can change the rules at any time.
    Even the Good Book reminds us that there's a time to reap and a time to sew=there is a time for everything under the sun.
    "To have and to hold from this day forward" is supposed to apply to marriage-not to a random number table.
    Dec 9, 2014. 03:42 PM | 3 Likes Like |Link to Comment
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