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  • Panic-Induced Volatility: Make It Your Friend And Make 53% Annualized In 16 Days [View article]
    George, the put premium increases-the call premium will decrease. That's how the 'protection' benefits the call writer. The put value and call value will diverge, depending on expiration and strike price. But, volatility can allow for rapid swings in option value-so it's certainly possible to trade this volatility. So, theta is not linear-or straight-line-and proximity to expiration where IV is high will allow numerous trading opportunities. Now, there are times where sustained volatility will increase premium across the board (as in 2008). And, there are cases where seasonality will ramp up IV, and hence the total premium.
    I would add that low volatility creates unique opportunities to sell options. Spreads and ratio-writes work well. Would discuss more but internet connection with SA terrible today.
    Aug 11 10:49 AM | Likes Like |Link to Comment
  • Retail Investors About To Get Fleeced Again [View article]
    As I noted recently, it was the 'professionals' bailing last week. Long behemoths got spooked and didn't buy the dips.
    A lot of my former clients never got back into equities. Most retail interest is still in bonds. Of course, there are quite a few guys that trade a very small portion of their net worth-and they've done quite well.
    The greatest impediment for a retail player is simply not being equipped with all the right tools. It reminds me of the commercial where the golfer has 14 drivers in his bag.
    Aug 11 10:13 AM | 2 Likes Like |Link to Comment
  • Panic-Induced Volatility: Make It Your Friend And Make 53% Annualized In 16 Days [View article]
    I see that options are still widely misunderstood-which is too bad.
    But, here are some very general things to contemplate, which I don't think were mentioned.
    Selling a covered call will do little to 'protect' the paper loss during a sell-off. However, if A and B have identical holdings, and A sells a call and B does nothing, and after that point in time, both A and B hold their portfolios unchanged for an infinite amount of time, A's PV will create a staggering differential. Recall the example of the approximate $26 paid for the island of Manhattan a couple of centuries or so ago. Even a conservative compounding exceeds several billion dollars.
    In teaching some retired school teachers the basics of covered calls, I've noticed a tendency to sell a call at the absolute worst time. If you make a decision to sell a call into the teeth of a down market, you've waited too late. If you select a call that exceeds the basis in your stock or ETF-you've just made another mistake.
    If you want to actually 'protect' your portfolio, you must either buy appropriate puts or collar the position (yes, an inverse ETF might work also).
    Also, I've yet to note that anyone has discussed historical volatility and the impact of selecting a target price for selling a call-nor is much attention paid to selecting expiration/strikes. Rather, I get the impression that most people just sell a covered call at some random point, and then claim that it either works or doesn't work. (Of course, that's how most people make decisions anyway).
    The other problem I've noticed is that some folks buy 100 shares of the most volatile stock they can find-just to locate the option with the most premium. This is just a generic, non-technical list of situations I've actually noticed-so by extrapolation, I strongly suspect that there are many people that fall victim to these same things.
    So, how can we improve?
    First of all, sell your call when the stock is increasing in value-and be prepared to roll it out. The vast majority of calls, unlike puts, are assigned at expiration. If you can't figure out how to roll out, get some help! And, be prepared to roll out numerous times. It's like extending a lease on a rental property-and getting paid for it.
    It's better to own several hundred shares of stock (if you can), thereby allowing a much better call selling strategy. In fact, and this is very important, having the ability to double down, or otherwise use probability in conjunction with the basics of the option pricing formula, will exponentially increase your returns vs a portfolio with 100 shares. This can be a bit complex, but I encourage anyone interested to delve deeper.
    As with any topic or subject matter, a little knowledge can be a dangerous thing-or in this case, one's results will not be optimal.
    Aug 9 12:58 PM | Likes Like |Link to Comment
  • 5 Days Of Fearful Trading Provide ETF Insights [View article]
    To my way of thinking, I just look for the best deal at some moment in time. If your interest rests with shorter-term ETF plays, I was upfront about shorting TZA. I sold TZA calls, adding to the position when TZA spiked. Several people questioned me about the 'wisdom' of that play-but yesterday every option still open expired worthless.
    Here's my quick rationale: (a) liquidity, liquidity and more liquidity (b) the pros caused the downdraft to protect the year (c) retailers were piling into TZA (the end result would stabilize small caps-same folks would bail when they posted some gains) (d)option expiration suggested TNA would be pinned at a higher point, and (e)I was simply prepared to double down until the bears began to cover.
    So, there's a 'how' and a 'why' to these sorts of moves. If you understand the reasons behind the 'why'-and not just the inane media explanations-you can move from being 'foolishly arrogant' to 'serenely confident.' Just in the past few minutes, I've come across numerous references to snorting bulls and snarling bears. All I know is that the lion sleeps tonight.
    Aug 9 12:14 PM | Likes Like |Link to Comment
  • Barron's hangs a "For Sale" sign on Zillow and Trulia [View news story]
    The very simple fact remains that buying a home is not just the most expensive decision a consumer will make-it is so exponentially greater that comparisons with other marketing strategies are virtually meaningless. One doesn't make an impulse decision to buy a home over the internet. A 'purchase' is linked with mortgage factors, plus the required services of a host of local experts-attorneys, inspectors, appraisers, surveyors, etc. There are numerous pitfalls for the unwary, and unlike a Walmart or typical retailer, a buyer can't get their money back if they find a better price-or a boundary line dispute. For these reasons, this is the one predominant "zone" where the middleman will always play a major role.
    Discount brokerage services and internet savvy ideas can only accomplish peripheral or marginal results-at best. Even younger folks, armed with cell phones, laptops, etc. will defer to a local agent-assuming that agent has the requisite experience to link all the key variables together. So, I had absolutely no problem doubling down on my short position when the TRLA/Z was announced. I sometimes think some people want the 'internet' to feed them and tell them what to do. But, when it comes down to substantial sums of money, it's an entirely different mindset. I'm still short for all these reasons, plus a few calls from some annoyed realtors to their senators will spell big problems for this 'merger.'
    Aug 9 11:37 AM | Likes Like |Link to Comment
  • Fear And Loathing On The Marketing Trail, 2014 [View article]
    Well, we all 'strut and fret our hour upon the stage'-some play the knave and the fool, others the mild and meek, some the dramatic-it's impossible to truly recognize and appreciate our biases. As humans, we've studied the great works from Plato to Kant; we have made enormous strides in evolutionary biology, psychology and bio-chemistry. But, to continue from the master: " 'tis a tale told by an idiot, full of sound and fury..Signifying nothing."
    No one has said it better, and perhaps no one ever will. So, we note that the world has changed dramatically since the Industrial Revolution, and in my opinion, political centralization, and by proxy, its various appendages (central banks), are but an obvious byproduct.
    Existential anxiety? Malaise revisited? It's all another chapter in the 'tale.' What character do you want to play?
    Enjoy your writing Ben.
    Aug 8 09:53 AM | 2 Likes Like |Link to Comment
  • More Signs A Market Bottom Is Forming [View article]
    In my world, I don't contemplate tops or bottoms-just regression and probability. Aside from that though, the recent downdraft was initiated by the professional money managers. The behemoth long-only guys suddenly went from buying the dip to protecting the year. I detected a lot of smaller players reaching for those inverse ETFs. In my opinion, the retail player is learning to use available tools to protect themselves from the pros. Of course, the cash balances are the ultimate variable-so, if the big dogs all panic at once....
    Aug 7 11:46 AM | 1 Like Like |Link to Comment
  • Think Strategically About Income During Market Volatility [View article]
    Rather than selling a cash secured put, one might consider adding a lower strike long put. This is far more present value oriented and clearly defines risk/reward. It also allows much more portfolio flexibility.
    One quick example of flexibility, particularly at a mild level of volatility, is the ability to both collect the premium on the long put, while rolling out the short put for more premium (assuming a market decline). In conjunction with that strategy, one can duplicate the spread-but moving down the risk curve via the lower price.
    These strategies require patience and planning. This is not for 'daytraders'-a longer-term objective is required. I also wouldn't dismiss selling calls on spikes-provided that one is in tune with their basis. Some can sell in-the-money calls, new holders of shares might want to consider spreads-even when they are otherwise 'covered.'
    Note: My comment is simplistic. Some level of financial acumen required-but worth contemplating.
    Aug 7 11:37 AM | 1 Like Like |Link to Comment
  • The Good News From A Bad Friday [View article]
    There are more tools for the average player to utilize. For instance, someone complained about being long TNA. Without using options, one can buy TZA and decide time and proportion. Say I'm long 100 shares of TNA. If I bought TZA at 15 and sold it at 17 (assume 100 shares or 'x' amount) I'm better off than simply holding TNA. So, TZA works like a de facto short call on TNA. Regardless of what happens to TNA, my strategy is forever superior to an equal portfolio that simply did nothing.
    The key is knowing your alternatives,and executing.
    Also, it certainly appeared that thousands of small players were doing this. I got the distinct impression that large players were bailing to protect the year results (whereas they previously bought small dips). So, the way I see it is that many retail guys are getting hip to mitigating downdrafts. Congrats to them!
    The real question is not so much what happens per se in this crazy world, but rather what do the big dogs do? Rest assured that the big dogs watch the other big dogs. They are pack animals. They are also bargain hunters.
    So, what's next?
    Personally, I would cash in on at least some of the insurance/hedge returns. The decision then relates to whether to implement more hedging-or allocate to an eventual rebound. In this context, expect a choppy pattern-it's a natural byproduct-but it creates opportunities to trade both long and short. I don't get the feeling that the decisions reflect "risk on/off" as characterized the market a few years ago. Again, you can just 'see' fund managers getting caught up in the 'protect the year' mindset. After all, we are approaching the latter half of the year.
    Aug 2 11:22 AM | 3 Likes Like |Link to Comment
  • Short Sellers And Seeking Alpha [View article]
    Yes, since the time we developed a pre-frontal cortex, our predilection has been for clear skies, great health, harmonious relationships and a happy dog. We are wired to both resent and fear spurs under our saddle-even to the absurd extreme of blaming our horse for his evasive antics.
    The same chemicals that created fight or flight responses hundreds of thousands of years ago still control our emotive complex. Indeed, as has been stated, we've met the enemy-and he dwells within.
    Life's lessons are not readily learned. Remaining objective and dispassionate when confronted with a loss is, as has been well-documented, stirs up a witch's brew of noxious chemicals. We are loss averse to an extraordinary degree. The anguish can be so great that we can hardly bear the suffering. Yet, without that pain, our ancestors would not have survived.
    As long as there are markets, there will always be Enrons. There will always be insiders that benefit from superior knowledge. The seasoned poker player knows that he will win and lose-sometimes he just makes a dumb mistake-sometimes he recognizes a superior player and bets accordingly. In every thing we do, from choosing a route to work, selecting a gap wedge or lob wedge, making a presentation or visiting a dentist-we make use of the one tool that we are blessed with-the grey matter that announced the theory of relativity and that will send men to Mars and beyond.
    But, we are not yet capable of pure rationality. Prospect Theory and subsequent studies about how we make decisions is both illuminating and a bit concerning. We are too quick to be victimized by word-spinning and logic-chopping. Our mental calculus eludes the sabre-tooth monster but fails us in our response to Monte Hall's problem.
    The market is but a manifestation of human decisions-in essence it is perfect for a game- theory perspective. One can devise minimax strategies, or establish a complex matrix, utilizing a blend of different strategies at different time points or zones. But, at the end of the day, there are professionals, very good amateurs, decent players and rank beginners. And, of course, there are the perpetual hackers. The pro can play offense or defense, and is prepared for adversity. He actually thrives on adversity and relishes the fight. Our loser constantly complains about the weather, that his opponent was 'lucky', the greens were too fast, etc.
    But when it's all said and done, Judy Collins had a great observation-'I've seen life from both sides now...I don't really know life at all.'
    So, the light at the end of the tunnel is not a snorting bull nor a snarling grizzly bear-those diversions that occupy the mind are simple amusements along the way-I'm afraid that light belongs to the Grim Reaper.
    Aug 2 10:46 AM | 2 Likes Like |Link to Comment
  • On the hour [View news story]
    Yeah-just thinking the bears ate a few of the weaker bulls and headed for a nap.
    Aug 1 02:22 PM | Likes Like |Link to Comment
  • Thursday's Stock Market Gets A Wake-Up Call [View article]
    Hi Peter-excellent insight as usual. I guess that ivy league school education made your parents proud.
    My take, and I think others feel the same, is that the market is now somewhat analogous to recent weather patterns. In essence, storms seem to unleash a bit more fury and wreak a bit more havoc. So, we seem to have these Mt. St. Helen moments.
    That's an analogy-not a correlation, of course. But we 'seed' the market storms with technological tools, and our perception of global and centralized responses by central authorities. The one eternal constant is that market players, as a whole, have never learned to 'be prepared.' I keep thinking that rationality will eventually make at least a modest appearance-but I'm now confident that I'll never live to see it.
    Aug 1 10:51 AM | 1 Like Like |Link to Comment
  • Short Sellers And Seeking Alpha [View article]
    I had a really good history teacher in the 8th grade. We spent a lot of time discussing the bill of rights-you know-freedom of speech, assembly-those sorts of ideas.
    Jefferson said 'The price of liberty is eternal vigilance.' We are not that far removed from The Inquisition, and sad to say we've murdered innocent people for practicing withcraft.
    We do have laws against libel and slander. But any attempt at censorship will always have a putrid smell. As humans we are so hopelessly biased, yet we have our moments when we reach for ideals that transcend our own pecuniary interests. But for that brief moment of transcendence, we fail all those that have come before us, and all of those yet to be.
    Aug 1 09:23 AM | 7 Likes Like |Link to Comment
  • Comp sales decelerate at Whole Foods Market [View news story]
    Didn't know it was down AH-until I read this. My short calls were looking ugly (still are on my screen). Looks like red will turn to green in the morning.
    I have been short in-the-money calls as I couldn't understand how in the hell this stock was flying thru interstellar space.
    Jul 30 09:51 PM | Likes Like |Link to Comment
  • Why St. Joe Shareholders Will Inevitably Be Disappointed [View article]
    It seems like a 'new' JOE article pops up every 13 months-same themes, same comments, same conclusions. The area is discussed, 50 year plans are cited, but, alas, the sand continues to trickle through the 'hour-glass'.
    "So goes the days of our lives..." the man said.
    At what point in time should I mark my calendar to assess the success/failure of this company? What about August 1, 2030?
    Incidentally, by far the largest 55+ retirement area is The Villages, Fl. They pull people from all over the USA-even the world. They continue to buy land with an insatiable appetite, and to sell thousands of new homes annually. Currently, they are building several new medical facilities and are becoming a destination treatment center for geriatric issues (naturally). This juggernaut is the most amazing building machine I've ever seen-and I've seen a lot. Even at it's hottest peak of building, the Florida panhandle is no match. They don't need a 50 year plan-they just keep repeating what they've been doing for the past several decades. One family controls everything, so they don't have to placate a bevy of diverse local politicians.
    Can the panhandle grow? Absolutely. But JOE has not demonstrated any competency beyond the ability to take the gift of history and randomness, and simply do the obvious. Many other large real estate players are now firmly entrenched in this market. Proof? Simon Property Group with its Pier Park project.
    But so what as to all of this. How does one make $ tomorrow on any of this?
    Jul 30 09:43 PM | Likes Like |Link to Comment