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convoluted

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  • Read This Before Shorting Anything! [View article]
    The other way to short is to utilize bear call spreads. This avoids the dividend reimbursement issue (where applicable), and establishes the exact cost/benefit in advance. Another important consideration is the BCS maximizes leverage. Naked calls and shorting shares has a present value issue that tends to get overlooked.
    As to real vs theoretical exposure with shorts, the solution where one is concerned is to simply buy a cheap OTM call to hedge the short shares. This will also establish the maximum risk, and conserve leverage and margin.
    Feb 11, 2015. 08:06 AM | 5 Likes Like |Link to Comment
  • Profiting From Market Randomness [View article]
    Interesting that no one attempted to define 'random.' I would rather say that the market is characterized by a 'weak determinism.' Remember that the 'market' is a product of human input-it can't be random in any true sense. Perhaps we can say that the mere fact that the market exists, as such, is random. But that only begs any number of questions.
    I've stated this before, but, much like Archimedes-give me sufficient capital, and I'll move the market to any place I desire. I could drop the market to zilch in a heartbeat, or move it to an infinite high.
    More than anything, it's human bias-not mathematical randomness-that moves the market. Take the time to imagine that you're a visitor from a distant galaxy. You observe humans engaging in the weird activity of 'buying/selling.' I submit this alien would quickly develop a keen sense of when the humans would 'flee or fight.'
    Feb 10, 2015. 06:22 PM | Likes Like |Link to Comment
  • Is crude oil's bounce over? [View news story]
    The way I play it is to use the short profits from USO to buy shares of UCO. The short calls on USO-that were 'blood red' last week, turned a beautiful shade of green today. If oil will either (a)do nothing, (b)go down or (c) go up a small amount by Friday-I'll be adding a tidy sum to UCO.
    I previously closed the $6 UCO short put positions I suggested a couple of weeks ago-so I'm both long and short the magic elixir left by decaying animals millions of years ago.
    I'll continue the game-it will be one of those homerun events that come along every now and then. Of course, I don't know if I'll ever live long enough to witness another play like shorting volatility for 4-5 years running. I suppose there will come a time to short treasuries-but I don't see that as readily-too much long-term structural damage to 'the way we were.'
    Feb 10, 2015. 06:02 PM | 2 Likes Like |Link to Comment
  • Walter Energy: A Contrarian Play With Tremendous Upside Potential [View article]
    Put premium has WLT at near bankruptcy. On the other hand, buying LEAP calls is better than buying lottery tickets.
    Go out to JAN 2016-look at say the 2 strikes. A mere $500 could make one a lot of money. OR, oil could go to $20, and most coal companies file Ch 11.
    Another strategy-one that I may implement-is to sell the lower strike 2 call, and buy a ratio of the higher strike calls. Since you would own more long calls, a spike in share price would create (1)an initial decline in position value, (2)a break-even point, and (3)finally a profit making move. It's possible that such a move could occur overnight, and you wouldn't observe the first two points.
    If WLT becomes worthless, you would either break-even, or possibly pocket a small credit-depending on how you establish the initial ratios. You might have a small negative, where WLT moves a small amount, but not enough to push the long calls. In that scenario, simply weigh the cost of buying the calls and having them expire worthless. I would much rather play an explosive move with an initial credit-especially when my crystal ball is not working properly.
    These strategies require enormous patience-which is why I tend to go the other way (put ratio backspreads) to play market drops. Also, if I sell an ITM SPY put to fund more OTM SPY puts, I don't have to close the short SPY put-I can use it for something else after I collect the quick long put gains.
    Feb 9, 2015. 02:46 PM | 3 Likes Like |Link to Comment
  • Stop Trying To Beat The Averages [View article]
    Seems that Fib and E-wave reflect human emotion.
    The "average" golfer? Yikes!
    I set targets for each strategy- totally independent of the "market". An "average" student makes "c's"-
    Averages are a contrived metric for incompetent mutual funds or generic financial planners.
    Feb 9, 2015. 09:31 AM | Likes Like |Link to Comment
  • Selling Stocks Is Like Football: Ohio State Coach Woody Hayes On Portfolio Management [View article]
    And under what circumstances did Woody leave college football?
    Feb 7, 2015. 11:41 AM | Likes Like |Link to Comment
  • Upping Our Fair Value Estimate Of Alibaba [View article]
    "Sweet Home Alibaba"? -
    Ba ba black sheep?
    (-)BABA = moolala
    Feb 7, 2015. 10:07 AM | 4 Likes Like |Link to Comment
  • Last Chance To Dump Twitter [View article]
    I've NEVER used TWTR or FB-do not have an account-don't even know how to use either. I've observed people using FB and it's rather shocking. It's like some sort of crutch. If people feel like they have to announce the urge to go to the potty-or post pictures of themselves coloring their hair-I just can't buy into it.
    I suppose in some sense, it's harmless-maybe like teenage girls talking on party lines back in the 50's.
    Yet, the USA, as well as other countries, show declining education and a rapid increase in health problems associated with obesity. Why not adopt a dog, go for evening walks with your new best friend, and gaze up at the stars-perhaps you might contemplate the meaning of the cosmos- like Hawkins or Einstein.
    Feb 6, 2015. 06:04 PM | 3 Likes Like |Link to Comment
  • U.S. Middle Class Has Disappeared Into Higher-Income Groups; Recent Stagnation Explained By Changing Household Demographics? [View article]
    An unprecedented number of Americans on welfare- not just food stamps, but a variety of programs- 50,000,000 and increasing daily.
    Student loan debt spiraling to the stratosphere.
    70% black and 40% white 'households' have no father.
    Homeless and mentally ill a national tragedy.
    Home ownership decline continues.
    Public school systems subverted.
    Millions hooked on anti- depressants and pain pills.
    Meth labs flourish and cocaine returns with a vengeance.
    Have another toke.
    Feb 5, 2015. 07:47 AM | 10 Likes Like |Link to Comment
  • Here We Go Again: The Robo Machines Are Raging [View article]
    "I knew little of chess, but as only a few pieces were on the board, it was obvious that the game was near its close...[Moxon's] face was ghastly white, and his eyes glittered like diamonds. Of his antagonist I had only a back view, but that was sufficient; I should not have cared to see his face."

    "Moxon's Master" by Ambrose Bierce-A science-fiction story about robots.
    Norbert Weiner sounded the alarm many years ago, noting that complex decisions would be turned over to sophisticated game theory machines.
    It doesn't take much to move the 'market' around. Start with a very simple premise that an infinite amount of money can move the market accordingly. From there, one can admit more players, and spread out the money. The money or liquidity is nothing more than the transmission sequence. In some sense, it's like the pac-man game where the figures change colors based on a program.
    But, wait a minute! Aren't 'investors' allocating capital based on something called 'earnings?' Now that's where it gets really sinister.
    Feb 4, 2015. 04:36 PM | 1 Like Like |Link to Comment
  • BP: The Stock Market Is Not A One-Way Street [View article]
    If you want to be involved with BP over a longer time frame, look at selling LEAP puts. The yield (depending on the exact structure) could be in the double digits. It's also possible to sell bear call spreads (much shorter duration). If the bear call spread begins to move against you, the larger put premium will accrue in your favor. If the stock continues to move in a tight range, the probability of collecting on the short calls is high. At the same time, the short put will decay gradually. The combination of collecting on both the short call and LEAP short put will put you solidly in the double-digit category.
    You could add a downside long put for max security, and this would also allow for better cash management. If you can manage to sell the LEAP put on a particularly 'bad' day, and the shorter duration bear call spread on a 'good' day (as well as buy the hedged put)-you'll see a significant bump in yield.
    This strategy requires a lot of patience!
    Feb 4, 2015. 11:05 AM | Likes Like |Link to Comment
  • Volatility Is Whipsawing Investors, Which Side Are You On? [View article]
    Spreads (such as modified iron condors) working very well. In some sense, I let the market throw the first punch, and then I'll counter- punch.
    Feb 4, 2015. 10:15 AM | Likes Like |Link to Comment
  • Rising Credit Spread In Junk Bonds - This Red Flag Is Really Ominous [View article]
    Very succinct and prescient. The eternal problem with equity players is the penchant for Dr Feelgood's magic elixir-until they wake up with the inevitable hangover. They only know one way, only have one speed-and when the man finally yells FIRE-the stampede takes out a lot of people. It happened in 1929 and 2008-and it will inevitably, unequivocally happen again.
    But, I'm layering in my put ratio backspreads and various other strategies. It's just a part of the game. The tidal wave will come and then retreat. Many will be lost-others will make fortunes. Fate will yawn, and nature 'red in tooth and claw' will prevail once again.
    Feb 3, 2015. 03:45 PM | Likes Like |Link to Comment
  • 12% In 12 Years [View article]
    Chad Brown is spot on. Look at it this way: Van Cliburn was one of the greatest pianists of the 20th century. How many hours a day did he spend practicing?
    There is an incredible difference between an accomplished talent like Van Cliburn, and so many reasonably good piano players that ply their craft at churches, weddings and lounges.
    Chess? Billiards? The names of the greatest of these categories remain legends. But for every Bobby and Willie, there are thousands of reasonably proficient players-but many more millions that can only hope and wish.
    The same is true in golf-but here we find the evidence extraordinary, because we know, via statistical evidence, that 99%+ of all people that play on a regular basis can't beat old man par. This is despite countless lessons, new clubs, watching hours of instructional video-it just doesn't matter.
    What I find in a seemingly endless parade of articles, books, etc. is a one-dimensional, rigid conformity-a 'foolish consistency.' I find an utter lack of creativity, a dull awareness of human irrationality and almost no skill (or even a mere acquaintance with all the available tools) level beyond parroting the words 'diversify, diversify.'
    I remember watching Cramer's show a few years ago, when he did something called "Am I Diversified?" People would call in and say they 'owned' ABC, XYZ, etc. I'm thinking, this reminds me of people that collect poisonous snakes. So, you call in and say 'I own an eastern diamondback rattlesnake and a copperhead-am I diversified?'
    "Hell no!' is the response. 'You need to add a king cobra and a black mamba.'

    Feb 3, 2015. 10:55 AM | 3 Likes Like |Link to Comment
  • Bill Gross: Games People Play [View article]
    Michael, I suppose it's an open question as to a time of reflection for most. Here's one of my favorite passages from Schopenhauer, which touches on the issue:

    "As we have said, the common, ordinary man, that manufactured article of nature which she daily produces in thousands, is not capable, at any rate continuously, of a consideration of things wholly disinterested in every sense, such as contemplation proper. He can direct his attention to things only in so far as they have some relation to his will, although that relation may be only very indirect. As in this reference that always demands only knowledge of the relations, the abstract concept of the thing is sufficient and often even more appropriate, the ordinary man does not linger long over the mere perception, does not fix his eye on an object for long, but, in everything that presents itself to him, quickly looks for the concept under which it is to be brought, just as the lazy man looks for a chair, which then no longer interests him. Therefore, he is very soon finished with everything, with works of art, with beautiful natural objects, and with that contemplation of life in all its scenes which is really of significance everywhere. He does not linger, he seeks only his way of life, or at most all that might at any time become his way....Whereas to the ordinary man his faculty of knowledge is a lamp that lights his path, to the man of genius it is the sun that reveals the world. This great difference in their way of looking at life soon becomes visible even in the outward appearance of both."

    In Popper's essay "Indeterminism and Human Freedom", he ask us to think about the 'vagaries of the weather' on the one hand, and 'clockwork precision' on the other. He puts a number of ordinary things (puppies, plants, cars, etc) along a continuum, which best describes the proximity to either pole. But, even as he has us follow him, agreeing with his seemingly simplistic depictions (we have used our common sense)-he hits us: we arranged things "not according to their nature, but merely according to our ignorance."

    So, as we think about these things, and observe inhabitants of the Eccles building sending out puffs of smoke, signaling a tangled web of rather trite information-how is it that a few basis points one way or the other causes wild animals to howl at the moon? But maybe we should ask who entrusted these folks with a set of matches to start with?
    Jan 31, 2015. 12:50 PM | Likes Like |Link to Comment
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