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convoluted

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  • Housing Starts [View news story]
    The residential market is devoid of vibrancy and enthusiasm-for the most part-which reflects the general mood of the average American. That we seek any glimmer of some significant rebound from mediocre statistics just adds to the seemingly intractable malaise.

    We can whistle past the decline in median income until the cows come home, but it's a tune of a dirge, not the sound of a joyful band. I prefer the 'go-go' years of the past, not the cultural schism of today. But, it is what it is-and it's up to each individual to scale Maslow's hierarchy.
    Jun 16, 2015. 02:00 PM | 4 Likes Like |Link to Comment
  • Netflix Shorts Cry Uncle [View article]
    Today is a perfect example of layering in short positions and having patience. Now, one can close their short profits and nibble at a long position. Life (and stocks) are a two-way street. The key is to not get emotionally involved in whether NFLX goes to China or Mars. Unless you work for the company and make a salary, why would one pursue a suboptimal strategy?
    Oh-and I'm definitely not 'crying uncle' this morning. Nor am I doing a victory dance-it's just another probability play-another 'day at the office.'
    Jun 15, 2015. 11:04 AM | Likes Like |Link to Comment
  • Share Your Best Pair Trade And Compete For Big Prizes [View article]
    Well, I've thought about a pair trade. After making it to Atlanta last week to see the Rolling Stones, I think I'm eternally long Mick Jagger and short that Pit Bull character.
    On a less serious note, I've thought about a 'pair trade' but I haven't implemented that strategy in decades. The obvious and often cited negative is that one can be wrong both ways-and if you have some insight as to why ABC is better than XYZ, isn't it better to allocate your allotted chips accordingly?
    Having noted the basic criticism of pair trades, I do incorporate that thinking in a different way. Essentially, every instrument and every characteristic of that instrument is time-sensitive. So, in a larger sense, it is time itself that becomes the greater variable-and that which presents the greatest opportunity.
    For instance, we can be both long and short ABC by calendar spreads and other derivative strategies. We can even 'pair trade' one unit of time (years, months days), against another time. And we make the nuanced decision based on our best probability distribution and whether we note some skew or gameable advantage between and among the time differences.
    We also have to be cognizant of macro moves-now more than ever-for we've all lived through the 'risk on/off' matrix where virtually all stocks drop on adverse macro news. This is part of robotic trading, and I think we are just on the cutting edge of AI and having to match wits with super computers that create short-term volatility-just for the contrived opportunity to maximize profits out of the ensuing chaos. In short, it's the raw human emotion and biases which have evolved over time, pitted against emotionless machines that have no use for traditional concepts of 'value.' In short, I'm now convinced that there is a 'game within a game'-another dimension cloaked by a combination of a general unwillingness to accept that our institutions are flawed, and the rise of extraordinarily gifted systems designers perched atop this new technology.
    Or perhaps I'm still recovering from last week.
    Jun 15, 2015. 10:47 AM | 2 Likes Like |Link to Comment
  • Netflix Shorts Cry Uncle [View article]
    I trade NFLX both ways. If it pops for some reason, as it's prone to do, I buy an ATM put and sell a lower strike put to partially fund the long put. If it's down, as reflected in the last couple of days, I will either buy a call and sell a further otm call, or buy a call a few months out and sell a call closer to expiration. I have also shorted the stock and sold puts and bought calls. The good thing about NFLX is that option premium tends to be quite high, and the price of the stock allows for many different strikes. If they split the stock, this part of the strategy won't be as flexible.
    This is a good gameplan for volatile stocks that have a decent volume. I do the same with BIDU and some others-although BIDU seems to be spinning around in the mud a bit lately.
    Jun 12, 2015. 02:07 PM | 1 Like Like |Link to Comment
  • Greek Court Suspends Gravity [View article]
    I try to keep abreast of what's happening financially in the 50 states-at least from a headline perspective. The humorous item I came across recently was Alabama. Seems they have a $250Million budget shortfall, which has elicited support for a state lottery. One would think that prior opposition came from organized religion-not really a major factor. Bingo and lottery are being opposed by Indian tribes, who have been blessed with a gambling monopoly. But, the funny (or sadly absurd) thing is that the tribes have publicly agreed to make up the deficit-if the citizens would just leave the gambling to them. As a side note, their prisons are 197% of capacity, the teachers have opposed a very modest increase in insurance premiums and social services/public pensions continue to mount. Increased taxes on small business seems to be the solution.
    Jun 12, 2015. 11:03 AM | 3 Likes Like |Link to Comment
  • My Pair Trade: Short Palo Alto Networks / Long VASCO Data Security International [View article]
    I enjoyed reading the article-cybersecurity is an area I haven't spent much time with.
    But, here's a broader question: what can go wrong with a pair trade? Well, of course, one can be wrong and losses mount (or paper losses can accrue forcing one to make adjustments).
    In your case, with the existing pair trade, why not utilize a long straddle. This is actually a pair trade with one stock, or it can be used for two stocks. The only issue is to cover the premium on one side, but isn't that insurance against the risk of being wrong on the stock pair trade?
    Jun 9, 2015. 09:44 AM | Likes Like |Link to Comment
  • Share Your Best Pair Trade And Compete For Big Prizes [View article]
    Neat idea-can I use options to establish the 'pair' and can you donate my winnings to the humane society- you can choose a local site?
    Jun 7, 2015. 10:05 AM | Likes Like |Link to Comment
  • Looming Rental Crisis In The United States [View article]
    According to a comment a few weeks ago, home building is set to 'bust loose' this summer. And, home builder confidence is 'surging'- so not sure what you're worried about.
    Jun 7, 2015. 09:49 AM | Likes Like |Link to Comment
  • Greek Tragedy Rocks The Markets - What Next? [View article]
    Phil, I tend to agree with you. My observation is that the vast majority of articles (or whatever form of dissemination) is similar to reading a newspaper. Except, of course, the 'Letters to the Editor' are communicated almost instantly. So, all that really happens is that most people read through the 'daily paper' and fire off an ad hoc comment. And so, we end up with a blend of pseudo-journalism and arm-chair advice from Ann Landers.
    The world is full of Monday morning quaterbacks and rowdy spectators, but there are very, very few elite athletes. I admire people that cut the crap and let their game do the talking. But, then again, how many people are really good at this game, and how many are content to just sit in the bleachers?
    Jun 4, 2015. 04:07 PM | 2 Likes Like |Link to Comment
  • IMF calls on Fed to hold off on rate hikes [View news story]
    Let's suppose for a moment that the optimal strategy for anyone and everyone is to buy inverse ETFs. Now, everyone is ready for the inevitable-right? And, everyone makes a fortune.
    Are inverse ETFs simply a substitute for puts? Is volatility actually distorted by increased utilization of these inverse ETFs?
    Is there a scenario where the seemingly optimal strategy merely results in market stagnation? If everyone seeks to find the Nash Equilibria, (which assumes almost perfect knowledge), what happens?
    The market began to accelerate up in 2009, once the majority of players became convinced an infinite amount of liquidity would assure a one dimensional bet. What countervailing force could achieve the reverse direction with the same degree of assurance? The rational perspective would relate to net PV-where interest rate instruments trumped equities (adjusted for risk). And then, is there not an eventual equilibrium in this context?
    Ultimately, do we not have to assume that the majority of players are ignorant as to their optimal strategy-in order for our inverse ETF strategy to really pay off big? For if we now seek to exploit the 'time of fear' as opposed to the 'time of greed', do we not need a multitude of frightened little lambs to run to their mommies?
    It would be a bit easier to plan-if we confronted a true Darwinian world. But our sheep have struck a deal with the devil. And that renders Nash (RIP) perspectives a bit problematic.
    Solution: put ratio backspreads.
    Jun 4, 2015. 03:46 PM | 1 Like Like |Link to Comment
  • Friday Is Judgment Day In Crude Oil's Financial Cold War [View article]
    It's refreshing that you provide specific strategies-and take the risk/reward.
    I've changed tactics a bit over the last few weeks-although I still use USO/UCO and SCO.
    The odds of any significant/sustained direction at this point seem well below even money. Thus, I use a variety of spreads designed to capture option premium-not so much to play for directional gains.
    I would share the info, but the problem is that I may make minimal adjustments-or several-within a short time period. The good thing is that either short or long positions can be modified, and gains can be had in many ways. For instance, I sold some SCO puts at the last oil uptick-and that is looking good. I'm now thinking about selling some USO puts. If oil drops and I allow USO assignment, it's like buying a house that I can rent out for a week, month, year or longer.
    Jun 4, 2015. 12:24 PM | 1 Like Like |Link to Comment
  • The 'New Economic Era' Is Coming Sooner Rather Than Later [View article]
    Wait a minute! Stop right now!
    If consumer confidence is up, homebuilders are happy, buyers are coming out of the woodwork, the market is not really over-valued, companies can't find enough workers-and we can't raise interest rates by a teeny-weensy, paltry fraction of a fraction??
    Is there some logical inconsistency hidden just out of pre-frontal cognition? Or do we just keep singing "Don't Worry, Be Happy"?
    Or have we found inner peace and tranquility in this new equilibrium of wine and roses?
    Jun 2, 2015. 12:33 PM | 1 Like Like |Link to Comment
  • Why Zillow Is Still An Incredible Growth Machine After The Merger [View article]
    MLS is integrated with all agents. Agents have to be a member of their local MLS (that's what I'm told). What this means is that when you list a home with an agent, that agent immediately submits required data to MLS. All other agents (a buyer's agent, for example) will look for info on MLS-not Z. So, MLS data is the most timely and accurate. In fact, agents can be penalized if they don't stay on top of changes. Z, on the other hand, can have info that's YEARS old.
    In other words, MLS data is the unequivocal 'go to' information. Further, MLS has improved their service by allowing data integration by which to give accurate comps and real-time competitive information. The only way that can happen, is for real estate agents to submit that information to start with.
    So, if you're in a neighborhood of 300 homes-what are the relevant questions if you want to sell your house? What's it worth, of course.
    Access to MLS allows an agent to instantly determine what's sold, when, how much, how many square feet, etc. And, to also compare existing listings-how long on market, how many price reductions, etc. The software can actually provide a rudimentary appraisal of your house, given the existing data. Z is not even close to that capability.
    Finally, Z can't provide the peculiar local knowledge that is still so vitally important in dealing with real estate.
    If you over-price or under-price your house, you make a poor decision. If you don't handle the advertising correctly-you can lose sales opportunities. A good agent can negotiate price and deal with repair issues-not to mention dealing with contract forms and various addendums and exhibits.
    I always use an agent-just to have a buffer between me and the seller/buyer. Z just can't do a fraction of what's required in handling a real estate transaction.
    Jun 1, 2015. 09:47 PM | 2 Likes Like |Link to Comment
  • GDPhriday: QE Doesn't Work, Now What? [View article]
    Well, yes-I'm beginning to think that what we toss around as the 'middle class' may have been a fluke anyway. I suppose time will tell.

    May 31, 2015. 11:23 PM | Likes Like |Link to Comment
  • U.S. Households Under Pressure: Stagnant Incomes, Rising Basic Expenses [View article]
    Wait a minute-I'm totally confused. The experts at the University of Michigan reckoned that the consumer confidence index was up, and virtually all the real estate experts are predicting that home prices are getting ready to go to the moon.
    Riddle me this: if median income is declining, how do home prices go up?
    And why are males aged x to 54 losing traction in the job market? Does this represent a decision to just let their girlfriends bring home the caviar? Just a few years ago, it was the male that brought home the bacon. Have males decided to watch ESPN 24/7? I was never that smart.
    I suppose that if I had to open a small business, I would open a pet boutique, hire a few millennial chicks, and stay in the back office trading options.

    Well, I thought about it, but just didn't want the liability of millennials drinking wine on the job. So, I'll just continue to donate to the humane society and trade options from the veranda.
    Advice to male millennials: work on your golf game-Rory and Ricky are doing fine.
    May 31, 2015. 10:36 PM | Likes Like |Link to Comment
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