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  • Contango Unchained: How I Learned To Stop Worrying And Love The VIX [View article]
    "Bet Kelly' and various martingale strategies can be combined with option strategies. Look at SVXY/VXX today. A double down every day from the correction of the correction would have been enormously profitable for VXX holders today. What the market has that can't be factored in Kelly is ergodicity-the propensity of price points to 'orbit' or return time and again to any point in a price plane. Price points don't gallop away from us in a linear construct-like a comet they circle around again. Granted, the redundancy appears random-BUT, if it were easy, well...you figure it out.
    Feb 19 06:33 PM | Likes Like |Link to Comment
  • Loeb's BlackBerry Purchase Is A Major Catalyst And A Vote Of Confidence [View article]
    corstr-I'm not 'bullish' or 'bearish.' I just try to be on the right side of human emotion. I know from many years that a stock will exhibit certain characteristics, at certain intervals or times. In some sense, 'everything old is new again' is a theme that repeats many times during the course of a day. Or, if you like movies, the market is a lot like "Groundhog Day".
    As a CPA, I might say that risk is limited to net book value. But, what type of risk? To me, a risk is simply the perception that others have in common. But, I'm not a one-dimensional market participant. My risk is always that I momentarily forget that the world is populated by an irrational species. Thus, I ALWAYS have a counter-weight. If the horses are running, and someone says "I'll take the bay," I'm likely to lay odds on the bobtail nag.
    You ask if I believe in the long-run bull thesis. You see, I don't have a clue as to what the long-run is, or where to find it. The long-run is like some "never-never" land, where Dorothy and Toto can glide forevermore down the yellow-brick road.
    What I have instead are strategies that have a very specific time table. And, I can measure the results and make appropriate adjustments-if needed. But, it's only fair to say that I started managing money in my early 30's, and I've studied options since my mid-thirties. I'll also admit that my philosophy of the market is very unorthodox. To me, it's simply a continuous game theory phenomenon, where a multitude of decision makers are constantly making random decisions, based on biased and impertinent information. Or as the Bard put it, we all...'- strut and fret our hour upon the stage-'tis a tale told by an idiot, full of sound and fury, signifying nothing.'
    Feb 19 02:50 PM | 1 Like Like |Link to Comment
  • Loeb's BlackBerry Purchase Is A Major Catalyst And A Vote Of Confidence [View article]
    So far, I'm dead on target. Sometimes, if not all the time, it's just all about human emotion and behavior.
    Feb 19 02:19 PM | Likes Like |Link to Comment
  • The Smart Trade For Tesla's Earnings [View article]
    That's a great point about the theta aspect. This can happen when options expiration coincides with earnings announcements. If you stumble across a similar situation where a company is not scheduled to announce, you can invariably conclude that "somebody knows something." Can be a good indication of inside information that's not quite 'inside.' These options will drop like an anvil unless the OTM options reach and exceed the given price point. Missing by even a small amount will cause the air of IV to escape, causing a total collapse. It's a beautiful thing when it works in your favor.
    Feb 18 11:41 AM | 1 Like Like |Link to Comment
  • Investor Jujitsu Part 1: The Volatility Dividend [View article]
    I've been pair trading options almost since the inception of these amusing diversions. If I recall, I gave a rather lengthy comment on how to establish competing iron condor trades, and then make adjustments as needed. The options are still priced based on the BS formula, so the 'beta decay' that you mention is theta decay in options terminology. There is a very specific formula to calculate theta. But, the actual price of an option at any point in time is a blend of several different equations. I tend to utilize FAS/FAZ because of low bid-ask and plenty of volume. Also, I can incorporate a bank stock that's part of the index if I need to.
    I tend to set parameters ahead of time, and then wait. I 'spike fish' on just about every option trade-even on pair trades. But, to learn how to do this is very inexpensive. A total newbie should sell a bear call spread and a bull put spread against either FAS or FAZ, and observe the option activity. A more enterprising fellow might establish iron condors on both ETFs. More excitement is created by viewing the matched iron condor set as a 'team' that plays against another leveraged product. The objective is to have all the short options expire-or return an acceptable profit. This is not as easy as it might seem, that's why I deviate from the rules a bit and establish one side or the other. To me, I can increase the odds (of double expiring profits), by legging in.
    I seldom use the actual shares-unless I want to create a 'de facto' delta neutral state for uneven positions. (I forgot to note that one doesn't have to have a perfect iron condor formation).
    Happy hunting!
    Feb 18 11:21 AM | Likes Like |Link to Comment
  • Airline misery continues as snow storms pound on [View news story]
    Most airlines had entered the stratosphere, and were headed to the dark void of space. Sold calls on DAL last week-taking partial profits today.
    Feb 18 10:40 AM | Likes Like |Link to Comment
  • Consequences Of A Farmland Bubble, And Who Gets Hurt When It Bursts? [View article]
    In reading the article, I'm not so much thinking about the prima facie case of ethanol use, but rather the exponential repercussions of limited foresight. In a larger context, the issue is more significant than the particular subject.
    Further, I don't require an author to limit his thoughts and exposition to allow for some common denominator of interest level. I spent almost 30 minutes reading and thinking about the material. Many papers that I read exceed 50 pages. My mindset is that if I'm going to spend the time, I simply want the author to state the issue and then support by the available and appropriate evidence-pro and con. And, it may well be that the issue raised is not resolved. Indeed, others may raise ancillary issues that are profoundly important. In reading other articles by this author, he strikes me as one that treats the evidence impartially. I for one, greatly appreciate the time and research. I've written a lot of reports/papers/legal briefs in my time, and it requires a rather intense effort.
    Feb 18 09:08 AM | 3 Likes Like |Link to Comment
  • Loeb's BlackBerry Purchase Is A Major Catalyst And A Vote Of Confidence [View article]
    Changing the symbol from RIMM to BBRY did not reduce volatility. I noticed though that the short term puts have been priced high relative to the LEAPs. So, a few months ago, I bought LEAP puts and began selling weekly expirations. I suggested that others do the same in a "Stocktalk" several weeks ago.
    As a general rule, a lot of folks sell calendar call spreads-not much attention is given to put calendar spreads. But, the increased volatility keeps the longer -term long puts at a stable value, while the weekly short puts have had a propensity to expire like clock-work. Actually, my strategy is technically called a diagonal spread, in that my strategy has been to sell in-the-money puts. And, while it's certainly possible to be assigned the shares, it's only happened once-this Friday. The basic idea with this type of strategy is to (a) generate enough option premium to pay for the long options, and (b) continue to sell the short options, as each dollar collected now goes straight to the bottom line. In some sense, it's like buying a rental property. Once one collects enough rent to satisfy the mortgage or recoup the investment, the future rent payments will be mostly profit. Of course, with options, I can buy several different types of 'properties' and determine the 'rent' and 'tenant risk.' And, of course, I never get calls about frozen pipes and noisy neighbors.
    Feb 17 09:28 PM | 1 Like Like |Link to Comment
  • Japanese economic growth disappoints [View news story]
    ok-a morsel worthy of consideration: but could you provide a bit more on the term 'speculative excess' please. And, how do you see the correlation between the yen carry trade and equity markets? I suppose part of the answer must relate to the actual size of the yen carry trade (actually I don't 'suppose' but interested in your take)-
    Thanks.
    Feb 17 09:07 PM | Likes Like |Link to Comment
  • Market Outlook - Bullish Pivot [View article]
    Fishfryer, there's never been a cozy correlation between the 'market' and the 'economy.' In theory, one person could own all the stock, but an economy is a mixture of culture, various templates of free enterprise or capitalism, and demographics. The top 10% can own most of the stock and trade back and forth, creating an illusion of 'prosperity.' The superficial take is that earnings yields value or price. Yet, it's still a game, with rules set within a few generations. There is minimal history associated with stock markets-compared to all of human history. It's just difficult for us to really conceptualize history as it unfolds before our eyes. You mention the next meltdown in 18 to 24 months. But, for every meltdown, there is a melt-up. So by the year 2020 we would have just another instance of human frivolity. In 2020, the same folks that are said to be bullish, will be out blowing their horns again. The so-called bears will reiterate their same old tune. What may be of some interest by 2020 is the demise of what has been called the 'middle class.' Perhaps by 2050, the 1950's will be viewed as some historical aberration. The fractal forces at work today will follow the projected patterns. Every long run must be comprised of a series of short runs, but any change of an extraordinary nature will surf the short run wave. It will crash, re-energize, and crash again-and again. So, we are very early in the age of central planning. What can our species hope to accomplish in the centuries ahead? We only have our brief hour upon the stage-yet the time devoted to the contemplation of what markets will do a mere few months from now is beyond amazing. I suppose if the Romans had a stock market, and forced traders to compete in the coliseum, much like gladiators fought to the death, I might understand the modern angst. Oh, I'm guilty too. But I do my best to simply sell seats in the coliseum.
    Feb 17 08:28 PM | Likes Like |Link to Comment
  • Summers: U.S. risks becoming a Downton Abbey economy [View news story]
    When I was a grad student, I wrote a paper entitled "Maldistribution of Income As A Factor in the Great depression." One thing I learned was that I didn't want to be on the 'maldistribution' side. It's not a new issue. It's always been around-except where ruthless dictators looted everybody. And, in those cases, we still see the folks at the pinnacle taking the resources. North Korea is a modern example.
    This can best be studied and understood, not so much by economic theory, but anthropology and psychology. Man has tried communism, socialism and various other isms throughout time. As of yesterday, there was no answer to this testy little issue. Of course, there's always today, and if not today, then surely tomorrow. We all know that 'tomorrow's another day' We probably should have a government agency conduct a feasibility study-that will show we're serious about the whole thing.
    Feb 17 10:54 AM | 2 Likes Like |Link to Comment
  • Market Outlook - Bullish Pivot [View article]
    I don't see a drop in existing home sales as a problem. Almost across the board prices have increased-some substantially, but most quite moderate. The issue is determining a correlation with income and wages, absent the extraordinary one-off impact of various funds buying retail houses-for the first time in recorded history. A modest price point will likely be more profitable, and allow real buyers to participate.
    But, as Doris Day noted, 'whatever will be, will be.'
    And what will be for me is to short ITB at 25. Hasn't failed in quite sometime.
    I don't know about alarm bells going off-not since the 6 o'clock alarm never rings.
    Feb 17 10:31 AM | Likes Like |Link to Comment
  • Contango Unchained: How I Learned To Stop Worrying And Love The VIX [View article]
    Currently near Naples-not into South Beach. Had a couple of beers after golf-don't like umbrellas in my drinks anyway. I have previously indicated the amount of money I made regarding this topic (see the article by Peter Way on SVXY).
    I only mentioned it to show the validity of shorting volatility. The idea is to help others. Admitting that there is always more to learn is the first step in acquiring wisdom. Shorting volatility is quite different from anything you'll ever learn in accounting or finance. But, it's a lot easier.
    Don't overly fret about buying VXX-you can buy SVXY and treat the VXX shares as a 'de facto' call against SVXY. You can also sell VXX calls against your shares. I absolutely promise you that there are several ways to turn the VXX purchase around and make money.
    Feb 16 10:25 PM | 1 Like Like |Link to Comment
  • The $500 Apple Put: Backing Up The Truck On Buy Backs [View article]
    I didn't notice any specific advice. But, if one believes the 500 put thesis, the JAN 15 2016 500 PUT can be sold for 61.50. That's 6k in your account now. If one feels the need to hedge a bit, the 300 put can be bought for 5.10, leaving the trade with a max profit of $5,320, and a max loss of $14,680. Of course, the loss zone can be hedged as well by shorting the stock along the way. Or, one could buy another put, which would cut into the $5k gain-but maybe that's ok. Or, one could spend about $6,300 and buy the put, and sell the weekly puts for income. The idea here is to sell enough weekly premium to amortize the cost of the long put. Once that's accomplished, the remaining time will kick out positive cash flow. Personally, I generally prefer to sell option premium, but there are times where volatility skews dictate the reverse. If you intend to purchase 100 AAPL shares and you accept that risk, then I would strongly consider selling the LEAP put.
    No charge.
    Feb 16 09:37 PM | Likes Like |Link to Comment
  • 3 Reasons Bears Never Prosper [View article]
    Saw him for the first time in the 80's, then again in the mid-90's. He's still touring.
    Feb 16 08:37 PM | Likes Like |Link to Comment
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