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  • Shorting The VIX: How To Protect Profits In A Volatility Spike [View article]
    I think it's important to determine whether a volatility instrument is intended as a hedge, or is simply a gameable construct standing alone. Of course, it might be both, but then we have to ask if that's an optimal use of resources and time.
    As David noted above, we can collar an existing position-but we must have in mind some desire to 'hedge the hedge'-and if that's the case, do we not begin to 'chase our tails?'
    Because a lot of these creations are quite new, it's been tempting to experiment with various strategies. But, again, nailing any directional move will produce better returns. But, to take another look at a vix collar, it might be rather profitable to trade dynamic collars, using the shares to hedge the leverage we gain from using options. In this sense, we simply use the shares to prevent the short call from exploding in our face. What we prefer is to have volatility drop immediately after we institute the collar. We double dip by collecting on both the short call and long put. And, we simply re-load our collar at the next spike and have another go at it. We can do this for days, weeks, months...years.
    My thinking is that option strategies are necessary to avoid having two antithetical positions clash with each other; and, my preference is to collect option premium irrespective of the instruments used. The reason is that income will accrue via expired options, and this can be considerable over time. I would note that it's fine to hold (for time periods consistent with a given price target), shares of say, SVXY. And, this can be 'hedged' with a UVXY short put spread. The maximum gain/loss is known on the spread, and it's also known that a decrease in SVXY will assure a winning UVXY spread.
    And, it's certainly possible to open/close SVXY shares (should the market allow that kind of trading), and one can add shares as well. A consideration at this time with the UVXY put spread is, as noted in the article, volatility is historically low. So, there's a probability component here as well-I mean, does volatility dissipate and vanish in this orchestrated market? Well, thus far human emotions have not been eliminated-so, we have to's just a matter of time. It's that time factor that we want to yield additional returns.
    Mar 30, 2015. 10:45 PM | 3 Likes Like |Link to Comment
  • Volatility: Up She Rises [View article]
    Yes-the index tracks put demand/premium rates. "Fear" is somewhat of a misnomer.
    I suggested previously that the advent of various inverse ETFs have created a 'substitution' effect, thereby driving put premium down. This, of course, leads to a decline in the inverse ETFs (in addition to tracking error).

    And, riddle me this: If we have a Greenspan put, followed by a Bernanke put, followed by a Yellen put, etc.-why should one pay for additional coverage? (Tongue-in-cheek, of course, there's always the LL situation and mo stocks such as TSLA, OPEN, GPRO, BABA have their own volatile issues).
    Mar 30, 2015. 09:51 AM | Likes Like |Link to Comment
  • Sears Holdings: The End Game [View article]
    Any transfer made in contemplation of bankruptcy can be deemed 'preferential' whether 'fraudulent' or not. But, there are time limits on the rule.
    In reality, proving that a public company made a fraudulent transfer is quite difficult. The courts will not typically second-guess a management decision made in a transparent fashion.
    Is the actionable suggestion to short the stock? And, if so, whether to accomplish via long puts, short calls, or selling the stock (basic short)?
    What time frame is required to reasonably anticipate a desired return?I used to trade this stock, but have no position at the moment. Interesting article.
    Mar 27, 2015. 01:08 PM | 3 Likes Like |Link to Comment
  • When Beating The Market Is Not Enough [View article]
    I begin with the philosophical perspective that what most call the 'market' is nothing but a 'game'. The game is chaotic or fractal, to the extent that human behavior is likewise. It is also 'evolutionary' in that it has a bit of tit-for-tat learning inherent in its system. But, for any n time period, it is characterized by price ergodicity and mean regression.
    I no longer consider 'yield' to be a useful reference point (except in looking at certain probabilities), but rather establish strategy objectives for each strategy set. For example, I suggested on SA last summer to short oil. About 2 years ago, I suggested shorting the euro (using FXE). What I suggested with FXE was to sell a deep in the money call, and add an out of the money hedge. As part of the strategy, I suggested selling a near-term put spread. Adding the option premium (netting) would 'yield' a 'zero' net but only where it became necessary to reverse the 'dominant' move. What I really desired was to catch the increasing strength of the dollar, while capturing additional premium with the bounded short put play. The total dollar return was easily given via the option platform ($250,000). The risk, again was close to zilch-provided one allowed time to play out and made the few tweaks needed along the way.
    There are also cycles within this game that offer 'one-off' strategies, with enormous odds in one's favor. As soon as the Fed gave the assurance that it was, in essence, buying the 'market', I shorted volatility. This may prove to be a once in a lifetime opportunity.
    I also noted, I think well over a year ago, that I was short gold and coal miners.
    I'm also on record for noting (numerous times) that selling BBRY puts when BBRY was under 9 would produce stellar returns for several months on end.
    And, two days ago I noted that I was selling calls on NFLX (I knew the knee-jerk response would catch the shorts off guard). I did get out too early, but not without a big profit.
    If you really understand the few things I've pointed out, then you're ready to make some serious cash. But, what did I just note that is worth some reflection?
    (1) Governments can't help but be highly inefficient actors (governments consist of politicians)-which means that the economic system will reverberate with certain cycles which are a function of reaction/action by governments to 'solve perceived problems.' To wit, decreasing rates after 9-11, which encouraged the real estate/financial party-and then increasing rates to deal with a perceived problem, which fostered yet another problem, and so on and so forth. But, as our species became horrified, mortified, terrified at, not an impending alien invasion from an unknown galaxy, but a 'liquidity' issue, panic erupted. It's a scientific fact that we humans will seek a homeostatic equilibrium-we just can't keep our adrenaline maxed out for very long. Thus it was inevitable that our high blood pressure (called volatility) would be treated. I shorted volatility with a vengeance.
    (2) As Journey tells us 'the wheel in the sky keeps on turning...'-so there are always instances where stocks such as NUE, BBRY, etc become mired in a 'trading range.' There is a unique, and quite profitable, strategy to exploit this phenomenon: selling straddles and collecting premium from both sides.
    (3) For as long as I can remember, an 'upgrade' will create a rapid increase in the subject stock. The appropriate counter-punch is to short the uptick. For, if we assume that, at any given moment, all information is already known, and thus 'priced' in the subject, can it not be true that the upgrade information was already known? If not, then the entire discounting premise is false? (But that's another fairy tale for another time).
    (4) At least 4 times a year, we will witness a plane crash or an equivalent health scare-this will sink the price of airlines, and possibly increase the price of oil. There are certain 'embedded strategies' that are capable of exploiting this event.
    (5) IPO's are inherently subject to swift decreases after the initial love affair dissipates. Shorting things like GPRO, OPEN, BABA, etc, etc, etc, etc has been very profitable for me over the years. Of course, you can get in on the IPO, but your broker will not be terribly happy if you dump a large amount 5 minutes after the opening bell. IN this case, you need to collar the stock as soon as the options are available, and trade the collar for awhile. Then you close same, and short the glamorous IPO.

    So, it's all just an entertaining game. Plenty of strange and colorful characters, a wide audience and an abundance of poor folks that never got past Chapter One in the rules book. Hopefully, the above will give one something to contemplate.

    Mar 27, 2015. 12:49 PM | 1 Like Like |Link to Comment
  • Economic data shows Japan nearing deflation [View news story]
    Hi flash9- I think it was Paulson that so pathetically uttered that infamous phrase, but I've wondered if Bernanke had any inkling either.
    But, on another level, here's an interesting question: Given the elite talent and research/analytic firepower, how is it that the seriousness of the situation remained elusive? And, if 'they' knew about the 'situation' do we characterize the afore-referenced representations as (a)grossly fraudulent, (b) negligent representations, or (c) innocent representations of material facts?
    To me, it's more than 'who knew what, when'-that strikes me as an elementary distortion of logic. And, I find it incredible that, to this day, there is no real attempt to make a cause/effect distinction.
    Mar 27, 2015. 11:43 AM | Likes Like |Link to Comment
  • March Reuters/UofM Consumer Sentiment [View news story]
    Yes-data coincides with increasing use (and abuse) of prescription pain medication, and alarming rise of heroin use.

    "Don't worry, be happy!"
    Mar 27, 2015. 11:05 AM | 1 Like Like |Link to Comment
  • Chip stocks slump again after SanDisk warns; TSMC remarks in focus [View news story]
    I shorted SNDK on the most recent GS upgrade-about 2 weeks ago-I think. This took a little longer than 48hrs-but well worth the wait.

    But here's a long tip if you don't like shorting. BIDU is likely due for uptick. News about China hospitals pressuring BIDU is a bit of grandstanding.

    Buy the SEPT 18, 2015 240 CALL for about 600 bucks. This is an OTM call, so you're looking for gamma to really goose this strike price. Hold for about 2 weeks, and dump it if BIDU doesn't move up. If it does move up, set trailing stops.
    Mar 26, 2015. 02:25 PM | 2 Likes Like |Link to Comment
  • Airline stocks clipped by Yemen unrest [View news story]
    I'm shocked at the reaction! Well, I suppose it's some consolation that my perpetual short on airlines will pay off this morning.
    Maybe-just maybe-I'll consider buying a few calls with my short profits.
    Oops-getting ill just thinking about a long position in the airlines.
    The last flight I was on had several delays, and sported negligent parents that had no clue as to child management.
    I took a video of same, which I later showed to my 88 year old mother. She just shook her head in disgust.
    So, I like to be in touch with my elders. Reminds me of all the things sorely lacking in today's world.
    Now, if the homebuilders will upchuck this morning as well, I'm headed to the practice range.
    Mar 26, 2015. 09:36 AM | 3 Likes Like |Link to Comment
  • The Future Of Seeking Alpha, From One Contributor's Perspective [View article]
    I specialize in unique option strategies. All one has to do is go back and review my comments and study the results-it speaks for itself.
    But, I don't know if it's worthwhile to package this information for readers/subscribers. In other words, I've no clue as to the number of folks that have the requisite approval from their trading platforms/brokers to establish the suggestions that I would formulate. Secondly, setting up an initial position is perhaps the easier part-often the real money is made via dynamic management.
    I've noticed various internet services sprouting up over the past few years, but my observation would be to avoid.
    I have assisted several SA readers that have contacted me personally regarding options-and I'm happy to try to lend my opinion. What I've tried to do is provide relatively simple (and usually quick) suggestions, that most people reasonably versed and familiar with the strategic risk/reward dynamic can quickly implement.
    The feedback suggests that those of you following my picks have done well. Anyway, perhaps someone can explain how the accounting works. Nonetheless, I will continue to assist those that contact me, as well as to offer some quick and longer term plays.
    The more money you folks make, the more you can donate to the local humane society.
    Mar 25, 2015. 01:05 PM | 14 Likes Like |Link to Comment
  • Stress Tests Are Imperfect: Global Data Indicates GFC-2 Is Imminent [View article]
    I think we must back away from the narrow question, which seems to be a debate about whether the Fed should/should not engage in the aforesaid questionable practices. As David asked, in essence, what's the alternative:a matter of substance or process?
    Over the past few decades, society has changed centuries of human accountability, by virtue of shifting from a 'caveat emptor' to a caveat vendor' mentality, resulting in sweeping changes in all aspects of our jurisprudence and lives. The evolution of our culture shapes government policy. In a very simplistic sense, we demand spontaneous relief-from whatever 'ailment' we encounter.
    In a chronology, we must note that the initial debate was whether or not to create a central bank. Once society, via its political representation, made that affirmative decision, the printing press was born. The changes in technology over the past 100 years, combined with the interaction of momentous events, further laid the foundation for both financial creativity and abuse.
    And, along the way, we've crafted a system of 'capitalism' that reflects our shift away from caveat emptor. But, what variety of capitalism does society want? Why was the Sherman Anti-trust Act passed in 1890? Clayton Act 1914? We've created the FTC, EPA, SEC etc, etc, etc-all to fashion and enforce our capitalistic perspective relative to 'fair' competition.
    The Fed is a wheel within a wheel-a product of our culture and our conceptualization of free enterprise. Again, do we want Darwinian capitalism-like nature, "red in tooth and claw"- or do we wish upon a star for a more ephemeral blend of a revivalists' concoction-not too bitter, mind you, let's all be happy!
    Are there solutions to enhance and truly energize the human soul-do we seek to reach that star, however elusive? Or do we just flounder around, a trifle bored, neurotic at times. And, how do we really measure the success (or lack thereof), when it comes judgment day for our central planners? Unemployment? Inflation?
    Or perhaps we should ask whether we have the same vibrant middle class we had a few decades ago. Isn't that the sine qua non for all this government activity? Relative to the time, money and resources expended by government, where is the cost/benefit to the masses? Are children better educated and prepared to confront life's challenges and opportunities?
    So, the current riddles, which are trapped within the enigmas of our societal evolution, first require honest questions-then, and only then, can we tease out the truth.
    Mar 25, 2015. 12:26 PM | 1 Like Like |Link to Comment
  • The New Commodity Kings Making A Boatload In The Oil Market [View article]
    "...different set of ethics..."
    Ethical considerations are universal. And, I think it's fair enough to say that philosophers from Plato to Popper have conveyed to us a workable framework.
    I have the obligation to treat you with due respect, whether we meet in New York City, Berlin or Jakarta.
    Yet, the forceful insistence that the laws of one jurisdiction 'should' be imposed universally is a totally different proposition. I think that's where the US runs into a hypocritical maelstrom, breeding antagonism and disdain. And, asserting a supremacy predicated not on ethics, but legal expediency, displays a corresponding lack of ethics. Assuming the mantle of world leadership by interference and abject coercion can never earn the respect thus desired. Comity is a two way street.
    So much for political science. I'm all for the volatility. And, if I were a few years younger, I would be running my fund out of Buenos Aries.
    Mar 24, 2015. 09:42 PM | 5 Likes Like |Link to Comment
  • Short-Term Gains And Long-Term Disaster [View article]
    Quite interesting.
    It seems that we creep ever closer to a dimension contemplated by none other than Philip K. Dick. What is 'real' capitalism? What are 'real' investments? At what point do we separate illusion from reality? And, for reality, wherein lies our benchmark? Our bright and clear line of demarcation?
    In Dick's classic "Do Androids Dream of Electric Sheep?" (Ridley Scott's adaptation entitled "Blade Runner")-a device called the Penfield Mood Organ allowed one to dial up any emotional state desired (think central bank)-and in a world devastated by WWlll-finding and caring for a 'real' animal was a paramount objective. The main character, Decker, maintained an electric sheep on his rooftop.

    "He thought too about his need for a real animal; within him an actual hatred once more manifested itself toward his electric sheep, which he had to tend, had to care about, as if it lived."
    Mar 24, 2015. 04:26 PM | 1 Like Like |Link to Comment
  • Bank Of America: The Frustration Mounts For Shareholders [View article]
    A stock that 'languishes' can be an enormously profitable play. Rather than contemplate the stock's fate, or bemoan your dead money-sell straddles. BAC is not alone in this regard. Some other examples where I sell straddles are: NUE, BP, BBRY, MO and numerous ETFs (e.g. XLU).
    The cites relating to the research very revealing. Note the 23 year 'dead zone' re debt overhangs.
    Mar 23, 2015. 04:36 PM | 2 Likes Like |Link to Comment
  • Why Coffee Could Be The Best Commodity Performer Of 2015 [View article]
    Excellent points. In fact, one might consider selling the SEPT 18 2015 27 PUT (for a credit of 4.15), and using same to buy the SEPT 18 2015 23 call (3.80).
    If you eventually get assigned on the put, it will be at a price below the current level.
    Mar 23, 2015. 04:18 PM | Likes Like |Link to Comment
  • The U.S. Oil Bust Gets Uglier [View article]
    Good data in article, but use of terms 'bust' and 'uglier' are in the eye of the beholder.
    Every move-up/down/sideways-... ample opportunity.
    I'm happy though, that my fellow humans transfer their emotions to volatility spikes.
    I predict more knee-jerk reactions in the coming weeks and months-if not forever and evermore.
    Mar 23, 2015. 10:17 AM | 2 Likes Like |Link to Comment