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  • A Fork In The Road For XIV  [View article]
    Did you mean theta decay?
    The term "beta" isn't a component of the option pricing model. It is, of course, a term applicable to stocks.
    Theta is unique to options, as an option will gradually shed its value. BUT, unlike an option to buy real estate, theta can be 'trumped' by sudden shifts in volatility. Of course, an option to buy a parcel of land could triple in value, if, for instance, an unfavorable zoning decision was over-turned on appeal.
    Your idea, though, which is to buy UVXY puts after a VIX spike, is certainly worthy of consideration. Bear in mind, though, that you have to cover the strike and the premium before gains accrue- and this must happen within a time period.
    What is the most important issue? That relates to expected value over time, and that, in turn, is probabilistic. And again, the option seller has the advantage. It's no small coincidence that large institutions sell options. Or, to frame the issue this way: would you rather own the casino, or feed the slot machines?
    Sep 24, 2015. 11:57 AM | Likes Like |Link to Comment
  • A Fork In The Road For XIV  [View article]
    Yes- selling far OTM calls can be quite lucrative. The variables and equations that comprise the BS model, are...equations. Reality can only be approximated. So, the light at the end of the tunnel could turn out to be a harmless firefly- and not the proverbial 800 pound gorilla. If the early indications suggested placing a bet on the primate, the price of those OTM options surged with gamma- driving the price quite high. As we approach the end of the tunnel, only to discover a harmless insect looking for a mate, the resulting gamma crash, as well as theta decay, will reward the seller with stellar returns.
    If we had martingaled our position at a point in the tunnel, just moments before we observed the firefly, we really juiced our returns.
    So, I like the strategy suggested, and certainly encourage those interested to take a closer look.
    Sep 24, 2015. 11:25 AM | Likes Like |Link to Comment
  • A Fork In The Road For XIV  [View article]
    Seems counter-intuitive, but the idea is to nail the spike. If one accepts the premise that panic/fear always recedes, or even moderates, the strategy is to short volatility at the darkest moment. Likewise, one gets long volatility during the calm, sunny days.
    Every market crisis, without exception, has always moderated. Whether it be October, 1929, Pearl Harbor, dot.com bust, financial crisis of 2008- all of these events become compressed memories, and part of cultural lore.
    And, perhaps the most important issue hasn't been discussed. In general, 70% of all options expire worthless. I greatly increase even those odds when I nail a spike. Note that the option seller simply wants to "run out the clock"- not predict future events. Also, establishing an initial position is the opening gambit- there are thousands of ancillary moves available to the chess master- and options strategist.
    So, I see fear ( for lack of a better term) as the time to strike.
    Sep 24, 2015. 10:45 AM | 5 Likes Like |Link to Comment
  • A Fork In The Road For XIV  [View article]
    VXX ETF best for selling calls. Volume results in low bid-ask, easy execution.
    Good luck.
    Sep 22, 2015. 06:14 PM | Likes Like |Link to Comment
  • A Fork In The Road For XIV  [View article]
    The most consistent strategy for choppy markets is to sell VIX calls. Use historical volatility as a rough guide, and be prepared to implement Phase 2, Phase 3, etc. Smaller accounts can add an OTM long call to control risk to the penny. It also preserves margin and facilitates moving to the next phase of your strategy. In using options, one can quickly calibrate risk/reward, and control a complete array of strategy sets. Most of you don't have the time or inclination to worry with contango, backward action, etc. Why try to solve differential riddles with algebra, when options provide the elegance of calculus?
    Sep 22, 2015. 03:34 PM | 4 Likes Like |Link to Comment
  • The Time To Hedge Is Now! Junk Bonds Fall To Continue  [View article]
    Good ideas. The put cost can be mitigated by selling calls, or using bear call spreads- or perhaps selling a lower strike put. And, you need not limit yourself to one strategy. Further, any strategy can be changed or dynamically managed.
    Sep 14, 2015. 11:16 PM | 2 Likes Like |Link to Comment
  • Yes, Of Course The Fed Will Raise Rates - Here's 6 Reasons Why  [View article]
    A gut-wrenching raise, with much assurance that future increases are somewhere in the distant future. It's not the first increase that matters nearly as much as the probability of step- wise moves that have characterized the past. So, expect the language to reflect a heavy dose of melancholy, if not tears of chagrin, relative to the same old song and dance.
    Sep 14, 2015. 11:01 PM | 1 Like Like |Link to Comment
  • U.S. Housing Market Set To Boom On Demographic Trends  [View article]
    The idea of "ownership" is an illusion. As a boomer, I've "owned" a lot of houses. The fact is that "owners" continue to pay "rent" via property taxes, insurance, HOA fees, repairs and capital expenditures.
    I've concluded that ownership of a unit consisting of bricks, boards, concrete, etc is far more of a cultural/ anthropological issue than an economic one. In my time, it's been quite the status symbol, and living behind guarded walls strikes some as offering a degree of safety.
    The vast majority of younger guys that I strike up conversations with have zero desire to join the homeowners cult. On the other hand, females are just the opposite. So, I predict that a substantial number of young guys will eventually find themselves mowing their own little lawns one day, adding a plumber to their 'favorites' and, in a moment of reflection, wonder what the hell happened.
    Sep 13, 2015. 02:07 PM | 1 Like Like |Link to Comment
  • Will We Hold It Wednesday - Strong Bounce Edition  [View article]
    I call this strategy a " truncated synthetic long"- truncated because of the short calls.
    I'm ok with naked puts because one can double down on short stock- assuming the trade isn't on a stairway to heaven. But, even if it is, the bull call spread, while seemingly simplistic, is often difficult to manage.
    So, my comment relates to bull call spreads in general. It's not enough to understand what the max/ min option calculator tells you. It can't provide an array of expected values, and it can't tell you "when". Gamma often precludes a linear assessment- meaning that the bull call spread might actually show a loss, even if the underlying appears up or stable. Also, owning an expiring bull call spread where expiration coincides with earnings can be a challenge.
    I've only scratched the surface on the subject, but enjoyed article and comments. It's refreshing to read about specific strategies and not whether TSLA will take over the planet next week.
    If you have any questions on options strategy, call me at BR-549.
    "Good night Chet."
    "Good night David."
    Sep 9, 2015. 09:01 PM | Likes Like |Link to Comment
  • Bill Gross: Sizing Up The Global Economy  [View article]
    Interesting. I was playing "pickle ball" last night, when a loud scream from the adjoining court interrupted our game. Seems a lady was terrified over a rather small, harmless spider.
    "One of you guys come KILL it- quick!"
    My partner was a former NFL football player. "Lady, even the smallest of things has a right to live," he replied. He put it in a small cup and took it outside.

    Pickle ball is a game for us aging folks that can't get around much anymore.
    Sep 2, 2015. 10:02 AM | 4 Likes Like |Link to Comment
  • Toll Brothers: A Time To Buy Housing Stocks  [View article]
    Well, I did a triple down short on ITB at 29.50 and made a ton today. But how many times have I raised this trade idea? All I can do is state what I've done with great success for many years.
    "You can lead a horse to water..."
    Sep 1, 2015. 09:57 PM | Likes Like |Link to Comment
  • The Math Of Shorting Treasuries Through ETFs Is Highly Compelling  [View article]
    Agree with premise of article. What I do is sell puts during a typical flight to treasuries. Most expire worthless and I keep the premium. A few times I've rolled out. It's simple enough to look at an option chain and determine a point where rates are not likely to go.
    It's a rare event- and the only downside is being underwater a few bps for some period of time. Calls can be sold against TBT to balance or offset the bps discrepancy. And, this is a unique play where doubling down will pay off. IF the next Fed move has to be an increase, THEN there is one and only one logical move.
    Of course, we must allow for the chance, however remote, that a meteor could strike Earth.
    Sep 1, 2015. 01:52 PM | 1 Like Like |Link to Comment
  • T.S. Eliot, Stock Market Guru  [View article]

    "Phlebus the Phoenecian, a fortnight dead
    Forgot the cry of the gulls, the deep sea swell, and
    The profit and the loss"

    From 'Death by Water' which is (I think) Part iv of "The Wasteland".
    Sep 1, 2015. 09:58 AM | 1 Like Like |Link to Comment
  • Rigor Mortis Of The Robo-Machines  [View article]
    Let me not to the marriage of technology and derivatives admit impediments,
    Profit is not profit which alters when it alteration finds-
    Sep 1, 2015. 09:34 AM | 8 Likes Like |Link to Comment
  • How To Handle Market Crashes  [View article]
    The issue is simple, and has always been simple. The vast majority think within a one- dimensional construct. I'm reminded of the commercial where some guy is bragging about having 14 drivers in his bag- and off he goes to play the game, seemingly oblivious of the disaster that is certain to follow.
    It's mathematically impossible to optimize one's market returns without utilization of all the tools and strategies available. And the solution is definitely not having surplus cash available to further engage in sub- optimal moves.
    Of course, I fully realize that I might as well ask my dog to sing his favorite Sinatra song, as to expect any changes in human rationality.
    Sep 1, 2015. 09:24 AM | Likes Like |Link to Comment
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