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  • Contango Unchained: How I Learned To Stop Worrying And Love The VIX [View article]
    Again, great point. There are times when you can find a .10 spread, generally after a large fill. This is true with a lot of spreads though- once someone pays the higher freight, the opportunity sometimes exists to get a better deal.
    Feb 15 09:22 AM | Likes Like |Link to Comment
  • Contango Unchained: How I Learned To Stop Worrying And Love The VIX [View article]
    Excellent point! I would double down on SVXY before any stock.
    Feb 15 09:19 AM | 1 Like Like |Link to Comment
  • Contango Unchained: How I Learned To Stop Worrying And Love The VIX [View article]
    Hi Martin-I think the SVXY trade has been the easiest grand-slam of all time. And, just about any strategy enumerated above would have trounced the S&P. These products are new, yet they seem to proliferate. What occurs to me is that if market players are truly rational, they would find this strategy to be the optimal play. You raise an intriguing question-perhaps one that couldn't have been raised before this point in time. But, we may have the answer, at least in part, given by the observation that the VIX seems destined to trade at low levels. As traders, we need some degree of volatility to create strategic opportunities. But, when we all want volatility, even welcome it with open arms, do we not create a sort of paradox? For we now eagerly wish to ride the roller-coaster, confident in our knowledge that it will always return us safely of the gate.
    Feb 15 09:14 AM | Likes Like |Link to Comment
  • The Cash On The Sidelines Myth Lives On [View article]
    Money is as money does, wherever it is. Is there a propensity for 'idle cash' to pursue additional risk? I think the 'sidelines' comment is a time-worn, hackneyed expression aimed not so much at what might be an ambiguous future event, but rather given as solace to those that are current customers of major brokerages. Remember what Tolstoy wrote at the beginning of "Anna Karenina": "All happy families are like one another, each unhappy family is unhappy in its own way."
    Feb 15 08:40 AM | 2 Likes Like |Link to Comment
  • Bank of America cutting more mortgage jobs [View news story]
    I spoke with a Florida real estate agent recently, and he related that a lot of young couples were looking for homes. The concept or 'dream' of 'owning' one's home is still intact, at least among a section of younger people. But, of course, that conversation is hardly statistically relevant. Nonetheless (or nevertheless-can't recall grammar this morning)-it's encouraging that some are motivated and try their best, despite the economic headwinds.
    I trade several financial stocks and ETFs, so I'm ambivalent as to the stock price. I am bullish on young people that work hard and give it their best shot.
    Feb 15 08:28 AM | Likes Like |Link to Comment
  • Loeb buys into BlackBerry, shares +2% AH [View news story]
    Long via short puts, but watching flow indicates that's old news. Any spike acknowledging what has already happened will be short-lived. A real spike is predicated on totally unexpected, real-time activity.
    Thus, if you own the stock, you can sell calls. A spec play would be bear call spreads. Neither strategy is suggestive of longer-term activity. The idea, though, is to take advantage of event driven moves that come and go. Just like the days of our lives.
    Feb 14 06:59 PM | 1 Like Like |Link to Comment
  • XIV: How To Avoid A Disastrous Loss And Boost Your Total Return. [View article]
    Yes-the last couple of years have been anything but normal. Then again, with the Fed basically snuffing out volatility, SVXY was an obvious 'go to the moon' play. Logically, the easy money has been made shorting volatility-but it seems that the intent is to create a pain-free market, albeit with a zombie economy.
    I'm content to use various option strategies at this juncture to trade volatility. At the moment, I'm using what I term a 'net zero' protocol. Essentially, I'm just collecting option premium both ways. Odds are that we are mired in this sterile complacency-devoid of real energy and enthusiasm-content to run and hide like meerkats when we see the shadow of the hawk.
    Feb 13 02:50 PM | Likes Like |Link to Comment
  • U.S. Economy: Where Do We Stand? [View article]
    I would have thought that some retailers show better results-folks buying winter gear/more trips to Florida. (But stay away-too much traffic here now). For those of you that do drive to Florida: I don't mind if you pull out in front of me-just don't dawdle around-hit the pedal and move on. Go to a park if you want to look at the palm trees, gators and Flamingos.
    Feb 13 01:02 PM | 1 Like Like |Link to Comment
  • Do Naked Puts Trump Dividends For An Income Investor? [View article]
    Yes-the weakness in the comparison, and there are several, assumes a constant holding period. What has to be remembered about options is that premium fluctuates based on the BS formula. Thus, linear comparisons will always be difficult. But, if you asked me how to make a 'valid' comparison, I couldn't. The reason is that the tau component is a constant iteration, and while the binomial probability of an ATM delta suggests 50/50 at expiration, an event can quickly change the input. A simple observation that anyone can check is to make a theta forecast from t0 (the first day an option is available to trade), to tn (the expiration period-be it weekly, monthly or longer), and simply note that any projection of decay is not linear. Indeed, there are numerous instances where an option has as much value on the day of expiration as the initial trading day! (This can happen during earnings season or in times of market instability).
    IF the objective is to make more money than less, and to make said money in less time as opposed to more, I would trade the spikes as the comment above suggests. This does require a professional touch, so we should make that qualification. But, beyond that, there's a more fundamental problem with selling the longer-term LEAP put. It's at odds with the methodology used by the majority of option traders. Why? Due to a term already mentioned-theta. Again, decay is not linear. As an option approaches expiration, the decay, other things equal, will accelerate. This is why options experts advise that long call positions should exceed 3 months (although there are exceptions). Perhaps the better comparison would be to buy the stock, collect the dividends and compare with BUYING a LEAP put and selling weekly/monthly puts. Given the nature of options, I'm a bit surprised that selling the longer-term option compared as favorably as it did-but so much always goes into assumptions. For example, selling a LEAP put on an up day could have had profound implications, and significantly distorted the results.
    Feb 13 12:47 PM | Likes Like |Link to Comment
  • At The Money Or Out Of The Money: 2 Buy/Write ETFs Compared [View article]
    That would be interesting. What comes to mind is the utilization of LEAP options (long) and selling the monthly or weekly ATM or OTM. In this case, the LEAP is substantially less than holding 100 shares, crash losses are substantially mitigated, and the cost of LEAPs allows a fund to use both calls and puts. Furthermore, one can often find price skews, where the cost of the LEAP is cheap relative to the shorter-term option being sold. For instance, I've been selling BBRY weekly puts against LEAP long puts. Within a six week period, the profit/gains on the short expiring puts more than covered the cost of the LEAP puts. Going forward, I can sell shorter term puts for profit. I didn't buy the longer-term calls and sell shorter term, but no reason not to. I tend to pick puts for this because they typically maintain value better than calls.
    If this is ever implemented, it will put the buy-write ETFs out of business.
    Feb 12 10:06 PM | Likes Like |Link to Comment
  • J.C. Penney: No Borrow At Any Price. A Primer On Shorting [View article]
    I haven't bothered to look at JCP-I have enough short positions at the moment-including shorting volatility-yet again.
    But, for folks that don't short a lot, why not consider bear call spreads. That way, you absolutely know the best and worse case, and even if the stock stabilizes or goes up slightly, you still win by capturing the option premium.
    And, shorting the shares can be costly. If you want to take absolute risk via shorting, another way is to sell deep in-the-money options. Or, buy puts. Or utilize bear put spreads.
    Now, I will short the shares in a flash to counter-balance an existing option spread. For instance, several months ago I had an iron condor involving BIDU. The stock began its fall from the 170's, eventually dropping to the 90's (of course, I didn't know that was going to happen at that specific point in time). But, I closed the bear call spread for max profit, and then shorted 200 shares for each bull put spread. At the BEP for the spread, I reduced the short shares to 100 per position, and let that ride. I subsequently utilized OTM calls to hedge the short shares-eventually closing out around 105. The key is to press the accelerator to the floor-don't fool around. The reason is that weak hands will throw in the towel initially, and the true believers will hang on longer. You can skim the cream by hitting the short button very hard instantly.
    My 2 cents.
    Feb 12 05:09 PM | 1 Like Like |Link to Comment
  • The Marie Antoinette Rule [View article]
    Demand pull in a winner take- all vs Cost push.
    But look, the economy is better-it's just that the real folks (you know, your Uncle Harry, Jimmy, the ex-middle manager a few houses over that's been unemployed for 4 yrs, and counting)-can't seem to embrace this recovery with zest and enthusiasm. What the hell do they want? To have their cake and eat it too?
    Feb 12 10:11 AM | 5 Likes Like |Link to Comment
  • Worried About A Market Meltdown? Consider This [View article]
    A lot depends on one's adjusted basis in the portfolio, such that portfolio A could hold the exact same securities as portfolio B, but could have a history of entering the positions via put selling, and selling calls for several years. Portfolio B might show a far more passive history, and perhaps have a slightly lower basis just due to dividends. We assume capital appreciation is equivalent. Here, portfolio B has greater exposure, and requires more insurance to maintain capital.
    But, here's the real kicker: if portfolio B continues a passive strategy, even modest hedges will allow portfolio A to maintain an insurmountable financial performance, and continued basic management will produce enormous differences over time.
    Feb 11 03:09 PM | Likes Like |Link to Comment
  • Why Is The VIX So Low? [View article]
    The vix is supposed to increase as put premium increases. But, look at the sheer number of 'put substitutes' available. Likewise, the put/call ratio may be distorted, due to the same phenomenon. In some sense, inverse ETFs may be superior to buying puts.
    An example (and there are many) would be utilizing FAZ to hedge a group of financials. If I own a few shares of GS, C, BAC, etc. I can simply buy some relative number of FAZ shares. I don't have to worry about expiration, or whether I lack 100 shares of GS. I can even average in the hedge for greater efficiency. This doesn't require Level 3 option approval. And, the Fed is the ultimate, all-time put. When one combines all of these factors, we witness an extraordinary series of events-all of which will lower put premium, and thus lower the insurance index (VIX).
    So, it's not really a mystery-it's all right there in plain sight. Now, as to where all of this leads, I have no idea. My best guess is that some extraordinary negative will be needed to jolt the landscape. Failing that, we can expect 'nervous moments' (of the type just experienced), followed by a fairly quick conclusion that 'all is well.' What works in this brave new world? Selling neutral type spreads and shorting volatility on any spike should make plenty of money. I don't see this changing because the economy will continue its zombie like 'recovery' and government debt will preclude real initiatives. People are slowly accepting a downward drift to their standard of living and to future expectations. Corporations will continue to buy their stock. And, super-imposed on all of this is something that's really quite simple: this is the only game in town-it will continue to be played regardless of the economic/cultural backdrop.
    Feb 11 12:53 PM | 3 Likes Like |Link to Comment
  • Contango Unchained: How I Learned To Stop Worrying And Love The VIX [View article]
    That's fantastic! You are smarter than the vast majority of MBA's, mutual fund managers, and other 'experts'. I suspect you intuitively incorporated all the mental tools needed to notice this opportunity, and then to capitalize on it. The years you devoted to this understanding will provide a lot of 'icing' for those cakes.
    Feb 11 09:29 AM | 3 Likes Like |Link to Comment