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convoluted

convoluted
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  • Peabody Ignites Coal Trade [View article]
    With ACI one could sell LEAP puts, and hedge with very cheap long puts-just in case the bottom fell out. One could also sell call spreads on a monthly basis as additional income/hedging.
    It seems to me that this stock, as well as other coal stocks, get whipsawed almost daily. (I'm not counting the last couple of days where the seas turned red). Aside from basic, run-of-the- mill sell-offs, it has been possible to sell puts on down days and calls on updays. I've had short calls run substantially against me, only to regress and turn profitable. Same with put spreads. So, ACI seems to be a stock for both swing traders and longer-term campers.
    Apr 18, 2013. 06:48 PM | 1 Like Like |Link to Comment
  • An End To The Pain Trade [View article]
    The risk relates primarily with establishing the initial parameters, and making an assessment about the dominant position. For example, if we felt (or determined via our individual investment criteria) that KO was underpriced, we might opt to sell a LEAP put spread. But, on the other hand, and realizing that even the best plans go astray, we might take the other side-in a smaller sized, shorter-term bear call spread. If KO really tanked, the initial negative on the longer-dated strategy might be greater than the shorter-term positive.
    Thus, if we are correct about KO, we have more upside. If we are wrong, on the other hand, we still have an offsetting gain. Arguably, with a stock like KO, the receipt of the net call premium could be viewed as a de facto dividend-and we have no problem with owning KO, say in the year 2015, at a much lower basis-and we've been paid a double digit return along the way.
    The greater risk, which I always contemplated at my hedge fund, was the optimal selection of strategies out of a universe of possibilities. Now that I'm retired, that question still is front and center. But the point to be made is that the retail market participant can learn new strategies and techniques. As for risk, perhaps the greatest risk is a state of blissful ignorance.
    Apr 18, 2013. 06:31 PM | 1 Like Like |Link to Comment
  • An End To The Pain Trade [View article]
    Well, the solution is not to be the blackjack player, but the casino. The casino sells options and collects premium. And, the odds are even greater than roulette, blackjack, slot machines, etc. Not just in a statistical sense, but one always gets a consolation prize-even if assignment is elected. But, less than 1% of the population of investors even understands this fact-thus there's ample room for education.
    What I mean by the 'consolation' prize is that (a) a short put results in something tangible-shares of stock; a short call results in a short position, and (b)the game continues via a slightly different format. As in game theory (see theory of continuous games) the player can implement an assortment of strategies and is not subject to a truncation. In short, the odds of the casino plus the unique skill of the game theorist, can make extraordinary returns.
    Instead of watching a data set move up or down based on the collective pre-frontal cortex of the planet's humans, even the novice would be better served by taking a net zero risk perspective. For instance, selling a LEAP put as a dominant strategy would be amortized and hedged by a servient strategy of shorter term call spread selling. If one is wrong on the calls, the LEAP put plus the long OTM hegde will will be positive. If the LEAP put declines in value (because the underlying went down in value), the set profit on the short call spread will accrue-and one or more additional call spreads will be written until the LEAP put is paid for. At that point, a $1 increase in the LEAP begins to yield a positive return-and, importantly, it can now only yield a value =/> 1.
    So, people don't have to wait for some mystical dip or heavenly sign-very conservative approaches exist by which to win the game.
    Apr 18, 2013. 04:46 PM | Likes Like |Link to Comment
  • Investing In Equities Now - Learn From May 1946 [View article]
    "The Last Picture Show"-in so many ways. What we lost somewhere along the way can't be measured, can't be recovered- sad and tragic-
    Apr 17, 2013. 10:24 PM | Likes Like |Link to Comment
  • Energy's Decline Is Unwarranted [View article]
    "Unwarranted?"
    Reminds me of the Clint Eastwood movie with Morgan Freeman and Gene Hackman-Clint guns down the sheriff (Gene Hackman), who with his dying breath curses and claims "...it ain't fair."
    Clint, in his inimitable style responds "...fair ain't got nothing to do with it."
    "Unforgiven"
    Apr 17, 2013. 10:02 PM | 2 Likes Like |Link to Comment
  • Why Sell Schlumberger On Any EPS Pop? [View article]
    Ok-SLB can drop much further. But, it will happen in tandem with the broad energy sector. I used to trade it for several years, but there's only so many hours in the day-and the days are now consumed by golf.
    I think the basic bear call spread is an easy strategy. If the market continues to slide SLB will absolutely, unequivocally drop into the mid-60's. But, HAL, APA, APC etc, etc will follow. With ETFs one might simply buy a LEAP call on SLB-but short with ERY (triple inverse short). Or, use bear call spreads with SLB and a long strategy with OIH or XLE. Of course, the adventerous can simply short the stock, and perhaps hedge with an OTM call.
    Apr 17, 2013. 09:51 PM | Likes Like |Link to Comment
  • 5 Reasons Why I Am Shorting The Market [View article]
    Well, as usual the bulls are snorting and charging the matador, while the bears are growling and seeking an unattended picnic basket. The eagle flies high above, observing the antics of both animals.
    The name of the game is opportunity. There is an opportunity cost associated with a one dimensional bias. But, very few people can change their opinion-and why should they since they know they have the magic keys. But, as someone noted, the secrets to life are to be found in two locked boxes-each containing the other's key.
    So the game continues, tomorrow and tomorrow and tomorrow...(the Bard)-and the market loves the little bovine and the little bear cub. But just get on the stage and strut and fret your hour. Buy your tickets. I'll sell calls to the bulls and puts to the bears. Don't worry-be happy. Just play the game.
    Apr 17, 2013. 09:29 PM | 1 Like Like |Link to Comment
  • It's Time To Buy Some Gold Miners [View article]
    Good point-options can work like antibiotics. But using options to eradicate a disease requires a correct diagnosis and, above all, patience. Most people think of options as speculative, yet in the right hands they can do anything-except raise the dead.
    Apr 17, 2013. 08:52 PM | Likes Like |Link to Comment
  • It's Time To Buy Some Gold Miners [View article]
    So where is all the money going that's fleeing commodities anyway? I finally sold leap puts on an array of coal stocks-and ended up shorting the stocks-AGAIN. And, I finally decided I had shorted AAPL beyond all reason-down to a 2.5% yield. So, I sell put spreads thinking that I had overstayed the short side. NOPE. Got so annoyed that I shorted 300 shares for each put spread-even though the spreads were reasonably tight. I'm rolling in the cash and can't believe the irrationality. Cleared out and left the short puts-doesn't matter what the stock does now.
    This may be a bull market-whatever that is-but you need all the tools to make a living. No complaints though-just keep those curve balls coming.
    Apr 17, 2013. 04:28 PM | Likes Like |Link to Comment
  • It's Time To Buy Some Gold Miners [View article]
    I've got ABX JAN 2015 20 PUTS set at 6-and have for some time. In fact, I almost forgot that I had it open. Almost there-probably tomorrow morning while I'm playing golf. But, wondering if I should wait for more premium. Any thoughts-I'm not a goldbug-but this is really absurd.
    Apr 17, 2013. 04:17 PM | 1 Like Like |Link to Comment
  • U.S. Equity Optimism From A Virtuous Cycle Of Credit Worthiness [View article]
    Hawking also postulated that nothing can escape the gravitational pull of a black hole (except perhaps something called 'Hawking radiation'). The super massive black hole is the US deficit. Like the one in our home galaxy, this black hole is voraciously consuming resources. As we move farther away, it 'seems' that there is no impact from the black hole. Yet, its gravitational pull is unrelenting. It's simply a matter of "time."
    Apr 17, 2013. 08:10 AM | 3 Likes Like |Link to Comment
  • Beware The Sweet Siren Song Of XIV [View article]
    SVXY has wide bid-ask on options, but worth it.
    Apr 16, 2013. 08:22 PM | Likes Like |Link to Comment
  • The Art Of Trading Volatility [View article]
    Also, I strongly suspect that the willingness of traders to reach for inverse ETFs and cheap puts, actually forces a form of 'benign' volatility. If this is true, an extraordinary event would be required to move the volatility needle-and keep it elevated. With massive liquidity, a psychology that is tired of distressing news and new tools for hedging available to all-look for a certain bland euphoria as the new background noise.
    Apr 16, 2013. 04:53 PM | Likes Like |Link to Comment
  • The Art Of Trading Volatility [View article]
    Set system to sell 20 calls for this morning-went to play golf and already in the green. (Although I got a text that the trade didn't turn green until about 30 minutes prior to today's close).
    I maintain bull put LEAP hedges on VXX-came in handy yesterday. Even with the VXX ETF at this level, it's still possible to game the spikes. So, it's not so much about where it used to be, but rather the premium amount available. Don't be biased because it's easy to get anchored to the previous price level. We are in a zone now where bad news can create a spike-but it's not a trend, and quickly disappears. In fact, I would suggest just setting parameters and let it happen. Often if you just stare at a screen for hours on end, you begin to force the action. That's a no-no. Let the moves come to you.
    Apr 16, 2013. 04:48 PM | Likes Like |Link to Comment
  • Why Real Estate Prices Cannot Go Higher [View article]
    I still think mini-storage is a good way to go. The people that have to rent are opting to go to smaller/less square footage-which means a lot of 'stuff' has to be stored. Even younger tenants acquire stuff that can't be stored in an apartment. And, you never deal with plumbing issues or late night calls from the police.
    If you must cut your teeth on residential, I would opt for resort or retirement properties that are still recovering. But, let the big dogs have the 5%-I would expect to do a lot better.
    Apr 15, 2013. 10:00 PM | 2 Likes Like |Link to Comment
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