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  • Gloom Can Bring Good Times [View article]
    The 'sustained' moves can be pesky-or present a new opportunity. "Sustained" is illusory, as change is the constant. The owner of the gentleman's clubs is the consistent winner, as is the bookie or casino owner.
    I used to be a hard-core fundamentalist, as befitting a CPA. In later years, I incorporated charts. There is some correlation between the two, just as there is a correlation between oceanic tides and the moon.
    I believe though that there is a unique and optimal strategy set for a given range of human behavior. Just as most people can't sustain an emotional outburst for an extended period, put/call volatility will mimic same. It took a great mind some twenty years to make the change from x=0, to x>0. Energy must dissipate as the natural order of the universe. That's not part of the BS equation, per se, but theta is a more powerful concept than generally recognized.
    Feb 19, 2013. 12:42 PM | Likes Like |Link to Comment
  • Gloom Can Bring Good Times [View article]
    Stevie Ray Vaughan has a song about being caught in the crossfire. Selling spreads on both sides against the middle puts the random movement of price in the crossfire. And, you get paid to watch.
    It's amusing to note the various articles attempting to assess whether the market is oversold or overbought-some apply an assortment of statistical 'tools' to guide the market traveler. It reminds me of the "Book of the Dead" which was crafted to guide ancient pharohs to the after-life. Now, that's long-term correlation folks.
    Feb 19, 2013. 11:09 AM | Likes Like |Link to Comment
  • Forecasting The Market: A Thought Experiment Revisited [View article]
    The only way to predict the future is to build a time machine. Or maybe, just maybe, a quantum computer could simulate the brain cells of all people that will ever make a decision which directly or indirectly impacts a data point. In the years and decades to come, though, we can amuse ourselves with our futile efforts to see tomorrow.
    Feb 19, 2013. 08:45 AM | Likes Like |Link to Comment
  • The Best And Less Of Long-Short Equity Investing [View article]
    You can't put a car in 'drive' and 'reverse' at the same time-the car gets stuck in 'neutral' as it consumes gas (trading costs). One can drive several vehicles, however, that are designed for different terrain. 'Innate savvy' allows one to garage the cars not needed, and traverse the landscape at hand with the appropriate vehicle.
    Feb 19, 2013. 08:33 AM | Likes Like |Link to Comment
  • Thursday Thump: Delusional Systems Kick Back In [View article]
    Hawley-not Harley.
    Feb 18, 2013. 10:38 AM | Likes Like |Link to Comment
  • Thursday Thump: Delusional Systems Kick Back In [View article]
    Has no one noticed the 'four paw' above? Pay attention.
    Feb 15, 2013. 06:41 PM | Likes Like |Link to Comment
  • Thursday Thump: Delusional Systems Kick Back In [View article]
    Yep-I think austerity and income distribution are distinct issues-but I lumped them together (a lapse of academic judgment on my part)-it would take thousands of pages to even get started on perhaps the most interesting period in modern history-but Smoot-Harley, prohibition, Fred and Ginger, Pearl Harbor, packing the Supreme Court, Albert and the gang-incredible. I never tire of reading about that period.
    Feb 15, 2013. 01:53 PM | 1 Like Like |Link to Comment
  • Thursday Thump: Delusional Systems Kick Back In [View article]
    Austerity put the "great" in "Great Depression." Worldwide austerity created a slight bit of social unrest, and allowed a little known artist to destroy a country.
    My thesis in grad school was "Maldistribution of Income as a Factor in the Great Depression." Of course, Ben studied the subject in slightly more detail.
    If I cut back on my dog's treats he gets grumpy and unproductive. There's a lesson there somewhere-perhaps a balance.
    Feb 14, 2013. 01:50 PM | 3 Likes Like |Link to Comment
  • Which Way Wednesday: Over Or Under S&P 1,520 Tells The Tale [View article]
    Excellent comment on selling options. This is the one edge that has withstood the test of time, and will continue. It is truly analogous to your casino example. Most people buy a stock or option hoping that it hits a certain price point within a given time. The option seller always has Father Time on his side, and is concerned only with predicting where an instrument will not go within a designated time. That is a far, far easier proposition.
    My trading screen is full of short spreads. I will be long a spread only to offset a wide credit spread, and where the debit is still fractionally less than the gain to be derived from the short spread. In other words, the sold premium covers the chance of a gamma spike.
    I suppose it's good that the vast majority of folks would rather pay the casino. Without suckers to gamble, we'd have to do something else.
    Feb 13, 2013. 03:15 PM | 1 Like Like |Link to Comment
  • Should You Break Up With The Markets On Valentine's Day? [View article]
    It's a shame that so many people are one-dimensional in a three-dimensional world. But for what it's worth, I flipped into AAPL 470/460 bull put spreads, and just took half (ten) off. Went out to March and re-loaded with bull call spreads. As we get to the end of the week AAPL should settle in on a 'reasonable' trading range-but of course, it would be a mistake to accept such a premise as gospel.
    There's still a little meat left on the 470/460, so even a buy/holder could average down or pocket the premium. But nothing is a cinch-ever. That's the beauty of spreads. I will absolutely collect on one side, and I'll look to 'fix' the wild child. Beats playing checkers or shuffle board.
    Appreciate your work.
    Feb 13, 2013. 11:06 AM | Likes Like |Link to Comment
  • Should You Break Up With The Markets On Valentine's Day? [View article]
    Not to beat a dead horse, but the small retail investor actually has a lot of advantages-if they would spend some time challenging their biases and study. The technology and historically very low transaction costs offer a gameable distinction vs large funds. In a study of great chess players and IQ, the findings were that grand masters aren't any more intelligent than folks that watch Honey Boo Boo (one of my favorite programs). BUT, their brains became wired to successfully navigate and perform the task at hand.
    I made a nice return on AAPL bear call spreads yesterday, while most folks probably watched their long positions decline. Today, I'll probably take the other side, using a portion of yesterday's profits to hedge a bullish foray.
    So, while I may whine and opine about the state of the universe, I know that the stars will always shine against a night sky. Humanity is what it is, and I'm just a speck of protoplasm floating around crafting options strategies-and reading, playing golf, listening to music and walking the beach with man's best friend.
    Always remember what the great trader, Meatloaf, said " don't be sad, for two out of three ain't bad."
    Feb 13, 2013. 08:45 AM | Likes Like |Link to Comment
  • A Market At Equilibrium - At Least For The Moment [View article]
    On a wall in the office of my hedge fund, I had the following quote from Jesse Livermore:
    "It takes a man a long time to learn all the lessons of all his mistakes. They say there are two sides to everything. But there is only one side to the stock market; and it is not the bull side or the bear side, but the right side."
    And, "I was not, and I have never felt that I was, wedded indissolubly to one or the other side of the market. That a bull market has added to my bank account or a bear market has been particularly generous I do not consider sufficient reason for sticking to the bull or the bear side after I receive the get-out warning. A man does not swear eternal allegiance to either the bull or the bear side. His concern lies with being right."
    Feb 12, 2013. 11:05 PM | Likes Like |Link to Comment
  • Should You Break Up With The Markets On Valentine's Day? [View article]
    Erick, we knew from the announcement of QE1that we were in for something unprecedented. The full implications were lost on most-at least initially.
    The rationalist and skeptic would look at underlying data and remain unconvinced. Thin trading and anemic volumes were temporary obstacles to the central bank's agenda. Probably, the magic elixir would have worked quicker were it not for the Japan earthquake and the BP oil spill. Political ambiguity, Greece, Europe and other side shows also delayed the inevitable.
    But nothing can stop pure, unadulterated money printing-nothing. Again, the surprise is that it took so long to arrive at this point. It could have happened much sooner.
    Now that I'm retired and have time to reflect on what is happening, I find it, as Sinatra said-so amusing. It's amusing that so many people are still trapped in yesterday's framework. But, their personal identity derives from the perpetuation of the fiction. And, the market can sacrifice a bloated calf every now and then-just to maintain some semblance of the way we were.
    But what was the alternative? Survival of the fittest? Raw, unfettered capitalism? Do we let a thirsty man die in the desert? What about riots and civic unrest?
    So, it's more of a game than ever-but the rules are altered. I wonder about society and to what extent central manipulation permanently changes the landscape. And, I remain skeptical about how it is that the average person attains something of worth. I wonder about all the small businesses that are flat and going broke. Is it our destiny that small communities everywhere resemble the one in "Empire Falls?" Will technology replace an increasing number of workers, making their skills obsolete? Floating the stock market will not help those people and those communities. The Fed is the 'market maker' of the market. But what of the 23% of people out of work? Do we allow an underbelly of subsidized unemployed, while we celebrate the neon god of earnings?
    As the comment above states 'long live the bull.' Hell, long live the unicorn and Puff the Magic Dragon.
    Feb 12, 2013. 07:08 PM | Likes Like |Link to Comment
  • Post-Rally, Stocks Still Undervalued [View article]
    A great book. He debunks a lot of sacred cows. In a very folksy and enlightening way, he draws attention to some of our greatest biases. But alas, as Kahnemann noted in "Think Fast, Think Slow," there is little to no hope. Biased we are and biased we'll remain-right up until the last breath.
    Feb 12, 2013. 04:56 PM | Likes Like |Link to Comment
  • VIX - Options Volatility And Market Sonar: Monday Recap [View article]
    I suppose we could be generous and say that ideas and concepts have difficulty in creating sustained value-but I'm convinced that the market followed Alice down the rabbit hole. So, we have a peculiar and curious cast of characters that prance about everyday-elves, trolls, witches and zombies. They just hate to be caught practicing their elusive magic, but I just totally enjoy setting up traps and snares.
    Feb 12, 2013. 11:09 AM | Likes Like |Link to Comment