Thursday, May 29, 2008

Short SHLD (sell calls)

Short SHLD via selling the Jun 100 calls
SHLD Sears/Kmart lower on poor earnings and sales.

Positions: long IWM, short SHLD

Jaffe: Fully Invested Life

Chuck Jaffe at Marketwatch writes about his father-in-law's financial path in life (article).

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... people worry about getting the absolute most from their money, about getting optimal results from each and every purchase and transaction.
...
The moral of his financial story is a simple one: Financial goals are about more than just money. Factor in the time, worry, personal values, hopes, dreams, and anything else tied to money, then take a path that allows you to reach your goals, not just by the number but in keeping with your personal attitude.
>>

When young people ask me about investments, I ask how much time, effort do they want to spend? How much do they enjoy the process of picking stocks or funds? For many the answer is that they don't have much interest, and don't want to spend much time. For them, the best path may be what some call "lazy portfolios," using ETFs and/or index mutual funds.

Wednesday, May 28, 2008

Kohler: "Trade small, don't be a hero"

Option Addict Jeff Kohler is re-running what he calls his greatest hits (exit-ideas article).

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Trade small, don't be a hero. Plan on doing whatever is necessary to be here to trade again tomorrow. If you are on a bad streak, step away! If it seems that you are always on a bad streak, maybe it's not the market.... maybe it's not the stock... maybe it's your system!
>>

I have written many times about the risk/reward of being the hero and calling top or bottom. There are a lot more dead heroes often losing everything, than those who are successful calling major market turns.

Positions: long IWM hedged

Tuesday, May 27, 2008

Dividend ETFs and Bond ETFs

Here is a raw list of dividend ETFs (link)

Here is a list of all ETFs sorted by annual expense ratio (link)

Sorting through the data on the two lists and the following seem the most interesting to me:
DVY, PIP, SDY, VIG, VWY

For another opinion with more of a focus on current yield, I found this Gary Gordon article.Gordon's top three are: DEM, DWX, DVY

For Bond ETFs my short list includes:
TLT because it has options
BND Vanguard bond index with low expenses
SHY low volatility.

As always for the average person (vs. the gunslinging trader), dollar cost averaging into age appropriate investments is often the best road.

Position: long IWM hedged

Friday, May 23, 2008

Buy IWM (sell puts)

Buy IWM Russell 2000 ETF via selling the Jun 65 puts. Some fear finally showing up after a week of mostly down days, with the VIX perking up. These options are seven points out of the money, so it will take a smash down of 10% for them to be exercised against me. I am dipping my big toe back in the water after having all my positions expire last week.

Long IWM hedged

Thursday, May 22, 2008

Oil: one bull, one bear

Two views on oil from MarketWatch, the bearish article (link), the bullish article (link).

The bullish short term target is $140, only $6 away, so it isn't that bullish. The bear says that he is typically early. Of course, it is dicey trying to play oil at this point (or any stock or commodity that has seen a huge bull move).

One scenario I can see is a spike top on big news. That might tempt me to try and go short, though my history trading energy stocks is poor, so I tend to shy away from this sector. Usually the XLE makes a secondary top after spot crude has topped, but counting on that history to repeat isn't something I would like to tempt, considering the move up.

Tuesday, May 20, 2008

Mild sell off, AMZN, GLD

The stock market had a nice run up, so today's sell off seems mild and contained. Of the 30 Dow stocks, the only two that were up were the oils, XOM and CVX.

AMZN was upgraded on Monday. There are about three days worth of shorts in the stock, so on the third day from Monday (Thursday), I might look to buy puts, or sell calls.

Gold has had a very good week, though oil continues to show more relative strength. Historically, oil and gold have a strong correlation.

No current trading positions

Friday, May 16, 2008

GLD options coming soon

Barrons (link) reports that options on GLD might start trading as soon as May 30, 2008.

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After about four years of waiting, wanting, and whining, options on GLD could be listed as early as May 30, according to the Chicago Board Options Exchange.

Chickens and chicken feed

I am counting my chickens today, as my short options expire. Small profits to be sure, but any profits are good in the current market environment.

AXP, EWZ, HON, PCLN puts all expire, and I get to keep all the premiums

I've been cautious, a stock market "chicken" so to speak, so it seems appropriate to label these profits "chicken feed." Enjoy the weekend. Cheers.

Positions: none

Famous quotes and trading styles

Motley Fool has an article (link) on eight famous quotes that can be applied to investing. This is my favorite of the bunch:

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"If you hold a cat by the tail, you learn things you cannot learn any other way."

-- Mark Twain

And if you own a stock that tanks beyond recovery, you'll learn something that no collection of financial horror stories will teach you...
>>

I tell people that the emotional part of trading is the hardest part. For this reason, I rarely make sweeping predictions, and don't spend time on paper trading contests. Few people have ice in their veins and remain calm and logical when they are losing money. Few remain logical and thorough after a series of big winners. Again, a baseball analogy of not getting too high or too low is appropriate.

I also tell people that there are a thousand different ways to make money in the stock market. The trick is finding one that works for your personality. My trading style with its small gains, and potentially big losses would drive some mad. However, over my many years, I have found that these are the kind of trades that have historically worked out best for me. When I swing for the home runs, and when I want to hold for the long term instead of cutting losses, those are the times I usually lose, often losing big.

Tuesday, May 13, 2008

Complacent VIX, Motley Fool Buffett picks

At Adam Warner (blog link) writes about Jason Goepfert's findings:
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I checked for any other time since 1990 that the VIX hit a six-month low, while the S&P 500, on which the VIX is based, was still at least 1% below its own three-month high. That would show us times when traders were assuming a low-volatility environment despite prices that might not justify that assumption.

Returns in in the S&P 500 going forward were substandard (and negative) going out as far as two month's. From one to ten days out, the S&P was positive less than 45% of the time, and showed an average return that that varied between -0.1% and -0.8%. Not a huge negative edge, but certainly less than random.
>>

Over at Motley Fool, they have an interesting stock screen trying to find so-called Buffett stocks (article). I like PBR Petro Brasil best from that list.

Positions: AXP, EWZ, HON, PCLN, all hedged longs
out-the-money short puts expiring 5/16/08

Friday, May 09, 2008

Buffett and derivatives

Berkshire Hathaway disclosed paper losses on some of their long term SP index puts.

Here is a blog entry at Financial Crookery about that position (link) see May 8 entry. It is a bit deep in jargon, so option newbies might find it difficult reading.

Positions: long AXP, EWZ, HON, PCLN
all are out of the money short puts expiring next Friday 5/16

Buy PCLN (sell puts)

Buy PCLN Priceline via selling the May 125 puts
stock breaks out on earnings report. Strike price of puts is at chart base.
Sell May 125 PCLN puts

Wednesday, May 07, 2008

Cycle top May 8?

From Marketwatch (link)
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Bennet Sedacca of Minyanville notes that a combination of annual, decennial and presidential cycles yields a potential "top date" for the S&P on May 8. Those were, so you know, the same cycles that suggested a low on March 15th.
>>

As I have opined before, calendar cycles are one of the weakest influences on the stock market. That said, if the yearly calendar pattern has its way, the market will hold its own into May option expiration (5/16/08).

Crunch time in the stock market today, lots of stock got hit including my three (AXP, EWZ, HON).

Tuesday, May 06, 2008

Buy EWZ (sell puts)

Buy EWZ (Brazil ETF) by selling the May 85 puts

These are currently about nine points out of the money, so it is like putting in a bid at a sharp pullback. I am surprised at the overall stock market strength, considering the price of oil continuing up.

Monday, May 05, 2008

Sell BRKB Berkshire Hathaway

Sell BRKB for small profit, earnings below estimates. Over the long term, I believe that earnings more than anything else (eg: technicals, balance sheet, sales) drive the stock price.

Positions: hedged longs AXP, HON

Friday, May 02, 2008

Bear Market Rally?

Random Roger is convinced (blog, look at May 2, 2008 entry):
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Feel good rallies are a normal part of the bear market landscape. This is either a run of the mill feel good rally or I am wrong and this whole financial crisis/housing price deflation/bond market distortion will turn out to be nowhere near as important as many people thought.

What do you think is more likely?

I am convinced this is a bear market rally, there is no convincing me otherwise. That does not guarantee I will be right of course
>>

Positions: long BRKB, hedged longs: HON, AXP

Thursday, May 01, 2008

Brazil Brasil

Breakout on EWZ. Unfortunately, the two day move up is 9%, so it is chasing if buying at the market. Still, the longer term looks compelling, based on the chart.