Saturday, October 29, 2011

Trick or Treat? (ot: tablet post too)

I haven't been posting much. I was under-invested during this record rally in the stock market. The broad SPY is up about 20% off its lows at 107 in just a few weeks. Many traders missed the bull boat. That huge wall of worry was scaled and the market moved up. Some that missed out are writing angry missives about how it is a trick, that the fundamentals haven't changed. Well, how much did they change to drive the market down to 107?

I also missed this 5% gold rally off the lows, and 9% bond market move lower. I've been writing about October/November as the time to turn bearish on bonds. Looks like I waited too long to pull the trigger on establishing bearish positions (eg: long TBT or short TLT).

I am going to stray into an off topic subject, the buying of gadgets. There is a Best Buy commercial where a guy buys a 3D TV and then see's an ad for a 4D version. So it is with my new tablet, it is Android 3.2 and they just announced version 4.0. A person can always wait. My original plan was to buy one in September, but nothing offered for sale then was compelling enough for me to buy.

My new tablet is an Archos 80 G9 with an 8" screen. It feels like a steep learning curve for Android coming from Windows. Many times I throw up my hands trying to do what seem to me the simplest of things, or irritating bugs. No mouse, no keyboard, make for a very different interface. The main reasons I choose the Archos, are the 8" screen is about the perfect size for me, and the expandability. The 7" tablets are about 40% smaller in square inches, and the Ipads and other 10" tablets are about 30% larger. I made paper cut outs of each size of tablet, and the middle at 8" is the right zone for me. The Archos takes micro SD cards for more memory, and offered 3G expansion with a USB plug in. Unfortunately, I learned too late, that the 3G for the Archos only works in Europe and there are no current plans to have one for the U.S.

Tuesday, October 25, 2011

AMZN NFLX two horses down

Two of the glamor stocks of this bull market, Amazon AMZN and Netflix NFLX suffered huge declines today. NFLX has been limping along for months now. AMZN was near all time highs.

Amazon saw sales up big. The new Kindle Fire is rumored to cost $10 more than they are selling it for. Estimates are for five million of the units to ship before year end. That's $100 million in sales, causing an immediate net loss of $5 million to the bottom line.

Long term, it will help the company, but the stock was apparently priced too perfection and suffered. I was tempted to sell the Nov 180 puts this morning, thank goodness I did not.

I missed this big rally in gold.


Friday, October 21, 2011

7-1 for October

Seven winners, one loser for the October option cycle. Winners include short puts on GLD, PFF, SPY, TLT (2 strikes) and separate short put backratios on GLD, and SPY. Loser was a SPY vertical put spread. I legged out of the backratios and verticals, so that added more risk. The backratios came in strong, 200% profit on the SPY, 400% on the GLD, basis the initial credit. Before folks get too excited, the margin requirements are a lot bigger than the credit so actual percentage gains on margin put up are not so exciting looking. Still, some good gains.

I am short puts on BRKB, SPY, TLT going forward. For the first time in a long time I don't have a GLD position. I danced close to the flame this cycle, as GLD was in my zone of 154 to 159. I did well to get out with 400%.


Tuesday, October 18, 2011

Buy SPY (sell puts)

Buy SPY via selling Nov 99 puts. Another order before the open, another fill on the opening dip. Today I had better luck as the market rallied off the lows.

GLD gave me a bit of a scare with a big dip early, before rallying. I am still short Oct 154 puts and the low was in the 158 range. I don't have any November positions on GLD yet. I am skittish. It does not seem to be acting well.


Monday, October 17, 2011

Buy BRKB (sell puts)

I place an order to sell BRKB Nov 62.5 puts before the open and it gets filled as the market declines. Unfortunately, the market kept declining. I am light on Nov positions so may add more stock market longs if today's steep decline continues.

BRKB has a buy-back as support.


Friday, October 14, 2011

Unwind GLD (sell)

I sell my long GLD Oct 159 puts. This was part of a short put backratio. I am still short 2x GLD Oct 154 puts. I think GLD is headed a bit lower, but time is close to up with one week remaining until expiration to get below 159.


Tuesday, October 11, 2011

More SPY (buy)

I sell the last of my long SPY puts, the Oct 109 puts that were part of a short backratio 109/104. I remain short batches of SPY puts at much lower strikes 104, 95, 89.

My GLD short put backratio 159/154 is now slight negative delta. Max profit is at 154 on October 21, below 149 and I start taking on water.

Neutral GLD

Friday, October 07, 2011

Financial fasting

An off topic post for the weekend. A friend had this book, "The Power to Prosper," by Michelle Singletary. It lays out a 21-day financial fast and I quickly skimmed through it. Be warned that Singletary takes a religious approach, so it may not be for everyone. I won't link it so folks know that I am not getting any kind of kick back or referral fee.

I advocate a healthy, balanced approach to life. Like food fasting, too long or severe a financial fast can do more harm than good. However, like food, the vast majority of Americans could do a bit of financial fasting to reach a more healthy and balanced place in life. The person with the book, said she has done the fast several times after owning the book for a year. Overall, she had extremely positive things to say about the book, and the fasting program.

Other things I tend to advocate include a high savings rate, living below one's means, and being mindful of where a person spends their money. I tend to be a frugal person, and still found many suggestions in the financial fasting program that would be difficult to give up. For example, window shopping, even online window shopping, eating out at all, even cups of coffee, even if the guest of someone else, the giving of gifts and/or greeting cards that cost any money, are some things to give up during the financial fast. I would have a tough time with all those that I listed. One goal is to move away from linking spending or gift giving to happiness and fulfillment and friendships.

More than a few people say that government deficits are primarily a spending problem. I observe this with individuals as well, that focusing on their spending, their lifestyle, can bring a person to a healthier financial place.

One reason that wealth gets concentrated in such a low percentage of the population, is that about half the population spends all the money they make, no matter how much they make. Many go beyond that, and borrow and carry credit card balances and pay an extra 20% for the pleasure of consuming a few months earlier.

I like to do the opposite, do what now seems very old-fashioned, saving up before spending. I do the same with food, I plan to lose some weight ahead of the holidays, so I won't feel as guilty indulging during.

Thursday, October 06, 2011

Unwind SPY (buy)

Sell SPY Oct 100 puts, this locks at least a minor loss on the 100/95 vertical put spread. I see little chance that SPY breaks 100 before Oct 21. I flipped to net negative delta (short SPY) because of the way the options moved. This unwinding move brings me back to slight positive SPY delta.


Monday, October 03, 2011

Ritholtz: 5 down months, then what?

Barry Ritholz has an interesting look at what happens to the stock market after five down months in a row (link). This time might be the worst of the worst, but even then -40% after a year is about the worse. For two months out, another -9% is the worst historical case and that was in 1974, one of the worst bear markets ever.

As I often write, corrections, bear markets do happen, however, it is rare where they go straight down.

Even with the data, I certainly wouldn't bet the farm on another -9% and SPY 100 holding. SPY is at the 110 support level right now. So many other markets have broken down, SPY may break down as well. Still, the data is intriguing and I may take a flyer on some new SPY short put backratios (hedged positions that are net long but with an explosive profit at lower price targets).

Saturday, October 01, 2011

3rd quarter ends, Amazon Kindle Fire

The 3rd quarter ends with a thud for stocks worldwide. Down about 14% for U.S. stocks (SPY), down about 17% in Europe, 25% for Germany. Gold (GLD) up about 9% for the quarter, U.S. Treasuries soared up with TLT up about 25%, despite the S&P rating down grade.

I am very interested in the new Kindle Fire tablet announced by Amazon, and may purchase one. As for AMZN stock, with a valuation already over $100 billion, that particular tree won't grow to the sky. Apple and ExxonMobil at around $350 billion in market cap are the biggest companies, and can be thought of as a kind of an inhibitor as to how big companies can get. Once companies get that big, they make a lot of enemies, and growth becomes more difficult. Even maintaining streams of revenue can be difficult. So while I think the Kindle Fire is going to be a big seller for AMZN, it is difficult for a big company to have explosive growth.

I was in a decent position for this past week. My max profit is at 154 for GLD (currently 158) and 104 for SPY (currently 113) at October expiration. Bonds are about the only thing going up and I am making some bits of money from being short TLT puts. Of course, it could be better, and the GLD position has seen a huge drawdown as there is still a lot of time premium on my short puts.

For readers wondering why I am posting less, and trading less, it is a matter of time, schedules and priorities. Right now trading and posting are on the back burner and will likely stay there for some time.