Option markets anticipate volatility of the underlying product between now and when the options expire. If there is segment of time between now and when the options expire that traders expect the market to be slow, they will lower bids accordingly. This has the effect of lowering statistical volatility readings without lowering the perception of *real* volatility going forward.
Obviously options do not always estimate future stock volatility correctly. In fact they never get it exactly right, it’s an estimate. Surprises happen. But all things being equal, we are not going to be volatile over the next couple weeks. If you see a low VIX, you can call it complacency, or you can say that it’s simply a realistic anticipation of non-activity in a traditionally slow stretch. I am going with the later.
And I am using VIX for simplicity sake, but it’s for every option.
The point is that IF volatility looks low and you are inclined to call that complacency, and then are inclined to use that perception of complacency as a sign to get bearish, be very careful.
Yes, it’s noteworthy that in this time of Fannie and Freddie meltage, there’s no evidence of Fear. But by the same token we have 10 slow calendar days in front of us, so it’s perfectly rational to lower bids ahead of that.
Again, at this particular juncture in time, the VIX futures and options provide a better volatility gauge than the *cash* VIX. And they have barely budged, as the market expects 22+ volatility in September. The fact that there is a premium in the futures is expected, in fact, barring an actual uptick in fear, it happens every time. As I noted last week about the VIX Sep futures, "These are trading markets, and as such will price in the holiday. Right now
Courtesy of Allan – recommending long positions in a couple solar stocks, Canadian Solar Inc., CSIQ, and Trina Solar Ltd., TSL.
A friend of mine [David Gordon] emailed me this weekend and suggested that I take a step back from my charts, remove my trend lines and allow my intuitive powers out, in an attempt to see the charts as what they are, not what I am interpreting them to be. So for much of Sunday I have been occupied with looking at charts without any preconceived bias. The result: The solars look great.
Above is a CSIQ-Daily of price only, you decide.
Below the weekly, does this help?
Finally, let’s throw my trend lines back on:
Next, a simple line chart of another Solar, TSL, with only Triangle signals:
And once again, with my trend lines:
Solars are great trading stocks, they seem to cycle very nicely and provide excellent Intermediate percentage returns. For example, either of these two Solars could return 50% on a modest move back to the top of their respective channels.
I still don’t know if this sector belongs in the Energy complex, the Technology complex, or are their own complex. Doesn’t matter. My trend lines merely represent what my eyes are seeing, without the trend lines. Both these stocks look to be oversold and beginning a rally to overbought…….and that is the Trade.
Is Obama the liberal’s liberal or something else? In How Obama Reconciles Dueling Views on Economy, the New York Times attempts to portray Obama as some sort of quasi free-market half-conservative "Chicago School" pragmatist in favor of more regulation, handouts, and redistribution of wealth schemes. Is that possible? Let’s take a look.
The United States remains a fabulously prosperous country, relative to almost any other country, at any point in history. Yet Americans seem to realize that something has gone wrong. In recent polls, about 80 percent of respondents say the economy is in bad shape, and almost 70 percent say it’s going to get worse. Together, these answers make for the most downbeat assessment since at least the early 1980s, and underscore that the next president will be inheriting a set of domestic problems as serious as any the country has faced in a long time. John McCain’s economic vision, as he has laid it out during the campaign, amounts to a slightly altered version of Republican orthodoxy, with tax cuts at the core. Obama, on the other hand, has more-detailed proposals but a less obvious ideology.
Well before this point on the presidential calendar, it’s usually clear where a candidate fits within the political spectrum of his party. With Obama, there is vast disagreement about just how liberal he is, especially on the economy. My favorite example came in mid-June, shortly after Obama named Jason Furman, a protégé of Robert Rubin, the centrist former Treasury secretary, as his lead economic adviser. Labor leaders recoiled, and John Sweeney, the head of the A.F.L.-C.I.O., worried aloud about “corporate influence on the Democratic Party.” Then, the following week, Kimberley Strassel, a member of The Wall Street Journal editorial board, wrote a column titled, “
Farewell, New Democrats,” concluding that Obama’s economic policies amounted to the end of Clintonian centrism and a reversion to old liberal ways.
Some of the confusion stems from Obama’s own strategy of presenting himself as a postpartisan figure. A few weeks ago, I joined him on a flight from Orlando to Chicago and began our conversation by asking about his economic approach. He started to answer, but then interrupted himself. “My core economic
Fascinating topic: pharmaceutical companies, financial interests, and politics. Might also be interesting to those of us with daughters, who may be thinking about whether to get them vaccinated for HPV. Courtesy of Deborah at Wall Street Weather.
“Merck lobbied every opinion leader, women’s group, medical society, politicians, and went directly to the people – it created a sense of panic that says you have to have this vaccine now.” - Dr. Diane Harper, professor of medicine at Dartmouth Medical School and a principal investigator on the clinical trial of Gardasil, to The New York Times.
An editorial accompanying a study published online yesterday by The NewEngland Journal of Medicine(“Human Papillomavirus Vaccination – Reasons for Caution”) by Charlotte J. Haug, M.D., Ph.D, questioned the “lack of sufficient evidence of an effective vaccine against cervical cancer.” An article on the marketing of Merck’s (MRK) Gardasil vaccine in The NewYork Times describes how the company managed to get “an obscure killer confined mostly to poor nations to the West’s disease of the moment.” Merck is forecasting sales could top $2 billion this year.
According to the government’s Centers For Disease Control and Prevention (CDC) website, “11,892 women in the U.S. were told that they had cervical cancer in 2004, and 3,850 women died from the disease. It is estimated that more than $2 billion is spent on the treatment of cervical cancer per year in the U.S.” Scrolling further down the CDC’s web page shows statistical trends that “suggest that cervical cancer incidence and mortality continue to decrease significantly overall." These statistics are from 2004 – two years before the FDA approved Merck’s Gardasil vaccine.
Cervical cancer is caused by the human papillomavirus (HPV) virus. As Merck’s Gardasil Patient Information sheet states: “There are more than 100 HPV types; Gardasil helps protect against 4 types (6, 11, 16, and 18). These 4 types have been selected for Gardasil because they cause approximately 70% of cervical cancers and 90% of genital warts.”
Most of the population has contracted the HPV virus but their immune system has been able to combat it on its
Monday was manic as usual, with very nice pre-market gains quickly turning sour. We fell from 11,665 on Monday morning all the way back to 11,300 on Wednesday and finished the week at 11,628 – not exactly inspiring overall but we held our Aug 4th lows, which were better than our July 28th lows, which were better than our July 15th lows so it's kind of like progress only without the higher highs that indicate a proper recovery. So it looks as though we may still be consolidating, and that means perhaps another trip to 11,800 and the next time back down we'll be hoping to hold 11,450 as a firm bottom to call it progress.
It's all going to depend on the first two days of this week, if we can race up to 11,800, we have a good chance of breaking up, if we can't get there until Wednesday, we can expect it to be "hump day" and back down we go. From a data perspective we have July Existing Home Sales, probably not exciting, on Monday, followed by Consumer Confidence, July New Home Sales (blah) and the FOMC minutes on Tuesday. Nothing there that sounds like we'll be making new highs is there?
Our best chance for a big rally is Wednesday's GDP, which may be even higher than the 2.7% projected (thanks to the stimulus checks). It's very, very, very hard to sell a recession story when the economy is growing at 3%. If we can couple a better than 2.8% GDP with less than 400,000 jobless claims on Thursday morning AND we're holding 11,800 from Tuesday THEN we may get back over 12,000, that's the best-case scenario for the week.
We get earnings from TMA on Monday evening and Tuesday we see AEO, BIG, CHS, SFD, TUES, BGP and JCG, which will…
Analyst Richard Bove has stated Lehman CEO Richard Fuld has "lost control of the game." That is something I completely agree with as it should be obvious to all. Bove went on to say "If he doesn’t do something this weekend, as of next week, the game is on." That makes absolutely no sense. Nor does Bove’s price target of $20 per share.
Yes, Lehman has been shopping around for buyers, but buyers have been balking. I talked about Lehman talks collapsing and how poorly Lehman’s preferreds trade in
The same way sovereign funds balked over Lehman Brothers CEO Dick Fuld’s terms to sell them a chunk of the firm, some private equity firms are balking over Fuld’s terms to sell them a part of Lehman’s investment management business, which includes the firm’s crown jewel, the Neuberger & Berman asset management unit, sources have told CNBC.
As first reported by CNBC, Fuld, Lehman’s long-time chief executive, is looking to sell a 70 percent stake in the investment management division and have an option to buy it back at a later date. As a carrot to the potential buyer is a warrant to purchase a 20 percent stake in Lehman that could be cashed in when the credit crisis abates and the firm’s stock price recovers.
But potential buyers—which include nearly every major private equity firm—are starting to balk at Lehman’s initial offer, according to Wall Street executives familiar with the matter.
Their problem is the price. Lehman is pricing the investment management division at around $10 billion, meaning a 70 percent stake would cost $7 billion. But the real cost will be much more than that, because asset management firms are only worth something if employees remain with them following such a
"Recall that dollar volume flow (aka money flow) represents the dollars flowing into or out of a particular stock or market. We look at each transaction in each stock and multiply the transacted price times the volume of that transaction. If the transaction occurred on an uptick, we add it to a cumulative total; if the transaction occurred on a downtick, we subtract it from the cumulative total. That cumulative total at the end of the day is the money that has been flowing into (if the sum is positive) or out of (if the sum is negative) the stock…."
Excerpt: "A failure of U.S. mortgage finance companies Fannie Mae and Freddie Mac could be a catastrophe for the global financial system, said Yu Yongding, a former adviser to China’s central bank.
“If the U.S. government allows Fannie and Freddie to fail and international investors are not compensated adequately, the consequences will be catastrophic,” Yu said in e-mailed answers to questions yesterday. “If it is not the end of the world, it is the end of the current international financial system.”
Freddie and Fannie shares touched 20-year lows yesterday on speculation that a government bailout will leave the stocks worthless. Treasury Secretary Henry Paulson won approval from the U.S. Congress last month to pump unlimited amounts of capital into the companies in an emergency.
China’s $376 billion of long-term U.S. agency debt is mostly in Fannie and Freddie assets, according to James McCormack, head of Asian sovereign ratings at Fitch Ratings Ltd. in Hong Kong. The Chinese government probably holds the bulk of that amount, according to McCormack.
Industrial & Commercial Bank of China yesterday reported a $2.7 billion holding. Bank of China Ltd. may have $20 billion, according to CLSA Ltd., the Hong Kong-based investment banking arm of France’s Credit Agricole SA. CLSA puts the exposure of the six biggest Chinese banks at $30 billion.. .."
Excerpts: "Midwest Bank Holdings Inc. Chief Investment Officer Don Wiest is wagering U.S. Treasury Secretary Henry Paulson will rescue him from a failing $67 million stake in Fannie Mae and Freddie Mac.
Melrose Park, Illinois-based Midwest and banks from Philadelphia-based Sovereign Bancorp to Frontier Financial Corp. in Everett, Washington, own preferred shares in the beleaguered mortgage-finance companies that have lost more than half their $35 billion value since June 30. Concern that Paulson may step in with a rescue plan that would wipe them out along with common stock investors has sent the securities tumbling.
Cassandra on Peak Credit and our economic future. She worries, "some will think that these ruminations border on the insane" but I don’t think so, all appears perfectly sane to me. Courtesy of Cassandra does Tokyo.
Does Peak Credit inevitably follow piqued credit? Well if you’re my age, and you thought so and positioned accordingly, you’d have been bankrupted a very long time ago – possibly as early as the late 1980s. And if you were a glutton for punishment, you’d have been toasted again in 1994, another time in 1998, yet again in 2002, and rubbing one’s nose in it, perhaps every year after that until midsummer two-thousand-and-seven. Dog days indeed for those bearish on the ability of the financial system to manufacture, distribute, and service debt, whether in real or nominal terms, or in relation to any measure of the economy or change in the growth thereof.
Yet as pessimistic on its sustainability (and wrong!!) as one would have been in the past, one should now be as optimistic one’s assessment that this is The Big One, that we’ve smacked head-first into the boundary of the maximum amount of debt that can be assumed by households, corporates and governments in our economy and be reasonably sustained with the fruits of our labour, and investment. Actually, I would posit that we long-ago pierced any reasonably sustainable threshold, and only through sheer inertia and the fortuitiousness of pulling of rabbits-out-of-hats have we lasted this long. But it is the anchoring of popular belief in faith and absent solvency from days long passed combined with the extrapolation a series of non-extrapolatable macro income streams which could cause any sensible human being believe or have believed that the boundary lay somewhere in front of us and not far behind us.
Culpability is not singular. Stern-Stewart, investor short-termism and systemic mono-focus, along with greedy managers replete with agent/principal dilemmas must assume blame on the corporate side. Selfish American Voters repeatedly demanding representatives requite incongruous financial goals with cynically lame and unsustainable fiscal policies, along with a near complete detachment from reality in regards to present consumptive desires in relation to both incomes and longer-term savings requirements are just as at fault as the monetary wrecktitude resulting from an
Inflation is out of control. Now, we mostly agree that the Fed's official inflation numbers are just - ridiculous. But the real inflation, is even harder to quantify, and more subtle - as we explain in Splitting Pennies - Understanding Forex. What drives inflation is NOT Adam Smith's "Supply and Demand" - an interesting idea but completely static, and completely irrelevant for practical applications - and certainly not useful for business, or economic forcasting. Inflation is a s...
By Jacob Wolinsky. Originally published at ValueWalk.
Donald Trump will be good for economy, bad for Wall Street: David Rosenberg
Published on May 25, 2016
Live from the 2016 Strategic Investment Conference
Get the latest updates live from the sold-out 2016 Strategic Investment Conference with John Mauldin, Richard W. Fisher, David Rosenberg, James Grant, Niall Ferguson, George Friedman, Pippa Malmgren, Charles Gave, Neil Howe, and many more. Click go to following link to visit the conference’s live blog:
Hello, everyone who has joined us on the second day of SIC 2016. It’s going to be a long and exciting day. Today, we’ll hear speeches from George Friedman, Lacy Hunt, David Rosenberg, and other well-known financial and political experts. We’ll also do video interviews with each speaker, and all of th...
The Department of Transportation's Federal Highway Commission has released the latest report on Traffic Volume Trends, data through March.
"Travel on all roads and streets changed by 5.0% (13.0 billion vehicle miles) for March 2016 as compared with March 2015." The less volatile 12-month moving average was up 0.41% month-over-month and 3.2% year-over-year. If we factor in population growth, the 12-month MA of the civilian population-adjusted data (age 16-and-over) is up 0.33% month-over-month and up 2.1% year-over-year.
Here is a chart that illustrates this data series from its inception in 1971. It illustrates the "...
Central banks likened to pornographers. Greece, believe or not, is still getting bailed out, and China is apparently next. US corporate share buybacks are starting to peter out. Japan lobbies for bigger deficits around the wold. Sprott’s Rick Rule how and why the gold bull market is for real, while precious metals continue correcting. Look for next week’s COT report to be a lot more positive. Pensions are back in the news, and the numbers are as usual very bad. Doug Noland on why the Fed probably can’t raise rates in June — or ever.
Reminder: OpTrader is available to chat with Members, comments are found below each post.
This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).
We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options.
Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.
To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here
Do you remember when you were growing up and all your friends were allowed Atari game consoles but you weren’t?
Well, I do and the things seemed as foreign to me as Venus. Mostly because the little time I managed to spend on the gaming consoles when my friends weren’t hogging them I found it all a bit silly. I never “got” computer games, and to this day still have poor comprehension of things like Angry Birds.
I suspect that many people around the world view Bitcoin in the same way as I view Angry Birds: with mild amusement and a general lack of understanding as to what the hell all the fuss is about.
I was thinking of this since a buddy of mine recently started ...
After a three-year bull run that more than quadrupled its value by its peak last July, IBD’s Medical-Biomed/Biotech Industry Group plunged 50% by early February, hurt by backlashes against high drug prices and mergers that seek to lower corporate taxes.
Although we try to stay focused on finding and managing promising trade ideas, the comments in the comment section sometimes take a political turn (for access, try PSW — click here!). So today, Jean Luc writes,
The GOP debate last night was just unreal – are these people running to be president of the US or to lead a college fraternity! Comparing tool size? The only guy that looks semi-sane is Kasich. The other guys are just like 3 jackals right now.
And something else – if Trump is the candidate, that little Romney speech yesterday is probably already being made into a commercial. And all these little snippets from the debate will also make some nice ads! If you are a conservative, you have to be scared now.
Phil writes back,
I was expecting them to start throwing poop at each other &n...
This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible. Feel free to contact me directly at email@example.com with any questions.
Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts. After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.) Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.
Note: The material presented in this commentary is provided for
informational purposes only and is based upon information that is
considered to be reliable. However, neither PSW Investments, LLC d/b/a PhilStockWorld (PSW)
nor its affiliates
warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither PSW nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance, including the tracking of virtual trades and portfolios for educational purposes, is not necessarily indicative of future results. Neither Phil, Optrader, or anyone related to PSW is a registered financial adviser and they may hold positions in the stocks mentioned, which may change at any time without notice. Do not buy or sell based on anything that is written here, the risk of loss in trading is great.
This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities or other financial instruments mentioned in this material are not suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only intended at the moment of their issue as conditions quickly change. The information contained herein does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before investing, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
Site owned and operated by PSW Investments, LLC. Contact us at: 403 Central Avenue, Hawthorne, NJ 07506. Phone: (201) 743-8009. Email: firstname.lastname@example.org.